Friday, May 7, 2010

The "could have - should have - would have" game

As you know I have been "trying" with little success to short above the 1200 range and was afraid for more upside (eventhough we got close to my jan targets for this move up). I want to make sure everyone understands I am not being myself up, I did profit trading short in that range but we are talking about a few profits when trading options from 2.5 to maybe 3.5 or so. Now take a look at my attempts and what could have been.

I am just doing this for fun ... I do not like crash like environments since I do not gamble, if I had been lucky enough to have kept my positions, well, I probably would have closed them out anyways at 1140 or higher. Either way this chart says it all of how fortunes are made for a very few lucky ones, and accounts are blown up for the unfortunate ones - just imagine an options seller in this scenario - traders who have been shorting puts for the past 14 months having made LOTs of money - well now it backfired. As you all know yesterday rapid downturn was a crisis of liquidity and not some "citi induced mistake lol". Currencies gave an hour warning before it all came tumbling down and liquidity was drained from the system to cover FX losses/gains by using equities as a hedge or counter trade.

I use tradestation and lucky for me it was active during the entire event yesterday, when looking at my order matrix on ES futures after we dropped below 1130 - I have never seen such a thin market ... NEVER. Orders of minimal sizes were able to move the market substantially where in normal days it could barely make em move a quarter point. Any type of big order such as 2000-3000 ES contracts yesterday were moving the market 5+ points or more. Something that during cash hours would move the market by 0.25.

Amazing ... honestly. Well I am going to continue gazing at this chart lol. Maybe the lesson learned is that if you are bearish or bullish, never be 100% cash lol (ok I am not going to add that to my trade book just so you know - but I do wish I would have been able to capture some money off this down turn).

At this point - I am sitting and waiting, will not commit any capital to the market until we have found some boundaries. Where those are I do not know. On the short term I do think that we are partially done and the markets will calm down over the next 2 weeks, I do believe the feb low will hold if we do attempt it on the short term but after that, I do not know.

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