Embarassing but it's a deliberate decision I made @ RTH open to hold my short till EOD.

Instead of focusing on the poor outcome, I should explore the rationale of my process.

Though my new found infatuation with option greeks favored bullish finish into opex, I still believe going short was the right strategy for me based on my stats. (The Options world with gamma & delta is fascinating and hopefully useful in the future). Big thank you for @tigertrader for his post from spotgamma.com

However, I have to revisit the EOD hold of my positions. Since my strategy results are based on RTH open entry and EOD exit, I have been in this dilemma of fixed vs discretionary entry & exit for a while now. Lately my discretionary scale in/out has been more succesful and hence I will probably end this EOD hold (atleast for the losing position by EU close as reversal days are less frequent than continuation days).

Once the 3700 was not the resistance I hoped it would provide, I bailed out on my scale and perhaps should have been flat by then. Costly but useful lesson

Still green for the week

Bigger picture

Though my equity curve is not taking off in any big ways, it's partly because of my own conservative trading size. This is a choice I made due to my ongoing testing between fixed vs discretionary entry/exits.

My max size is 2 MES for now and usually 2-4 round turns per day. My goal is to increase it to 3 contracts before the end of 2022 and then push it up 5 next year.

For the rest of 2022, I will consider closing my losing position before EU close (particulary if RV is high as reversal day is less likely).

I have conviction in my edge now (based on past stats using investiquant.com and EMA crossover system by Ripster47). Spotgamma looks like a promising addition.

Execution is where I need to work on. Holding on to my winner is much easier now but letting go off my loser is not.

Do you pay attention to unscheduled news? Like on Friday we had the big Fed News prior to the open, which moved the S&P by 48 points in under 15 minutes.


This is what I believe screwed your short narrative. Without it your trade might have worked.
I know hindsight, but trading against news is something I personally hate. First reaction was bullish and News was pretty bullish. So I would rather play the long side or stay flat.

Harleking 

Do you pay attention to unscheduled news?

Absolutely not

Main reason is that I am looking for a more relaxed mode of trading, long term. Watching new stream increases my biological alert system and my fight/flight mode becomes supercharged. I also agree with your comments about hindsight bias. Finally, there is attribution bias as we are designed to assign a cause for big moves in the market.

Saying that, I do believe that syncronised crowd behavior is the cause for such moves and I'm currently exploring Option markets positioning by Market Makers and institutions to seek explanation. Big learning curve, but makes lot of sense and looks like worth the time learning option greeks.


At the end of the day, I accept this loss as cost of doing business. My goal is to cut the cost, not eliminating it. Key aspect of it is to find optimal points of exit for my losing positions.

Harleking 

Do you pay attention to unscheduled news? Like on Friday we had the big Fed News prior to the open, which moved the S&P by 48 points in under 15 minutes. This is what I believe screwed your short narrative. Without it your trade might have worked. I know hindsight, but trading against news is something I personally hate. First reaction was bullish and News was pretty bullish. So I would rather play the long side or stay flat.

You are partially correct. However, the market was going up Friday, irrespective of the news. The fuel for a melt-up (opex) was already there, the news was just the match that ignited the fire.

Narcissus 

Absolutely not Main reason is that I am looking for a more relaxed mode of trading, long term. Watching new stream increases my biological alert system and my fight/flight mode becomes supercharged. I also agree with your comments about hindsight bias. Finally, there is attribution bias as we are designed to assign a cause for big moves in the market. Saying that, I do believe that syncronised crowd behavior is the cause for such moves and I'm currently exploring Option markets positioning by Market Makers and institutions to seek explanation. Big learning curve, but makes lot of sense and looks like worth the time learning option greeks. At the end of the day, I accept this loss as cost of doing business. My goal is to cut the cost, not eliminating it. Key aspect of it is to find optimal points of exit for my losing positions.

Even if you an investor who operates on a longer timeframe, you have to take into account news events. And, if you are a trader, then it's infinitely more important. Obviously, news is going to affect the behavioral, for at least the few humans that are left trading. But there are also algos tied to the news, and these algos can act as catalysts for big moves i.e., Friday. There are times when news doesn't affect the macro picture and should summarily be faded. Personally, my natural inclination as a trader is to do exactly that. But then there are also times when you shouldn't get in the way of the news. This is where your skill and preparation come into play. This is where your perception of positioning dynamics comes into play. You will instinctively know whether you should go with the flow or fade it instead.

