Markets I Trade: April 9, 2019

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 methods 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.

One thing that is easy to notice is most weeks have no action and trading is quite boring. The equity based positions move in relative tandem. Volatility positions are the only place where exciting things seem to happen more frequently.

*Information on this post is dated at market close, Friday, April 5, 2019.

IWM: LEAPS Options

Credit: StockCharts.com

I purchased IWM $160 call options on January 15, 2019 when IWM was trading at approximately $143 per unit. IWM bounced near my stop level and has been steadily climbing higher. A move over $160 will be very promising to demonstrate a stronger uptrend. It still has not hit new highs in my holding period, so no change to my stop level this week.

EEM: LEAPS Options

Credit: StockCharts.com

I purchased EEM $45 call options on January 15, 2019 when EEM was trading at approximately $40.50 per unit. EEM has made another new high within my holding period, showing stronger signs of an uptrend. This is confirmed by rising long-term moving averages, a change from the downtrend we saw in these moving averages since mid-2018. My stop is now set at $41.40.

EWZ: LEAPS Options (Closed)

Credit: StockCharts.com

I purchased EWZ $50 call options on January 25, 2019 when EWZ was trading at approximately $44 per unit. My stop level was at about $40. EWZ fell solidly below my stop on March 27 and I closed my position for a loss that was just under my maximum allowable loss on a trade. It's a sudden turn was what seemed to be a strengthening uptrend just a few months ago.

KWEB: LEAPS Options

Credit: StockCharts.com

I purchased KWEB $50 call options on February 20, 2019 when KWEB was trading at approximately $45.10 per unit. This past week KWEB made new highs within my holding period. This is another holding where we seem to have found a bottom in the long-term moving averages which are slowly swinging back up. My current stop increased to $43.50.

VXXB: Options

Credit: StockCharts.com

On March 11, I purchased in-the-money VXXB $50 put options when VXXB was trading at approximately $31.25 per unit. We've gone through a small volatility spike during our holding period, but the signal stayed intact and volatility subsided. We are back into profit again on this position.

On March 27 I purchased in-the-money VXXB $30 call options when VXXB was trading at $31.85. These were sold for a moderate loss on March 29. I will be making some changes in how I structure my positions on long volatility trades to try reduce the impact of whipsaw losses.

Comments & Questions

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2 Replies to “Markets I Trade: April 9, 2019”

  1. Daren wondering why you chose to purchase puts for VXXB that we so in-the-money, making the premium paid more significant? Did you anticipate volatility or a different reason?

    Thanks.

    1. Daren (Editor) says:

      My trading in VXXB options are a bit of an experiment at this point. I’m using small positions per trade (about 1 percent of trading capital). VXXB tends to have larger swings each day than equity ETFs. Using $50 puts, I calculated my leverage exposure as 1.4x the underlying movement. You are correct that the premium is much higher, therefore my exposure is smaller. So far the moves have been pretty tame in this put trade.
      Once I am more comfortable with my strategy on VXXB, I want to bump up my risk to 2 percent of trading capital and keep it at that level.

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