Account Update 5 - $1,198.26 -19%

[Conqueror]

Daily Comments

Well, today sucked. I woke up this morning to the news that SENS had released news of their FDA approval alongside their abysmal earnings projections for the year. But I suppose we should discuss that in the breakdowns so let’s get to it.

Play Breakdowns

CVS

This was the play I shouldn’t have been in from the start, but thankfully with the down market it started to acquire some SPY correlation and came down hard enough to make me green. One thing that I need to be careful of is to properly select plays, instead of going off of what “everyone is buying”. I didn’t do that here and wound up in a trade I wasn’t really feeling. With that said however, I ended up making $120.00 on this play and it worked out for the best after some strategic averaging down.

SENS

Ugh. I had assumed that SENS would release their approval news over a weekend, but apparently I had assumed wrong. Yesterday after my gains with ASTR, I took a position in SENS at what I believed was a safe cost basis looking for some bullish movement at open today, similar to days previous which I could cut at a decent gain. However, the surprise release of the FDA approval (good) was completely offset by their atrocious outlook for the year. I’ll give @Shamu some much deserved props for his fundamental analysis for SENS in the thread because it would seem that the weak fundamentals of the company were more than enough to overpower the FOMO of one of the most anticipated approvals amongst retail.

My strategy for this was to stop playing it on Friday as in my opinion it had been running a bit hard and was due for a pullback. I never quite wanted to play this through the approval itself, but here we are.

People watching the stream watched me cut my SENS options at open for around a 50% loss which dropped the account to just shy of 1K, effectively erasing all my gains for the week. I became pretty tilted by this but in the short term focused on recovering some of the loss by playing the same play I’d gotten wrong in the correct direction. I took 5 puts and dropped them quickly for a 30% gain, making back $35 of the $339 I had lost immediately.

This left me with one open position at the time: CVS. I’ve spoken on this before and I got the opportunity to show it in action today. While I hated the CVS play itself, I did believe that the play would turn green for me. So instead of getting in my own head and thinking because I lost on SENS, I should immediately cut everything because I suck, I held the position because nothing about that play had been changed. As a result, I was able to make a $120.00 gain on the position today and cut for a profit. So instead of being down 32%, I ended down 19% preserving a modest weekly gain on account instead of ending where I started.

After I held enough composure to get out of my SENS position, I stopped trading. This is another part that I am fortunate to have demonstrated. Had I continued trading at that point I probably would’ve taken something volatile looking to trade back my losses even further, but instead, I went for a drive with my wife and her family, went to a bakery and got lunch. It was nice. Then, when I came back, I was fresh and able to sit down that actually just chill. You don’t have to trade all the time and in most cases it’s absolutely better that you don’t. Today is an example of that.

SPY

I touched on this in the intraday commentary, however, this account is the only account that I am now actively trading. The style is not my usual considering people are now following along and taking my semi-YOLOs all the time would be irresponsible and not indicative of the goals of this challenge, however, every once in awhile an opportunity might arise where I’m going to take a risk and this SPY put is one of those times. Given the current political climate and the fact that we’re heading into an emergency FED meeting on Monday, I can see a path to a gap in the downward direction on SPY. Normally I would’ve road FDs into the afterlife (well, one of them anyway) on this one, but I actually carefully selected a reasonably farther out expiration and an obtainable strike with a FEB 18th 430 PUT. Thanks to @thots_and_prayers I was just made aware that Bullard will be on MSNBC Monday morning so I’m liking my chances that I’ll probably be able to start next week off with this position green. Or maybe not, it’s a risk and that’s why I said so.

Closing Thoughts

At the end of week one I’m very pleased with how this challenge is progressing. While I undoubtedly made some bad trades this week, the account is still positive and I got an opportunity to show a lot of the stuff that I talk about in a more transparent manner. I honestly feel that at the end of the week, the challenge has already been a help and I am extremely excited to continue next week focusing a little more heavily on the research and trading sides now that the distractions of the setup are behind us.

One of the things I’m most proud of was today’s SENS recovery second to the ASTR win yesterday. With SENS, we called the play from the lower $2’s and safely and effectively rode it up to almost $4. Those following the account watched me take profit several times and reposition at better cost a better cost basis with a similarly sized position each time. Because of this, I was green on SENS overall despite getting completely blindsided by the approval drop:

SENS netted the account a total of $396.00, which is 39% of our starting account value. Obviously some of the misplays have chipped away at that, but it goes to show how properly profit taking and repositioning (not rolling) can protect you while increasing your profitability over time. So for this, I’m extremely proud. SENS went terribly wrong out of nowhere, yet the account is still intact, I’m still up on the week. This is how you succeed.

See you guys Monday. We’re going to hit this a little harder next week and I’ll be way more active in VC as well. Be sure to ask any questions you guys might have or give me any feedback you think is pertinent for the next week so I have time to read and consider it.

Stats

Today we were down -19% on account and we’ve finished the week at +19%.

[Conqueror]

Another change I’ll be implementing is getting up earlier next week (lol). For the past couple months I’d kinda gotten in the habit of sleeping past market open because I wasn’t actively trading and that was somewhat of an issue this week… so imma set an alarm and get up at old man time again. JB’s gunna get his scalping buddy back (minus the scalping until I’m over 25K )

[MENoir]

The way you played SENS is EXACTLY how you don’t get blown out when something happens out of left field.

That surprise ER is the kinda shit that you wake up to and can’t do anything about while you stress about how your account is gonna be worthless at 9:30am. You can’t plan for stuff like that, but proper trading discipline means it will be a bump in the road, not the end of your account.

