In my non-registered account, I am developing my trend following strategy continuously. I don’t pretend to have all the answers. I am sharing this ongoing learning journey with you in this series.
I am always exploring new ways of trading, new markets to access, and better control of risk and opportunities. My main goal is to avoid large losses while achieving reasonable returns over time. I try to focus on trades which I believe have good reward-to-risk ratios.
You will see me trade index products, currencies, and commodities primarily with futures contracts and LEAPS options for maximum capital efficiency. I try risk small amounts of capital with each trade targeting high return multiples on that risk.
IWM: LEAPS Options
I purchased IWM $160 call options on January 15, 2019 when IWM was trading at approximately $143 per unit. With the recent advance of U.S. Small Cap stocks, my stop has moved past purchase price and my options are nearly at-the-money.
IWM is in an overbought range at this point. At some point, the buying should relax allowing prices to drop. IWM has had barely a few down days in the past two months. As I stated last week, I am expecting the price is likely pull back somewhat in the coming weeks.
EEM: LEAPS Options
I purchased EEM $45 call options on January 15, 2019 when EEM was trading at approximately $40.50 per unit. EEM has moved up in price since my purchase and my stop is set at a little under $40.
EEM had a moderate pullback at the beginning of the month, but is now moving higher. I am looking for the price to move strongly past the $43.50 level to indicate a healthy continuing uptrend.
EWZ: LEAPS Options
I purchased EWZ $50 call options on January 25, 2019 when EWZ was trading at approximately $44 per unit. Since last week we have no seen a higher high, so I'm holding my stop level at a little under $40.
While EWZ does seem to be grinding its way higher, it is certainly not a very strong uptrend at this stage. I am waiting to see a move past $45.50 over the coming weeks.
GLD: LEAPS Options
I purchased GLD $125 call options on November 19, 2018 when GLD was trading at approximately $115.65 per unit. This has been a very profitable trade for me; my stop is set a little under $122 per unit right now.
GLD has been in a textbook uptrend since my purchase. There are small pullbacks on overbought readings with continuations to higher highs that follow. There is little not to like about this gold move right now. I'm looking for GLD to break past $127 in this next move.
I purchased VXZB $20 put options on January 16, 2019 when EWZ was trading at approximately $20.40 per unit. This is a volatility short trade that I made following the volatility spike we saw in December. So far the trade has nicely moved into profit.
For my stops, I track the more responsive VIX Index and VXXB ETF which both do not translate directly over to values in VXZB. At this point I would look for VXXB to spike above $40 to close this trade.
KWEB: LEAPS Options
I purchased KWEB $50 call options on February 20, 2019 when KWEB was trading at approximately $45.10 per unit. Since my purchase, the price of KWEB has increased to $46 so my trade is in profit with a current stop set at $39.40.
KWEB is a Chinese Internet Index ETF that got absolutely hammered in 2018. It provides exposure to Chinese-based tech companies like Alibaba and Tencent. I would consider KWEB to be a concentrated, higher risk bet.
DXJ: LEAPS Options
I purchased DXJ $55 call options on February 22, 2019 when DXJ was trading a little under $51 per unit. My initial stop is set at $47.60 per unit.
Like many other equity markets, Japanese stocks are setting a pattern of higher lows and higher highs since the end of December. We'll see if this pattern continues over the coming months.
Silver: Futures Contracts
I purchased Silver futures contracts on December 20, 2018 at approximately $14.83 per ounce. Silver has moved up in price since my purchase and my stop is set at $15.10 per ounce.
This past week, silver got held back again at $16.20 per ounce. While it's too early to tell if this is a top in the current uptrend, it would be important to see silver move past this number for the uptrend to hold.
Brazilian Real: Futures Contracts
I purchased Brazilian real futures contracts on January 3, 2019 at approximately US$0.267 per real. The real has strengthened slightly against the dollar since my purchase. I have my stop set at US$0.253 per real.
For a continued strengthening uptrend, I am looking for the real to move past the $0.275 level that we saw at the end of January.
South African Rand: Futures Contracts
I purchased South African rand futures contracts on January 25, 2019 at approximately US$0.0731 per rand. The rand has weakened a bit against the dollar since my purchase. I have my stop set at US$0.0692 per rand.
The rand actually tested my stop this past week, held the price, and moved back up. I will look for the rand to move back to those January highs. If you look at the chart above (inverse of the rand value), you can see a clear pattern of higher lows since last September.
At this point I've basically exhausted all of the long equity ETF positions that I would be interested in pursuing. I believe I have relatively broad exposure to all the major equity markets except for European stocks. I am still looking at some currency pairs to add to my positions.
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