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Following Live Trades

Mark,

Out of curiosity, if we're following one of your own trades at Options for Rookies Premium, would you be able to writeup a quick sentence or two each time (at most once per day) you re-evaluate the position to describe why you decided to hold it, make an adjustment, or close?

I understand most of the time, it would be 'underlying moved X, still Y% away from shorts, reward still worth risk, holding position' or some such. But still, I think a lot of us would be extremely interested.

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Hi davmp,

When writing Follow that Trade, I hope to make it as realistic as possible.  And I'd want to provide information that is of interest to members.  But consider what you are asking:

'At most once per day.'  On most days I NEVER look at the position.  Not even once.  During some weeks, I never look at the position.  Unless I have a position that is very sensitive to theta (and that's a soon to expire position), I see no need to take the time – unless something has happened to the price of the underlying asset.  Sure, if there is a huge decline in implied volatility, I may take a peek to see if the position is worth closing.

When I own an iron condor and the market doesn't move, why would I want to look at the position?  The answer is that there is no reason, and part of good risk management is knowing how to use investing time effectively.  When a position obviously requires no attention, that is what I give it.

I do not make a decision to hold every day.  Holding is my default decision.  I know when to look at the position to see if things are still okay with the trade.  I know that dull markets and positions that gain by collecing theta can be very dull to follow.  The compensation for that is the huge probability of making money on the trade.

More exciting markets make for more interesting opportunities to make adjustments and use those as educational opportunities for readers.  On the other hand, they are often – but not always – money losing situations.  Thus, I'd welcome those with very mixed feelings.

davmp – there are alternatives.  I may initiate a (paper) trade that is far from neutral – a trade that will likely require an adjustment soon.  That's good for educational purposes, but wrong from the persepective of attempting to manage a winning trade.  Thus, I have decisions to make, and that's why reader input is important. 

Consider an adjustment

When I look at the position and believe there is some reason to consider an adjustment, I'll write about that – even when I don't make the adjustment.  And it cannot be only a sentence or two because there is nothing valuable I can pass on in that type of post.  If you see nothing, assume there is nothing to report.

davmp – who would want to see this day after day: "nothing done"?  That would be a major turn off and not at all helpful.

I am hoping that no one will actually enter into the trades I make – for reasons I've stated before, but will offer timely comments when the comment is useful.

davmp: I want to provide information that interests you.  But try to look at this from my perspective:  I would never take the time to calculate: how much the underlying moved, how far it is OTM in either percentages or standard deviations, or comment on whether the reward was worth the risk. [You may assume it is, or else I would be out of the trade].  I don't do that now and I want this to be a realistic experience.

The trades I make and follow on OFRP (and Members will be encouraged to submit trades) are not to be actively traded.  It is necessary to be aware of what the market is doing, but if the underlying moves 0.1%, I do not bother to look at the position.  I want FTT to be realistic, so I will not look at positions for the sole reason of being able to issue a report. 

Follow the Trade is real life.  It requires patience until action is needed – or at least considered.  That's why I hope to follow more than one trade at one time.  That will eventually present a real problem when the market gets volatile (and that is the reason why I trade only one underlying asset) and there are several positions at risk simultaneously

I try to never turn down a request, but what you ask is not possible.  It's not in the best interests of readers. 

858

December 2010 issue of Expiring Monthly was published yesterday.

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