We had another great week +389% day trading SPX Weekly options and +278% day trading SPY weekly options. The standout day of trading was certainly Wednesday with the FOMC meeting. Trading on a Fed Day is always exciting, and this week was no exception. We’ve commented on this before in our blog, but thought it would be appropriate to comment again on how we trade Fed days.
Wednesday, March 15th was a FOMC meeting announcement (Fed Day). Our traders were reminded to read about our approach to Trading on a Fed Day in our SPX Daily Outlook, and were prepared for what to expect. As we mention in that article, we are much more flexible on our stops on days like this.
Our SPX Outlook provided our members with the key levels for the day, and we entered our call position at 9:35 am as is our normal approach to trading. At around 1 pm EST our option hit the initial % profit target of 100%. It was also trading above our 1st target level of 2376. There was obviously strength to the day and we were about an hour before the Fed announcement. There were two choices for a trader at this point, follow with a tight trailing stop, or give it more room because it was a Fed day, with anticipation of a nice breakout. We gave it more room, because it was a Fed Day. Our position pulled back …to the 30% profit area…but we held. Had it come down to break even, we would have exited the trade. But we held, and then as the Fed announcement came out, the market exploded to the upside.
Now as we’ve shared before there are normally huge swings in the wake of the fed announcement. Quite often, after a Fed announcement there is usually a strong push in one direction, then a retracement before continuing the direction. This is what happened back on 9/21/16 as we shared in our blog, and what happened on March 15th as well. Also, take a look at 12/14/16 for the same pattern in the opposite direction. Knowing it was a Fed day, and knowing this is to be expected, is how we continued to hold our position. We were expecting continued strength, looking for a rally up to our 3rd level of 2386. It did break through that level, and we were able to ride our position up to the end of the day where we exited with a very nice 316% profit.
Fed days are always tricky. There were many possible exits on this day, from the 100% early in the day, to the 200% right after the announcement, to the nearly 400% high in the last 30 minutes of the day. To ride the huge gains on a Fed day, you have to be willing to be much more flexible on the stops to give it room to move. But doing so, can result in very nice gains when it goes as we expect. We’ve seen this pattern repeated over and over again on Fed days, and our members are prepared for these days by receiving the SPX Daily Outlook. Having the target prices and knowing which direction to trade is the key to trading Fed Days profitably.
We look forward to another exciting week ahead, day trading SPX and SPY weekly options.