Short-Dated Play

Hey 5-Star Trader, 

“Tuesday Trade” Journal: One of the most important concepts in trading is to review your work, and learn from the good and the bad. Identifying what is working is critical — to do more of it. So, to lead by example, each Tuesday, you’ll get a trade from my trading journal, in which I explain my thought process from start to finish. Trading is all about finding something that works, and applying it over and over again. That’s how you find trading success. So study up on this “Tuesday Trade” and let’s get to work.

For “Tuesday Trade” this week, I want to outline my trade in Facebook (FB).

Earlier this month, I was on the hunt for shorter-dated trades that I could let chop around because I knew options expiration was right around the corner, which is why Facebook caught my eye. Not wanting to be too aggressive, I decided to buy a single contract of it —  SELL -1 IRON CONDOR FB 100 19 NOV 21 345/355/345/335 CALL/PUT @6.15 limit order (LMT).

The target for this trade was to stick around the $345 price point and I entered this contract on a Tuesday. The idea behind this was to try and get some theta decay within the next few days and to be out of this trade by that following Friday or earlier. Because I was intentionally trying to turn this trade around with only a couple of days, I kept my risk small at approximately 1.5%.

The following day the market produced more chop with the S&P 500 trading around 4700 and the Dow Jones hovering around 36,000. This behavior is very typical near options expiration and as mentioned, I specifically picked FB to fit this setup so my trade was looking fine. However, I did decide to hold to see if I could get closer to my target.

It was quiet for the remaining days until Friday rolled around… I was finally at monthly expiration. By the end of the day, the Facebook price ended up being strong for the iron condor, which is a bit of a bummer as it was holding really well the first hour of the market open. However, I was still able to close it out, taking profits on the $345 pin — BUY +1 IRON CONDOR FB 100 19 NOV 21 345/355/345/335 CALL/PUT @2.38 LMT.

Pictured above is my fill order in FB at $2.38. 

-Danielle =)

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