Here’s a video on time phase shifting where I’m looking for a long entry on AMZN:
Mojo
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I got an email from a reader who told me about a coupon code for Redbox that would give me a free movie. I’ve never used RedBox before but my kids love it and my wife is out of town (running the 10K in Pittsburgh) so I tried it out.
I started the session with ‘rent using this promo code’ and went through the menu’s to find something I wanted to see that most likely no other family member should see (kids) or would see (wife) (ala horror, really bad comedy, or a long shot). Zip my debit card and sent myself the receipt. Even though it looked like it charged me a $1 my email receipt shows the $1 discount. 
(I can’t tell if I’m more excited about the movie or the fact that it could be a real stinker and I won’t feel any buyer’s remorse. Weird…. Anyway, off to get some popcorn.)
Mojo
PS – The promo code is 9HB6MP22 .
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I had a good talk with Mojo on Wednesday night after our team meeting regarding trading in general. Some things came to light that I should share with you all that may be of benefit to you. Many of you will hopefully see things for yourselves as traders…
1. I work too hard- Because of the way we were raised, most of us think this is a noble trait. We are taught to work hard through school so we can later get good jobs and make lots of money, right? My parents were from Italy and survived WWII time and we came to the US when I was very young. For any of you that come from immigrant families, you know the struggles of watching your parents work their tails off (many times with 2-3 jobs a piece at the same time) just to survive in this country. It’s not an easy life, but one that I have always been proud of. So with this, I have ingrained in me the trait of working really hard. However, with trading, I am seeing it as a huge flaw. Trading should remain simple and effective, not tedious or complex. You have to trade smarter, not harder. This is probably the biggest lesson for me. I have to “re-wire” my brain without letting go of the great lessons my parent taught me. In this, I guess everything has it’s place.
2. I rush things because I lack patience- Mojo teased me about my ROTC background back through high school and college. From this, when I am given a task/mission, I like to go all-in and start knocking things out (”Git ‘er done” mentality) This can also be a huge problem as with trading, you NEED patience or you will either lose interest or hope if you don’t make your first million in a year, or worse off- you’ll blow up your account through reckless trading! I rushed with trades before I had my most current trading rules established (for those of you that requested my rules, I did not forget, I am just hashing them out still with my trading partner)!
3. I over-complicate things- I am a VERY detail-oriented person while Mojo is a big-picture type of person, so we are trying to find a healthy balance in teaching trading and blogging. I had the understanding that most people that read this blog already know what calendars are, for example, so I didn’t explain things on a more basic level. For this I apologize if I confused anyone! 
Ok so with my confessions today, I encourage anyone to give me feedback (you can send me a private message through Insane money if you choose). This helps me to become a better trader, and helps you understand what I am talking about so you can become a better trader! Thanks for reading….Happy Trading!
-Gekko
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Ok, so here’s what I have learned so far…It has been many months since I traded stocks because I was trading indices, so with USO, I did not check any upcoming economic announcements that could impact the trade.
So this morning right around 10:30am, I was working on something else while my spreadsheet (works real time with my trades in TOS) off to the side flashed red -23% then back to 8% loss within a matter of minutes! Woo Nelly. So here were the steps and questions that went through my mind to see what happened.
1) Once I noticed my red alert signal on my spreadsheet, I checked the chart and noticed the sudden drop in USO and gap fill on the 10min chart.
2) So then I asked myself–was there a news event? I checked http://fidweek.econoday.com/ (excellent site for checking all announcements in a calendar format) and saw the petroleum announcement came out at 10:30am EST and also the FOMC announcement was to come out this afternoon. This was where the problem was- had I checked it before the trade, I would have waited to enter until after the announcement in case of any crazy moves or sudden drop in volatility.
3) Once I realized the mistake, I looked at how I would adjust only when it stays below 7% loss for a period of time since there was fluctuation between -8% and -2.8%.
4) Then I immediately IM’d my trading partner (Mojo) with the adjustment before doing anything. This is where that emotional check came into play as he asked me a series of questions to determine if I really was emotional or not. Luckily I wasn’t emotional about it, but just neglected that one step of checking announcements, so I am adjusting my position.
5) Here are some notes Mojo shared with me for how we should take our “emotional temperature” when trading:
Emotional Temperature
=====================
1. Personal life- what’s going on
2. Distractions
3. Feeling rushed
4. Trading in general
5. About this specific position
6. Is or isn’t Coachable
7. Over-focusing or analyzing
8. Violates any rules
9. Acknowledges mistakes
10. Sizing
So with all that, here’s what I did to adjust the position once it stayed below 7% loss.
Since I was already 1/4 in the trade, I added another quarter on (15 contracts) of the Oct/Nov 34 put calendar for a debit of $0.85. This rebalanced my position and dropped deltas down significantly to a more neutral trade. Here’s what it looks like now after putting on my second calendar.
With the adjustment and second quarter of my position added, this brings my new cost basis to $1.75 and my new profit/loss to -1.4% as I write this at 2:20pm EST.
This was a good lesson for me so hopefully it helps you all too!
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Hello everyone,
Ok so I wanted to get into these calendars last week, but since quadruple witching day was Friday and volatility usually gets whacky during that time, Mojo and I discussed and decided to hold a few days before entering, just to see where the overall market volatility was going to go. The big factor was to see if market “vols” (volatility, not volume) would continue dropping or would they hit a support line and start turning up.
Yesterday and today have been great for my JPM calendar. We were able to turn a -7% loser into a +5% winner in a few days with our first adjustment. We’ll see how it ends up of course…you never want to get too excited until the trade is completely closed out!
