Trading Epic Fury (Part 12)

With Marco Rubio now proclaiming Epic Fury over, I want to wrap up my qualitative trading analysis because things did not end up well for me.

Things were going well as of Mar 30 (see Part 6). Since then, we have gotten:

The left arrow is Mar 31: first trading day after my Part 6 post. The right arrow is Apr 8. From a technical standpoint, the 20-SMA is reclaimed two candles earlier. Apr 8 reclaims the 50- and 200-SMA and the upper Bollinger Band is breached one day later on Apr 9. In retrospect, it’s clear by this point the rally is on.

In the moment with all the news swirling about, we don’t know the coast is on its way to being clear. Uncertainty reigns especially with many believing nothing the President says can be trusted because of how often he flips, contradicts himself, etc. Isn’t such the case with any politician, though?

For the sake of trading alone, the best advice is probably to ignore news altogether. I failed here by making a point to watch the nightly news regularly then switching to “Iran updates” online to get more “timely” reports. News varies by source and even by content and origination date as time progresses. History changes and evolves.

In contrast, technicals and day-of-the-week references are persistent and historically reliable. Technical analysis may be notoriously bad when it comes to prediction but with regard to trading post-mortem, it is a good yardstick to have. I give seasonal and technical rationale for the bull case in Part 9 and Part 10 (actually written on Apr 6).

Short calls were good to me until they weren’t during Epic Fury but over the last few years, it feels like I have lost money with them. Would respecting the stop-loss outperform a long-term campaign? Admittedly, campaigns aren’t terrible because eventually the market will fall enough to present loss-mitigation opportunity [probably coinciding with a desire to open more short calls for downside protection, unfortunately]. If the market makes an abrupt V-shaped recovery like it did here, though, then I’m caught with my pants down [probably being spanked pretty hard].

At the very least, short calls are somewhat tempting. During the campaign, I’ve made some money rolling the short calls for many months. Since I have no other upside margin, maybe it can’t hurt to continue.

Positive delta during the recovery would have been the panacea. It’s tough because leaning positive delta bleeds capital in a declining market, but at some point—either through a technical or stop-loss filter—those short calls might best be closed.

I will continue next time.