Practice Trades: IC 1.1

Whether important or not, I’m not happy about my trade diversity last year. In an attempt to push the envelope and improve, I’m going to start spending more blog time posting practice trades.

A practice trade may be live, paper, or backtested. Live and paper trades are both followed in real-time. Backtested trades are done completely in hindsight.

My goal in doing this is to gain more familiarity. Period. I want to be able to place these trades as if they are second nature. My bread-and-butter strategy has been repeated daily for months. I want to feel equally comfortable with others.

As seen in the post title, I am calling these “Practice Trades.” The subsequent code describes type of trade, trade number of the methodology referenced, and methodology (seen after the dot). I may or may not go into detail about the specific trade plan since my goal is not to wax eloquently about the pros, cons, and potential strategy variants. You’re always welcome to post questions or comments below.

Today, I will include the following methodology:

• Place in SPX monthly cycle 60-90 DTE using 25-point strikes and include TF $21/contract.
• Sell NTM option < delta 12 and purchase 100 (50) points farther OTM for puts (calls).
• Exit at 80% capture, when down 2x that amount, or with 7 DTE: whichever comes first.
• Trade and monitor 15 minutes before regular market close every trading day.

This trade begins 1/4/21 (74 DTE) down $336. MR is $18,036 (two contracts), PT is 1964 * 0.8 = 1572, and ML = 3144.

At trade inception, TD = 46, IV 21.31, NPD = -0.69, and NPV = -239.72.

On 3/4/21 (59 DIT), this trade closed for ROI of 9.1% with market up 0.19 SD. IV increased 17.5% over the following:

Chalk up one for the good guys. Remember though, the focus here is on developing “muscle memory.” To that end, losses must be welcomed as they are a reality of trading.