Trading requires mental toughness and trading is about deciding what action to take when faced with an adverse situation. These actions can be either positive or negative. We can choose to respond or we can just react. Usually responding is the correct course of action.
The week leading into the July 4th weekend was quite volatile and a lot of traders got burned one way or another, some covering their shorts for a loss or and some closing their longs on the way down. It is during these adverse situations that the true trader’s character shows up; is the trader ready to call it quits because of the doubts in his or her trading skills or is the trader aware of the bigger picture of his or her trading career and able to see that the week of July 4th was nothing else but just another trading week? The answer is in the eye of the beholder. We create our own reality and we are ultimately responsible if we are just reacting instead of responding in any given trading situation.
This article will share a trade that has gone wrong and the double fix that was done to repair it. This content is written for educational purpose and it is not to be used blindly on any given trade that has gone wrong. We will follow the trade with a chronological presentation.
An iron condor was sold on the XEO Thursday, June 28, when the weekly options were listed and it was trading at 610. The sold legs will be the center of our focus, the 620 call and 595 put. That very same day the XEO tanked and it appeared that giving 15 points (610 entry price minus sold 595 put) of “breathing room” to the downside made sense. The upside “breathing room” was only ten handles. The low of that day was 602 and it seemed that by the expiry the sold 595 put could be challenged. The… Continue Reading