Huge props for ending the week up 19% when at one point SENS was like 71% of your account. Would have been very easy to ride that position into today thinking you’d be relatively safe.

[winterkill007]

Hey Conq - appreciate the update and insight. Since the way you traded SENS feels like a major key that I (and I assume other less experienced people) might not fully understand - would you mind elaborating more on it? Being able to get a clearer understanding of how to play winners, which I feel like this forum is constantly finding, so you maximize returns while minimizing risks would be very helpful.

What indicators were you looking for to sell on and buy on? Were you moving strikes at all?

[tedro]

Not Conq and hopefully he’ll give a response but I’ll take a crack at it.

The main idea is even though SENS had a catalyst that we were waiting for, the stock price is still going to go through natural ebbs and flows.

Basically, take a position and cash out when it gets to a good profit. Hopefully you time a peak and then you watch the stock go down and find a level of support. Then you buy back in with your profits from the previous cash out. The key is to take a single contract, buy another, then another but always keep cash on hand to average down if needed.

Rinse and repeat.

Essentially, watch for a good entry price, when it hits your target, sell. Wait for another good entry price and buy back in. You don’t need to sell your entire position each time, just enough to maintain and gain more profits each time.

In theory, with each cash out you’re “padding” your earnings more. With responsible positioning you should still maintain profits even if there is something unexpected like with SENS this morning.

[nope]

I am beyond grateful for the hands on learning this teacher/student experience is providing. I’ve collected multiple books over the last few months & while I have read some, (enough to learn the very basics) I need to actually be practicing what I think I’ve learned for it to really stick. And I’m sure we all know, that can be VERY costly without proper guidance. TF is definitely beneficial but with how fast paced it is at times, it can be difficult to get detailed with things. So this challenge is perfect for me! Even on the not so great days like yesterday (Friday), I know if I had been in on the same plays on my own… I probably would’ve blown up my port. So THANK YOU for taking the time to do this!

With you & the other Gods/mods/ascending etc, there’s no stopping this coming community. Have a great weekend!!

[wolfwoodx]

Regarding the “Emergency Fed Meeting”, I’ll just say that this is not out of the ordinary and these have been schedule and held previously before and I don’t believe the meeting minutes are released:
Federal Reserve Board - Board Meetings (see 1/18 for another meeting with the same topic).

Although Jan 18th had a red day overall, it was in that general downward trend for SPY that week.

I also think that Bullard isn’t going to be as much as a bear catalyst as last time - although he’s on Squawkbox at 8:30a (before the meeting) he’s already said his piece, but he is the only Fed official who endorses a 50-basis-point hike - every other Fed President has countered this, I think JPow has been mum but Bullard is notoriously hawkish and isn’t afraid to say so. It’s possible the markets could dip lower on Bullard’s comments but he’s already said his piece at this point.

So given Fed meeting won’t release minutes, these happen fairly often, and no other Fed official has agreed with Bullard on the 0.5% hike, I don’t see Monday actually have a ton of bear catalysts short of Russia actually invading Ukraine, which is a white hot wildcard here. I know inflation is a concern, but the CPI data was released premarket Thursday and SPY actually rallied from the dip until Bullard’s comments. Also important to note is core inflation is 6.0%, which is above the expectation of 5.9% but not much. I personally think the markets are heavily overreacting at the moment to possible hawkish Fed action.

The final interesting piece to this week is the PPI - the producer price index. I don’t know if this necessarily will be coming in above expectations and if it comes in under it could be a bull catalyst. Two major reasons: EPS/earnings/profit has been on the rise in ER in addition to revenue beats, and although wages & costs have been on the rise which has transitioned into a higher retail price (CPI), from my understanding the prices factored into the PPI are from domestic industries of raw goods and services (no imports). Since this is a leading indicator, if supply chain were affecting these industries initially and driving scarcity up initially (PPI was high for most of 2021), resolution of supply chain could cause this to start dropping, which would then cause CPI to start dropping.

Indeed, over the past 5 months (since Sept), PPI had been decreasing a bit from mid 2021 until November, possibly due to Omicron, but in December PPI dropped dramatically. This, then, may be realized into increasing profits for companies in the Q4 cycle and recent ERs (when PPI was dropping but wages were increasing due to labor shortages).

This may be a chicken or egg argument but if inflation is more affected by supply chain issues, a decreasing PPI over time will be a leading indicator that inflation may have a transitory component - the importance of this, then, would be Fed policy would be less hawkish than what Bullard thinks is necessary.

So my thoughts are absent a Russian invasion, and maybe even after a Russian invasion, signals that inflation is not progressing as dramatically as the markets think would actually catalyze a market rally/recovery. This week may be really choppy for SPY though, war concerns + a lot of reports/news, including jobs data - which has been coming in stronger than anticipated as well: https://www.cnbc.com/2022/02/11/fed-rate-debate-ukraine-tensions-could-jolt-markets-in-the-week-ahead.html

[wolfwoodx]

that said, 1/13 was the release of the Dec PPI, which came in below expectations, and that day was still a pretty red day for SPY - but that day also happened to have the jobless claims report, which came in higher (230k) over expectations (200K). These claims (weekly?) have been trending downward, I believe, as well, and this week it’s released Thursday PM. Basically I feel like if the PPI meets or is below expectations and jobless reports continue to drop or stay flat, there aren’t any substantial bear catalysts for SPY this week (again, absent a war). Not sure if recovery will happen or if it does, if it’ll be anything like the tech ER weeks, but just my 2c here.