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OK, since we're sharing. My technicals were flashing sell across the board.
I was a bit early, but it worked.
Thursday was the fourth day in a row bonds closed higher. In addition,
it was the third day in a row they had higher highs and higher lows. On
top of that, there was a volume spike that was the higheset in about 2
months. Also, the 117 handle was just overhead.
The odds of another higher day were extremely low given that the
bulls had spent almost all their energy by now and were facing a support
and resistance level at 117. On the fundamental side, the market had
priced in good news. Anything but the best would be a disappointment.
Add to that the bulling on CNBC and and you've got an odds on bet for
sideways to down.
The AM test of yesterday's high had a printed once at 116'31, broke hard
on initial news with major impluse to the down side at the 0830 ET news, and
never looked back.
Two days ago I sold the DEC 118 calls near their highs of the day at 1'23.
Yesterday I had to withstand the heat for a day which was not fun, as the
calls got punched up to 1'36 and slightly more today at the open. They closed
today at '46. I'll get two more days of theta decay over the weekend, plus
a lowering of volatility (options traders, don't you just love that sucking
sound of volatility imploding when you're short premium?) and it should be
time to think about protecting profits or just getting out.
Had I waited until yesterday to sell the calls, I would have been better off
since I could have gotten a somewhat better price for them, but after three
up days, the odds favored a side or correction day so I anticipated that for
what was yesterday. Then I decided to hold because there were two 116'31
failures to test 117 in the AM and PM, indicating the odds of success were
getting lower. So although it was an up close, it was not a trend day and it
was a weak showing by the bulls. I then anticipated a bear victory in the next
day, which was today, Friday.
The beautiful thing about options is their flexibility. I was wrong about this
trade initially, but I managed to survive it and still win. Why? Because with
an options trade, I can be somewhat wrong on price and still keep my premium
if price stays far enough away from the strike. If I'm very wrong and get
suddenly pushed toward my strike, I can cover with the futures and still keep
my premium. I've got at least two chances at survival! If that's not good enough,
if I've got really deep pockets, I can roll my options out to the next strike
and or expiry and even make more money while moving farther away from price!
Phil
fchaman wrote:
>
> Hi RT's:
> Well, I just have to share my Sep. Bond's experience with everyone!
> Today was certainly the DAY in which the bears took the market by surprise!
> I was long since Tuesday, and made handsome profit all the way till
> yesterday. My technical all were showing buy signal without any sign of
> weakness. This morning, CNBC, before the opening, was yelling out-loud to
> buy bonds-this market still is going up! If anyone is a follower of
> "contrary opinion," this was certainly a sell signal!!!!
> Recently, I've become a subscriber to the CBOT's Market Profile. After
> reviewing yesterday's market activity, it was evident that there was a
> massive selling pressure in the Bond's market! In despite of, the market
> closed higher(116.25), the Market Profile was giving a hint that the bulls
> can't hold this market any longer!
> I overlooked this fact, and the bond market took all my gains for this week
> in only two hours of trading!! The lesson: pay more attention to the
> structure of this market, there is a logic behind it. And the only way to
> see it, is via the CBOT's Market Profile.
> Just wondering, if anyone is using the Market Profile to trade the Bonds?
> Thanks for your time!
> Frank
>
> ---------------------------------------------------------------
>
> Hi RT's:
> Well, I just have to share my Sep. Bond's experience with everyone!
> Today was certainly the DAY in which the bears took the market by
> surprise!
> I was long since Tuesday, and made handsome profit all the way till
> yesterday. My technical all were showing buy signal without any sign
> of weakness. This morning, CNBC, before the opening, was yelling
> out-loud to buy bonds-this market still is going up! If anyone is a
> follower of "contrary opinion," this was certainly a sell signal!!!!
> Recently, I've become a subscriber to the CBOT's Market Profile. After
> reviewing yesterday's market activity, it was evident that there was a
> massive selling pressure in the Bond's market! In despite of, the
> market closed higher(116.25), the Market Profile was giving a hint
> that the bulls can't hold this market any longer!
> I overlooked this fact, and the bond market took all my gains for this
> week in only two hours of trading!! The lesson: pay more attention to
> the structure of this market, there is a logic behind it. And the only
> way to see it, is via the CBOT's Market Profile.
> Just wondering, if anyone is using the Market Profile to trade the
> Bonds?
> Thanks for your time!
> Frank
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