Discipline When Cutting Losses Short!

2022년 1월 6일

First to note: This is playing out almost exact as my ominous 2007 chart pattern that I posted a few days ago on Jan 02. Im glad I posted it as it reminded me of being cautious on topping patterns, and today I cut my losses early from my most recent Call.

This is the 2-hr SPY chart, at 1:30 today it closed very bearish. The 2-hr stoch crossed down, and 4-hr stoch also failed lower, bad signs. In the past I would have held the Call longer waiting for a better selling point but I am trying to trade with strict “cut your losses short” discipline in 2022. My ‘stop loss’ rule for this particular Call was if the 2-hr candle closed with a stoch crossover. I opened short term Puts on SPY right after, sold them before close today, and profited in total double that which I lost from the Calls. Huge net gain on the week.

This is a reminder to myself to always follow your stop loss. We may see 5 more subsequent red candles down. Delta will completely destroy option premiums! Do not grab a falling knife.

Where do we buy back in to this with more Puts? 471 to 473, the green highlighted range I am thinking. I am hoping we see strength overnight and we open tomorrow in that range. We need VIX to pull back just a little bit anyways.