Riding a Rollercoaster Week

 

The U.S. markets had been on a nice, steady progressive uptrend for the past several weeks.

Wednesday was no exception and then the markets gapped-up huge. Would the bull market continue on Thursday? To my way of thinking, why not. I placed my bullish orders on all the US Equity Indices, risking $50 to make $50 per contract. 

A shared my bullish market out look with a mentor, Stephen Bigalow. He advised me to be careful, explaining that a large gap-up can also result in profit-taking coming in. While I had the opportunity to back out of my orders for a tiny loss, I decided to stay in the trade.

Stephen was right, and I got run over. When I woke up in the morning, I was deep in the red. All of my trades closed for total losses. In all, $1,500 was lost.

While that hurts, there was a silver lining to this trade.

1. With Nadex, there is a maximum risk on every trade. Sure, I lost $50 per contract, but in Thursday's free-fall, it could have been much, much worse. I'm sure many futures and stock traders felt run over.
2. I only exposed 2% of my account on each trade. I can recover from that.

Sure, Thursday sucked. But I was glad that I stuck to risk management. Losses happen.

Okay, On to Friday...

Here was my thought process for Friday:

"Bull Markets take the stairs on the way up. Bear Markets take the elevator on the way down."

With the steep selloff on Thursday, I expected continued profit-taking going into the Labor Day Weekend. This got me thinking about placing some out-of-the-money SELL trades on the indices.

At 6pm ET, when Nadex opened on Thursday night. I placed limit SELL orders on the four US indices,  at strike prices where I could get $25 risk for $75 reward. 

SELL US 500 (Sep) >3428 @ $75 (6 Contracts)  Max Risk: $150  Max Reward $450
SELL US SmallCap 2000 >1541.0 @ $75 (6 Contracts)  Max Risk: $150  Max Reward $450
SELL US Tech 100 (Sep) >11608 @ $75 (6 Contracts)  Max Risk: $150  Max Reward $450
SELL Wall St. 30 (Sep) >28150 @ $75 (6 Contracts)  Max Risk: $150  Max Reward $450

The Opening Bell was working against me, and then, sure enough, the bottom dropped out.

In just over an hour, most of my trades were up big, resulting in a $1,410 available profit out of a maximum total of $1,800 available.

With 5 hours remaining in the trading day, I opted to cash out. In just a few hours, I was able to recoup almost all of the losses from the previous day.

4:15 Daily Expiry Values

SELL US 500 (Sep) >3428 Closed at 3418  Max Reward $450 would have been achieved.
SELL US SmallCap 2000 >1541.0 Closed at 1531.5  Max Reward $450 would have been achieved
SELL US Tech 100 (Sep) >11608 Closed at 11550  Max Reward $450 would have been achieved
SELL Wall St. 30 (Sep) >28150  Closed at 28070  Max Reward $450 would have been achieved