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Trading Journey [ Part 1 ] - Follow My Game Plan


I am starting a series of articles to update my latest journey, the emotions I have been feeling, current state of mind, mistakes I've made and also things I did right and should continue doing. Basically a self-reflection of my investing and trading journey so far - more like a journal.


I have been profiting lately using a Sell Put Spread on SPY strategy (link here ) for the past 2 months. However it really has been a roller coaster ride as usually on the final week for each month, there had been a huge spike in volatility which caused a lot of uncertainty in the market. For these 2 months I have been fortunate enough to escape without incurring losses since I took profit manually a few days before VIX spiked up (at around 50-70% profit, days before the last trading day off the month.)


For the month of February I continued my strategy by opening a Sell Put Spread for SPY on the first week of Feb 2021 and collected a premium $3.30. I closed this position on 24th Feb 2021 when it was hovering at around 70% profit since the premium dropped to $0.98. During that time, my thought process was that I did not want to risk a bulk of the unrealized profit just to try to gain another USD16 (75% target profit). Moreover I only had 2 more remaining days to close this trade (must close by the last trading day of the month). So I decided to take profit and closed my Spread position by buying it back at $0.98, making $3.30-$0.98 = $2.32 profit.




I made the right choice by taking profit 2 days earlier as S&P 500 tanked for the next few days after news came out that bond yield went up thus triggering a frenzy selling in the market. So this begs the question....if I chose to hold on to the position until the last trading day (26th Feb) and did not exit 2 days prior, would I have the mental strength to close this trade and absorb the loss? From profit at $2.32 to making a loss within days? Or would I have held it till the following week until the market calms down but breaking my own rule for this strategy? Definitely something I have to think about in the event I do land into this kind of tricky situation.


Anyway after I close my position early, I started to read news that the market was about to crash, my friends telling me we could be heading for another huge crash, YouTube personalities talking about start of a correction, etc. I started to become worried since I was holding a few option positions at a loss. Yesterday on 1 March 2021, the day I was supposed to resume my SPY Sell Put strategy. I saw SPY was about to open higher pre-market....from 380 to 384. i was thinking to myself :

"Hmmm maybe I should wait a bit longer till the market cools down ...so that I can collect higher premium while keeping the Strike Prices as far away from 380 as possible..."



When I logged into the trading platform, SPY was at 386 and I was getting myself prepared to place the order. During that time i looked for 30/16 delta to do a Sell put spread - following the exact same strategy I have been doing for the past 2 months.





I hesistated to submit my order since I was hoping I might collect higher premium above $3.05. I waited until the SPY went to 387 and the premium for the above Strike Price fell from 3.05 to 2.95. But instead of adjusting my premium to match the market's asking price I decided to still stick with $3.05....thinking "Hey the market will likely go down...I will wait...I want to get higher premium!". It did go up a bit to 3.02...and I was still adamant collecting it at $3.05 (silly stubborn me). After that point , SPY never really looked back and went from 387 to 388 to 390....and eventually closed the day at 389.


My order never got filled and ended up expired for the day :


Another friend of mine who is following the exact same strategy did not hesitate and executed the order as normal.



Here were my mistakes :

i) I did not follow my Trading Rules # 13 : RULE #13 - HAVE A TRADING PLAN AND FOLLOW IT CLOSELY.


2) I made the mistake called Price Anchoring which proved to be costly. I wanted to collect the Premium at $3.05 at the exact same Strike Prices which I missed out the first time during my period of hesitation. Even when the premium went back up close to 3.02 I chose not to adjust my order. 


3) Trying to time the market. I wanted to time the market to collect the best possible price. I assumed that the SPY will go lower after moving up by 5 points. How can it go higher? It did and it closed 9 points higher....



What I should do Moving Forward:

i) Follow My Game Plan! I will open a position tonight at continue the Strategy....to sell put spread Delta 30/16. I will learn from this mistake of trying to time the market to get the best possible price.

UPDATE : I did open a position 15 minutes after the market open when SPY was at $389. However SPY ended up closing $387. Anyway I will focus on my game plan and will be prepared to take any losses. 


UPDATE 2 : On April 4, my stop loss which I set at 100% was triggered due to the huge sell off in the market . I have made a loss of $210 within 2 days . Vix closed at 28.57. I may have made 2 mistakes.

i.  FOMO - Fear of missing out. Entering the day after the 10 points surge in s&p500. So I already was selling at a high point.
ii. Setting a stop loss at 100%. Anyway time will tell if this stop loss was correct. 


I will still continue to trade with my gameplan but I definitely need to improve on my trading psychology and may need to tweak my sell put strategy.
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