First trade closed, next opened

The first SPY trade closed today on Friday. I have moved it forward one week. SPY did not end exactly where I would have liked it to be, but still a good portion of yesterday's gains were locked in. At the end of first trade, I am at $234 positive. It went as high as $417 yesterday and as low as -$200. Volatility of returns is high but the hope is that the positive trend continues.

I have increased the contracts from 8,6,6 to 8,8,10, though cash in has decreased. While the portfolio is worth $5,000 at start, only about $2,500 is at work now, rest is cash.

Option analysis

Yesterday I conducted an analysis of option volatility and bid ask spreads as the day comes to a close. This is around 4pm EST. Also, this is not the expiry of options but just as the day closes. This was done to ascertain the right time to close out option positions based on optimal vol levels and bid ask spreads.

I took 3 short dated options around ATM. Thus when S&P was at 138, I took options expiring in 3 days with strikes of 135, 137 and 139. I also took the next dated options expiring in 23 days with the same strike prices. These are also the current options spreads that I am in. Below is how the vol behaves in the last 20 minutes - 1 mins increment for the first 15 minutes and then 30 second increments.

139L is the long dated option which I am long. 139S is the short dated option which I am short. Note that the longer dated option vol does not move much during the last 20 minutes, which the short dated option vol is quite "volatile". Also short date option vol decreases in the last 30 seconds, which suggests a good time to cover. However, that may also increase the risk of not completing the transaction. Overall, no useful indications of ideal trade time. Which means I can close out of positions anywhere in the last 20 minutes as far as vol is concerned. Also shown are the bid ask spreads of the same options

Note that the bid ask spreads of the short dated options are much larger that the long dated options. They widen at close which is expected. There is a time around 5 minutes before close that the spreads contract. This may just be an anomaly but indicates a good window for closing out positions. This needs to be investigated further. Apart from above observations, nothing major comes to attention.

First trade in

Amen!

Optionshouse slow

Optionshouse is slow. I put in a request for a margin trading account last week and it is still "processing". Hopefully, it will be done by Friday so I can make my first spread trade.

Spread trades on the SPY

Tomorrow once I have my account funded in Optionshouse, I will start making some spread trades on the SPY. I will use this blog to document my strategies and how they do...

Citigroup is a beautiful stock. It goes up and down and then up again. If the market is down, you should invest in Citi. Then over the next 10 days, wait for the stock to go up - and it certainly does. Exit when the profits are decent and then wait for another down day. It IS that easy :)

I added eTrade and started investing out of it. eTrade is costlier than bank of America self directed investing, but it provides a lot of functionality which is very useful. I have also added more capital to my trading account.

I am getting the hang of swing trading - which is primarily what I described above with Citigroup. The investment is done with a view to catch on to 'swings' in stocks.

Over the next few days, I will also try my luck on market timing - i.e. being fully invested in the market during up days and staying in cash during down days.

Citigroups earnings

I am back after a gap of 6 weeks almost.

First of all, I realized that day trading cannot be done daily - at least by me. I am learning to sit on losses, which is key. The money for day trading should be thought of as a resource to make more money. Profit and loss are part of the game. I am getting to that mentality.

Second, there is money to be made before earnings announcements. Citi was widely anticipated to provide great Q2 earnings since Goldman and JPM had already done so. I brought Citi stock (5K) 5 days before earnings and it grew 20% during the days leading up to the announcement. To the surprise of many, Citi did badly and the stock was set to go down. I exited my positions before the plummet began. That is the good part.

Given I was following Citi for 4 days, I thought I 'know' this stock and can make some quick profits based on 1-2 cent trading i.e. putting in large amounts of money and wait for the stock to rise 2 cents and take all the money out. That was the bad part. I tried making a quick buck but the stock moved in the opposite direction and kept on doing that. I decided to hold on to the stock for a few days till it comes back to the same levels, which it did today. I sold off the stock fro exactly the profit that I was supposed to make in 1 minute - however, this trade took 5 days.

Overall, I am running at 27% profits in 3 months. Has been good for an iPhone, a camera and a laptop. Below is the total graph. I am using days of trading on the x-axis (before I was using actual dates of the trades) as there was a huge gap in between.