Friday was perfect example, along with the day CPI came out. Although, the CPI number provided a little twist that Thursday! Nevertheless, there was systematic threat going into that day of a global markets left-tail event; but instead, a right-tail outcome ensued due to the UK policy U-turn. The result was an almost historic relief rally. The market was leaning one way, and the news came out, and the market went the other way. Getting in front of that train would have been suicide. But as trader, you must be reactive; but, in an informed, intelligent, and prepared manner. News, may or may not change the overall picture, but it's your job as a trader to be able to differentiate between the two possible outcomes.

Friday's action was similar, except the news was an impulse easing and Yen intervention. And even though it was opex, the same market muscle memory kicked in, because of the positioning going into opex. So the dealers closed hedges by buying futures and upside calls were bought in ETF, indicies, and especially (if you look at the CBOE data) single name options.

tigertrader 

You are partially correct. However, the market was going up Friday, irrespective of the news. The fuel for a melt-up (opex) was already there, the news was just the match that ignited the fire.

Sure, I agree with it. I was already looking for long scenarios, but the thing is, without the news we could have had like some dump at the open. Some stop run through overnight low, test of lower 30's etc. and afterwards a reversal with bullish close.
Attached a screenshot.

tigertrader 

Even if you an investor who operates on a longer timeframe, you have to take into account news events. And, if you are a trader, then it's infinitely more important. Obviously, news is going to affect the behavioral, for at least the few humans that are left trading. But there are also algos tied to the news, and these algos can act as catalysts for big moves i.e., Friday. .. Friday's action was similar, except the news was an impulse easing and Yen intervention. And even though it was opex, the same market muscle memory kicked in, because of the positioning going into opex. So the dealers closed hedges by buying futures and upside calls were bought in ETF, indicies, and especially (if you look at the CBOE data) single name options.

Thanks for your input. It's great to see you back in the forum and hoping to see more of thoughts in the SPOO thread again.

I understand the importance of news, especially central bank interventions and adverse geo political events. However, I have difficulty in figuring out their causal relationship in big equity moves (except for FED's policy changes, actual or perceived).

For eg. Based on SPX greek options, Friday's support @ 3600 and resistance @ 3750. 20% volume expiring on friday with put decay tailwind. Implied volality also favored a bulls on Friday. SPX eventually went right upto the resistance. (Thanks spotgamma and apologies if I got it wrong. Still learning). Friday's bullish close was more likely based on the above metrics alone. Possibly without any news about intervention from BOJ. 2% move seems standard in this high volatility environment.

My question is this. How confident can anyone be, in linking BOJ move and the bullish SPX close on Friday?

Narcissus 

Thanks for your input. It's great to see you back in the forum and hoping to see more of thoughts in the SPOO thread again. I understand the importance of news, especially central bank interventions and adverse geo political events. However, I have difficulty in figuring out their causal relationship in big equity moves (except for FED's policy changes, actual or perceived). For eg. Based on SPX greek options, Friday's support @ 3600 and resistance @ 3750. 20% volume expiring on friday with put decay tailwind. Implied volality also favored a bulls on Friday. SPX eventually went right upto the resistance. (Thanks spotgamma and apologies if I got it wrong. Still learning). My question is this. Friday's bullish close was more likely based on the above metrics alone. Possibly without any news about intervention from BOJ. How confident can anyone be, in linking BOJ move and the bullish SPX close on Friday?

The Fed's news was arguably more important, because CB intervention rarely lasts. But the news acted as catalyst for the options flow. The big question is will the rally persist. Has the market been caught leaning the wrong way, or has sentiment changed enough to turn (temporarily) bullish?

tigertrader 

The Fed's news was arguably more important, because CB intervention rarely lasts. But the news acted as catalyst for the options flow. The big question is will the rally persist. Has the market been caught leaning the wrong way, or has sentiment changed enough to turn (temporarily) bullish?

Thanks. Yes, that's the big question.

I am also watching option flow, especially Calls farther out. Stock buybacks could provide a nice boost. With gamma turning positive, it does look like everything is lined up for the next leg UP. However, I'm unsure whether this is enough to counter the QT environment right now.

In your spoo thread, you quoted "The perception of a slowing down in the velocity (or a pause) in rate hikes". Is it based on bond movements, inversion strength or something else?