So since the volatility is continuing upward, I will add 4 calendars for today to get more practice. I will place my limit orders today before close…I’ll keep you posted as they fill.
NDX- 3 contracts Oct/Nov 1725 put calendar for ~$27.00 debit. Although this index is more bullish than neutral, the volatility is low and rising again so it’s a good time for calendar entry here. Since this is trending however, it requires maintenance so only trade this if you’re able to manage it as we will most likely have to adjust this. We are putting on the put versus call calendar since my outlook is more bullish on this, so this calendar gives us upward gain potential if it continues up a bit more before adjusting.
DIA- (half-in) Oct/Nov 96 put (14 contracts)/98 put (4 contracts) /100 call (4 contracts)/102 call (15 contracts) Shotgun calendar for total debit ~$4.93
Like NDX, this too has more of a neutral to bullish stance with low to rising volatility so we shift our calendar to where we can get a little upward gain potential (see white profit curve on TOS Analyzer) should this continue to rise. Also, note that it is currently at 98.09 so we are right ATM (perfect time to put on the calendar). This one too will need maintenance so only put this on if you have the time to follow it. I did 14/4/4/15 the contract ratio to create a flatter “tent top” on the risk graph. This is called “ratio-ing” in trading slang….This ratio still does not exceed my trade size limit but it helps to create a smoother profit curve spread out wider within the breakeven range.
PBR- 13 contracts (half-in) Oct/Nov 46 put calendar for ~$1.10 debit. You’ll see on the TOS Analyzer risk graph that it is not centered but shifted just off to the left. This allows upward gain potential (see white profit curve on TOS Analyzer) since I am neutral to bullish on PBR. I am also doing a put instead of a call calendar because I am expecting this leg to be the bottom side should PBR continue upward and I have to add my second calendar on the topside (would be a call). PBR has remained neutral since at least June and earnings is not until 11/6/09 so I have time to get at least one month before considering exiting before earnings. Also, volatility has started to turn upward after being in the lower 1/3 over the last 6 mths. This is also an ETF.. so luckily we don’t have earnings, splits, or news events to sneak up on us. Brazil used to be the hotspot with ETF investors back in 2003-2008 (look at 10 year charts of PBR and EWZ as examples) however these ETFs are still trying to overcome the market downturn.
USO- 15 contracts (quarter-in) Oct/Nov 37 call calendar for ~$0.88 debit. Notice how this one has been a dud chart-wise since June with low but rising volatility now. I am undecided on trend here so I chose the call calendar which is the cheaper than the put calendar. This is also an ETF.. so luckily we don’t have earnings or news events to sneak up on us.
Ok so with all this, I’ll be posting any adjustments so good luck and Happy Trading!
-Gekko
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Well, September expiry didn’t beat me up too bad. Over the past few weeks my calendars on RIMM, NDX, JPM, etc have been doing pretty well. At one time I hit a Sept high of +5.2% but lost a bit of ground last week.
Looking ahead, I will continue to focus on vega positive trades (best for low and rising volatility) and look for a breakout. Haley is going to do a course on his Diagonals (which are vega positive) so I will be doing some paper trading there as well.
All the best,
Mojo
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As a side note to everyone, if you are viewing this trade only on the main page, you should subscribe to the “Model Portfolio” forum in the blog this way you will receive real time posts. The main page will only arrive to you via email the following morning at 7am.
For those unsure how to subscribe to a forum, click on the Forums tab on the top of the main page (under the InsaneMoney logo), then click on the “Model Portfolio” forum (this is public for all). Then open the drop down menu on the upper right “Forum Tools” then select “Subscribe To This Forum.” This will go right to your email everytime I post.
Friday is Quadruple Witching Day which means it is the expiration of contracts for stock index futures, stock index options, stock options and single stock futures (SSF). This is a HIGHLY volatile period so beware of any open positions you have. Watch out for large spreads between bid and ask pricing as well as big fluctuations in your profit/loss.
So just now my 7% loss mark was hit for my JPM Oct/Dec 43 put single calendar, so per my rules, I adjusted by adding my second calendar on the topside to bring my deltas back to neutral and recenter my trade on the risk profile.
I added the Oct/Dec 46 call calendar. Typically it’s good to use put calendars on the bottom legs and call calendars on the top so you have more flexibility to adjust later if need be by turning the trade into a diagonal or vertical if you choose to per your trading rules. You could also just go for the cheaper calendar of the two.
Once I added my adjustment, it brought my loss down to 2.7% in 15 minutes. This is because we added our other half of the position. This is a good example of why you should leg into a position instead of going all in from the beginning. It gives you the power and flexibility to adjust your position accordingly instead of overexposing yourself.
Over the last 3 days, the trade has fluctuated majorly because of vega (volatility dropping overall in the market) and not delta movement. You can see on the JPM chart that the price overall has not moved much. This is why we are doing this trade…to show you what can happen in a trade when volatility affects it. Remember that we are choosing trades for the portfolio to focus on management, not entries. The most important part of trading is to understand how to manage the trade, not just how to enter it. If you can practice managing trades on paper, then you will become a great trader. It is easier to make money in a super trending market, but where the real trading skills get developed is in the choppier more volatile markets like this one.
I will be posting more calendars today and/or tomorrow for some more stocks, ETFs and indices so be on the lookout….Stay tuned for the next episode of “Insane Money’s Model Portfolio Bonanza.”
Happy Trading!
-Gekko
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