Iâm swing-trading equity options and placed my first trade on 7th December.
My current account size is 7K.
My mean hold period has been 9 days.
Overall, Iâm -2%.
Iâve been keeping it simple, speculating on direction with puts and calls.
Iâm trading with the trend.
I experimented a little, but now my basic strategy is to look for stocks in a firmly established uptrend, preferably having hit a recent 52 week high. I then look for bullish signals after pullbacks to a significant support level.
Essentially, Iâm looking to ride momentum, and Iâm happy to miss the very start of a move.
I use TC2000, which in my estimation is an outstanding product. Iâm using price, 50 day and 200 day simple moving averages, volume bars, and candlesticks.
Iâve set up stock scans on telechart for stock that have posted a 52 week high over the past week, and another scan for bullish engulfing patterns in uptrending stock. Iâm narrowing the search by looking at stock with a price of $5-$45, and (very recently) institutional ownership > 75%. I want to be following the smart money.
Iâm a very visual person and I believe firmly in gestalt. Seeing the bigger picture.
I initially set the screen to daily charts over a two year period, rapidly skim through the charts (usually a hundred or so), flag the ones that show promise and copy these to a watchlist.
I then go through them more slowly, looking at weekly charts, daily charts and then zoom right in to the last few weeks. Iâve also begun plotting industry comparisons, and will most probably stick to bullish stock in bullish industries.
I end up with a watchlist consisting of approximately ten stock.
The entire process takes but a matter of minutes.
I then further eliminate stock based on my risk management rules.
For every trade, there is an estimated position risk of ≤ 1.5% total equity, which equates to an estimated risk of ~$1 (including slippage). I would have preferred to stay with 1% but found it too restrictive at this account size.
I am aiming for a risk:reward ≥ 1:2.
I place GTC conditional market sell orders for every trade, based on the underlying hitting my stop level, which Iâve placed 20 cents or so below most recent support.
The majority of my initial small losses came courtesy of vega. I was buying ATM/OTM options, and getting burnt, even though the underlying often proceeded to make a nice move in my direction (after Iâd taken my 1% loss and closed the position).
So Iâve decided to stick to 75-80 delta ITM calls, expiring at least a month after the expected move. In this way, Iâm planning to minimize vega, theta and gamma, while I get a firm handle on the basics of technical analysis, order execution, stops, money/time management etc.
These are my current open positions, with dates of inception â
27th Dec
AEIS April 12.5 call
FCS May 17.5 put
5th Jan
ADPT Apr 2.5 call
CNET Feb 12.5 call
IVIL Apr 7.5 call
ZIGO Feb 12.5 call
BIOS Apr 5 call
6th Jan
HYSL Feb 33.375 call
LZ Mar 40 call
GOLD Mar 15 call
(Some of these positions were established before I clarified my process or rules.)
Currently, 50% of my total equity is tied up.
However, because of my ≤ 1.5% max loss, if I get stopped out of every single trade, 85-90% of my equity will be preserved.
These are on my main watchlist for Monday:
HIBB
RBAK
POOL
CPTS
TLAB
Hopefully, Iâll get home from work by 1800 GMT (1300 EST).
