Practice Trades BWB+Cal 1.2 (Part 1)
Posted by Mark on January 18, 2022 at 07:32 | Last modified: December 12, 2021 12:55This trade begins 3/3/21 (14 DTE) down $840 (max DD). MR is $6,065 (five contracts) and PT is $6,065 * 0.05 = $304. At inception, TD = 44, IV 21.9, NPD = 1.59, and NPV = -122.
After one day, market is down 1.3 SD to force adjustment. Trade now down $1,360 on margin of $9,235.
On very next day, market is up 1.6 SD to force adjustment with trade down $1,410. Second adjustment looks like this after calendar repositioning and rolling out upper wing:
Since most T+x lines are underwater, I would close the trade for a loss of 15.3%. The problem with T+x lines being underwater is that I would have to wait nearly to expiration to be profitable—and even at that, only if the market remains in a range. The market is 0/2 so far at remaining “within range,” which seems like a very ominous sign.
With trade opened near close of first bar, the underlying price chart looks like this:
Recovery from such a whipsaw is difficult in a short-term strategy. I would be fine without the first adjustment, which occurred with the market still under the profit tent. These guidelines dictate adjustment nevertheless.
I will continue next time with some potential alternatives to managing this trade.