It was a choppy week and month for us at SPX Option Trader.   We ended this past week -45% ROI in our SPX weekly option trading, -50% ROI in our SPY weekly option trading and +24% ROM in our SPX Spread Trader.  We ended the month of April -118% ROI in our SPX weekly option trading, -122% ROI in our SPY weekly option trading and -78% ROM in our SPX Spread Trader.

No one wins all the time in trading. There is a perception by some, that a trader should see a positive return every day, week or month. That simply is not reality. There are never any guarantees in day trading, and there are times where the market moves defy explanation or the best of projections. There are time periods where every trade seems to be wrong, and others where every trade hits it perfectly. These up and downs are a part of day trading and a trader must be prepared for it. It is easy to trade when every day is a winner and the gains are huge. It is more difficult when there are multiple losers in a row.

When drawdowns happen, many traders get very concerned and want to start changing their approach. When we go through periods like this, we start getting questions about what we will do differently, and what is wrong with our approach. But there is nothing wrong with our approach, we don’t change anything because of a few flat or down weeks. Drawdowns happen, every trade is a risk and sometimes things don’t go as we expect. It is helpful to remember, we are still positive for the year in our SPX and SPY weekly option trading (nearly +700% in SPX option trading) and down only slightly in our SPX Spread Trader (-42%) A few rough days doesn’t mean our approach is invalid and it is time to start over. It is all a part of trading. We stay consistent in our approach and this is how we achieve success.

This is why it is so important to trade a lot size that allows you to handle the storms of trading. A trader should be able to handle 5 or more down days in a row without impacting your lot size. Money management is crucial to handling rough patches in trading. If you are trading too large of lot size for your account, these types of rough trading days can wipe you out. Be sure you aren’t trading more than you can handle to lose comfortably. Because losses do occur, drawdowns happen and the unexpected downturns come. A trader must be able to keep trading consistently so that when the upswings come, you are able to benefit.

If we look at our past performance since 2016 we see that rough periods happen. Let’s take a look at the worst periods in our past performance. For example, in December of 2020 we were -408% in our SPX trading, which has been our worst month ever. Yet within 6 months we made that back and were up over +400%!  In our SPX Spread Trader our worst 4 month period was in 2017 from October to January of 2018. We had a drawdown of -430%. Yet, 9 months later we had made that all back and were up over +260%!  Now we all know that past performance is never a guarantee of future results. We can have a new best period or a new worst period in the days ahead. But reflecting upon the past is helpful in evaluating the present. All this to say, what we experienced this month is nothing out of the ordinary. We don’t know what tomorrow will bring, but we approach each day with confidence that over the long term we will be successful!

There is nothing unusual about going through periods of drawdowns. So, don’t despair and don’t throw in the towel. Storms come in trading and to be successful you must weather those storms and still be standing when it passes. Just realize this is part of trading, stay consistent and you’ll be there when things turn. We look forward to a great week and new month of trading ahead of us. Below are our comments for each day of this past week:

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