Back in business 2 NDX USD/CAD

I can't believe it's been since March that I posted!

I've been busy. Pics to follow in later posts.

Anyway, I have a couple of trades to post. One, a USD/CAD long that finished much quicker than I thought that it would. Also, with the indexes looking a little overbought, I was going through the playbook to try to find a way to go short the NDX in a way that with my limited capital that I would be able to take advantage of. Using the QQQ for selling a credit spread to the upside, or a speculative butterfly to the downside seemed prohibitive as far as commissions go. Once you get over 10 contracts or so, it can cost more than $40 to open or close a trade.

I almost never let an options trade go to expiration. Instead, at the beginning of the trade, I define the amount of profit that I intend to make, and the amount that I will accept losing. Often, this depends on the structure of the spread. On longer term iron condors or other credit spreads, I'll try to pull 50% profit on the credit generated at the outset of the trade. On shorter term trades, I'll try to get 10 to 15% off the capital at risk, and I will close the trade if it dips that far into the negative during the course of the trade.

Since I'm on the subject of options, I'll post the NDX trade I just opened last night.

 

It's a ratio spread of sorts that expires on 17 January 2014, or 48 days from the time of this post. I sold the 4300 strike, and then bought 1 4400 contract, and 1 of the 4500 contracts to the upside.

The spread was opened for a net credit of $37.25 on 28 November 2014. The total risk on this trade at expiration is about $6275. The margin required to post the trade is $10K. My profit goal on this trade is $17.25 or 17.25% of the margin.

I have a limit order to close the spread for $20.00. My ideal outcome would be a decline in NDX that would allow me to close the trade in a short period of time. My worst case scenario is a slow grind higher that will drown me in the "sea of death" to the upside.

As for the currency world, I went long the USD/CAD a couple of days ago, because it was the only pair on my platform that looked like a reasonable setup.

I entered long in the direction of the trend near the 200 period MA on a 4H chart, and OPEC did the rest.

Please post any questions or comments you may have. Apologies to Nicole from Thailand for taking 8 months to get back to her. I'm not on a ship anymore. :)

STT