Monday, April 16, 2007

April 16 trade summary

I'm going to start posting my P/L because I figure most people that visit trading blogs want to see how much other traders are making as well as the setups that these traders are using to make money. I've been checking out Dinosaur Trader's blog, and like how he's been compiling the daily P/L of other blogging traders and giving a show case to the days P/L winner.

P/L: $322

I've noticed that I'm most profitable trading the first 2 hours of the market open. I've noticed that most of my losing days are a result of trading the whole day, with the majority of these losing days realized when the market is trending in the afternoon. So what does this mean? I'm not good at trading trending days, because the majority of the time I'm looking to fade VAH and buy VAL, which works the majority of the time during the first 2 hours of trading when other traders are implementing a similiar strategy. This strategy doesn't work very well in the afternoon though, so I need to avoid trading the afternoon session until I have a better trading strategy for trading this time period. Today I scalped pretty well, keeping size between 1-2 contracts (I'm trying to rebuild my confidence from Fridays screwup by keeping size small and focusing on trading my signals).

Market observations-
Right now NYSE A/D is trending lower, but the indices are being held up, but from what? Buying in the oil sector and more shorts covering?
I'm starting to watch options on SPY, IWM, AAPL, and VIX to see if there is a pattern that I can exploit for an edge. I'm seeing volume in out of the money calls on SPY and IWM for the month of May. The last 2 days I've seen large size on at the money puts within the first 30min of trading on SPY and IWM. There is increased volume this morning on VIX April $12 calls. There is heavy volume in AAPL April 95 calls at 15 cents with volume at 26k right, and with about 1k volume in 95 puts at $3.80. I'm guessing someone took a large position on those AAPL calls expecting them to expire by this friday.

I'm expecting to see some volatility tommorow morning in the bonds and JPY with the annoucement of the CPI # and housing starts and permits. If you hadn't heard already JPY is at 2 years lows against the EURO and ZN "seems" to be oversold. As it stands right now, ZN is making a new intraday high, when normally during this time of day its trending lower. I'll be watching to see if the current trend will continue tommorow, or if there is a possibility that tommorow will be the start of some unwinding of the carry trades taking place on one sided bets on JPY and some of the other higher yeilding currencies. Also note where the financial sector XLF and building sector XHB stand in comparison to the broader market and other sectors. ETF investment outlook is a great website for checking out ETF's and the markets different sectors.

I'm looking at mortgage lenders and the home building sector and I see weakness. I see the rally these last few days as more of a short covering rally then from new money coming in and buying. Small caps are making new highs for the year, which means speculative retail money seems to be coming in. I'm looking at the option straddle view on many of the mortgage lender stocks and see a skew, lots of ATM puts and OTM calls. The charts tell the rest of the story. If you were looking for a reason to short the mortgage lending sector, the Countrywide CEO has been Exercising Options these last few days. (I wonder why?)

I'm listening to CNBC right now and they are talking to trading coaches. One of the things I heard that I liked is- "you have to think of why a trader on the other side of your trade would be taking that position". I see this analogy similiar to how professional gamblers play poker. Think of all the other possible hands your opponent could be holding and what your odds are of winning with the hand your holding. Once you've gone through this thought process decide upon the amount of money you want to risk on your trade and at what point you will admit defeat if you are proven wrong.

Today I wanted to highlight Mayor Bloomberg, since his name has popped up a few times on CNBC. Checkout his biography at NYC webpage and wikipedia.


Ryan on 6:04 AM said...

Was yesterday one of those volume gap days?

Ryan on 8:57 AM said...

I just thought about what I asked and I think I phrased it wrong (Luckily before you answered).

Given the gap up in the morning and the low(ish) volume through out yesterday, has a volume gap formed?

And yesterday I was completly confused too as I watch the A/D line slowly creep down, but the market not being phase by it.

I really like your blog.


HPT on 9:38 AM said...

The continued support in the market is from the financial sector lifting the market up as well as short covering from trades put on from the start of the correction in late February. There is a volume gap to the downside. I will cover this in my next post.

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