Wednesday, September 21, 2016 was a very interesting day in our trading, and so wanted to comment a bit on how we approached the day. Whenever there is a Fed announcement regarding interest rates, it clearly will be a volatile day. There are a couple of ways to trade such a day. A trader can skip trading, wait for the Fed announcement, or trade as always. We typically will trade as we always do, with one minor caveat, we will be a little more flexible on our stops.
Trading on a Fed day
On Wednesday we entered the trade at 9 we had about a 70% stop loss as we went through the day, because it was a Fed day we were giving it plenty of room to move. Once the Fed announcement came out, was clear we should see nice rally. Typically there are huge swings in the wake of a Fed announcement, as there was on this day. So this is why we didn’t exit our position, even though it dipped below our target level of 2144.
Our option traded at 2, which was -78%…and our stop was about 70%. But because this was Fed day, we didn’t exit immediately. Also it was bouncing off the daily target level of 2144 and was in the wake of the Fed announcement. We were expecting the rally off the Fed news to continue, and because it hadn’t broke 2144 we held, and it bounced. Then we followed it up to exit just before the close with a 62% profit for the day.
Had it broke through 2144 after the Fed announcement, we would have exited. But it held and bounced, which is why we stayed in the position. Fed days are extra tough, hopefully that helps explain our approach on such a day. The stops and profit targets are guidelines, and we use them together with the price levels. We never enter our stop orders ahead of time, to avoid being taken out with a very quick move.
223% Profit for the week Day Trading SPX Weekly Options
All in all it was a good week with a total of 223% profit for the week’s trading. More details can be found here. Once again our members received our SPX Outlook within the first 5 minutes of the trading day and were able to use that information in their trading.
We look forward to another great week ahead day trading SPX weekly options.