Cherry Blossoms

It's been an interesting week for the small time trader.

Spent the night in Hawaii on my way back to Japan. I highly recommend the Lava Flow at Duke's.

I was hoping I would get back to Japan, get some sleep and see that my Google Reverse Iron Condor would be in the money or closed at a profit. Not so much.

Looking back on it, it seems that I made a couple of mistakes in trade planning. Number one was that I shorted myself a day on this holiday shortened week. The theta, or the amount I lost daily on each of the long options in the RIC was way higher than normal. In addition, GOOG chopped around my entry price and closed within $15 of the entry at the end of the week.

Here's the weekly GOOG chart, and the trade details:

 

 



I had good movement towards the end of the week, but did not get close enough to the $790 strike to even get out at a percentage loss. It was 100%. This is a situation where I moved my strikes far enough out to get a very low entry price into the trade, but due to the shortened week, were just to wide.

So, the Google trade bummed me out, but I figure with all the stuff going on in Europe, maybe I could pick a catalyst and have a good currency trade to close the week.

One of the ways over the past couple of months that has been moderately successful for me is to trade an event as it happens to get momentum behind the move after the market has given away the direction. I started learning about the events from David Song's articles over at FXCM, like the one from last night: EUR/USD - Trading The German Unemplyment Report.

German unemployment can move the Euro quite a bit. Here's what the Euro looked like over the last couple of days:

You'll see my entry on the German Unemployment report as the first large red arrow, and my exit on the full stop value a couple hours later. A 100% loss of risk on the trade. Bummer again.

Here's what happened. We'll look at the economic calendar for the event risk picture yesterday.

 

My time zone is GMT+9 in Tokyo, so these times may be different than those that you see when you look at the calendar yourself, but the picture will be the same. On a normal week, the most significant event would have been the German Unemployment report. But this week, shortly after the Unemployment report was the Cypriot bank reopening. When I placed the trade, I figured that the bank reopening would be delayed, or would be a further downside catalyst for the Euro as people lined up to withdraw their money. I was wrong in that the Cypriot bank reopening cause a sharp reversal to the upside for the Euro and brought my trade to full stop in two hours.

Lesson1: Significant one time event risk can trump even the most powerful recurring event risk.
Lesson2: Most normally productive strategies can have a bad turn due to unforeseen circumstances.

So, not wanting to dwell, I entered next week's RIC trades as follows:

AAPL 05 Apr '13w 460c/470c/440p/430p or a 4.5% move to each of the short strikes.
C 05 Apr '13w 45c/46c/44p/43p or a 2.75% move to each of the short strikes.

Instead of getting burned on the reduced trading week by entering the Thursday prior, like I did with the GOOG trade in the article (still don't know what I was thinking), RICs that are entered the same Thursday as a week that's missing a Friday will be less expensive to enter, but will effectively have the same time until expiration.

So, this week I doubled down on two tickers that have done well for me in the past, while keeping the strikes as close as I could to enter at a reasonable price. 1 contract on AAPL, 4 strikes on C.

Small time.

STT