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 to 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.
Currently my exposure to stocks in the trading account is around 7.5 percent. Most of my cash is in BSV.
*Information on this post is dated at market close, Monday, May 20, 2019.
IWM: LEAPS Options
Momentum Factor: +3
I purchased IWM $160 call options on January 15, 2019 when IWM was trading at approximately $143 per unit. IWM broke down through the shorter-term important $154 range and the momentum factor has dropped. I have adjusted my position to a little under 1/2 size right now.
EEM: LEAPS Options
Momentum Factor: +1
I purchased EEM $45 call options on January 15, 2019 when EEM was trading at approximately $40.50 per unit. EEM has continued the downward slide and momentum is hanging by a thread. Based on my account size, I have exited this trade as it doesn't justify a tiny 1/10th position.
KWEB: LEAPS Options
Momentum Factor: 0
I purchased KWEB $50 call options on February 20, 2019 when KWEB was trading at approximately $45.10 per unit. As of Monday I have closed this trade for a loss.
EFA: LEAPS Options
Momentum Factor: +6
I purchased EFA $60 call options on April 9, 2019 when EFA was trading at approximately $66 per unit. EFA's momentum is continuing to drop and it sitting at about half strength. I have adjusted my exposure accordingly.
Momentum Factor: -3
On May 7, I purchased a call ratio backspread for a small account credit when VXX was trading at approximately $29 per unit. This is a hedged position betting on significant upside in VXX. If VXX falls below $29 I will earn a small profit, but if the VXX rises above $44 before the expiry I will begin to earn an exponential profit. I'm happy with this hedged position right now. VXX is hovering on that line of upside/downside shorter-term momentum. We'll see where it goes.
QQQ: LEAPS Options
Momentum Factor: +9
I opened a less-than-full position in QQQ last week with a purchase of $160 call options when QQQ was at $184 per unit. Of all the names I follow for equity ETFs, QQQ is still the strongest. I am watching this position closely as overall momentum has weakened in nearly all other major equity indices.
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