Hey Guys,
The market went down big time after the Fed made an announcement yesterday about interest rates. The S&P 500 is down almost 100 points from where it was yesterday.
There's a lot to talk about today, including the SPLK profit explosion, but first let's talk about the overall impact on the portfolio of the market getting hammered like that. I had a lot of risk on the table, which was perfectly aligned with the back-tested approach, but it made for a lot of red in my account today. Almost all my positions are down this morning, some of them quite noticeably. I also hit the stop losses on UBER and INTU and took partial losses on two stock trades that hit their time limits.
Yesterday as I saw the market going down, I felt a jolt of frustration. Even after all these years of trading, I still sometimes get emotional charges. The difference now is that I have a more healthy way of responding to them, which helps me get back to a state of being grounded way more quickly than I used to be able to.
In my case, what helped me is to zoom out my perspective. I thought about how I might feel when I'm at the end of my life, and what will really matter to me.
Will it matter to me that I had a bad day in the stock market?
Will this bad day in the market have any bearing on my life as a whole?
The answer, at least for me, is definitely "no" to both questions. It may seem like a big deal in the moment, but if you zoom out your focus, maybe it changes your perspective and makes it easier to live through. In my case, my goal is to stay in lock step with the back-tested trading strategy, so it's important to me to stay grounded. Beyond that, it's just healthier for me physically and mentally to stay grounded. Zooming out my focus often helps me with both.
Ok, on to the one trade that is glowing, glimmering, and sparkling today: my options trade for SPLK!
The stock gapped WAY up overnight. I had an option position for it, and my position exploded. I bought the option for $5.00 per contract. My profit target was $7.94, but it ended up selling for $29.52. That means a single option contract on that trade made a profit of $2,452 based on $500 of risk. That's a return of 490% on the trade itself. And my options account overall went up 21.7% just from that one trade.
I sure didn't see that coming. I was in the right place at the right time, which has happened to me before in the stock market and will likely happen again. It demonstrates one feature that call options have that stocks don't have: unlimited upside with protected downside. SPLK gapped way up, and I took the whole ride up with that call option position. If SPLK had gapped down by the same amount, my loss would have been capped at just the $5.00 per contract I paid. So in other words, with my trading approach, call options limit my "gap risk", yet I still get the potential gap reward.
As great as that SPLK trade was, I've got a lot of other red options positions today that are reaching their time limits. I'll be manually closing those near the end of the trading session today unless they reach their profit targets first.
I picked up some new positions today. In the main account, I bought stocks for TSLA and VEEV as well as options for HES And DKNG. In the double down account, I bought stocks for HES, DKNG, and CG.
If you have any questions or feedback, I'd love to hear from you.