Hello Hive,
Hope you are doing well. :)
This is to record my trade from yesterday, 1/29. I sold 2 contracts on SPX (S&P 500). I started by looking at what price had done in the past several hours, and also I like to take a look at the marketwatch indicator which is only found on my broker's platform. (my broker is TD Ameritrade)
It's mostly green which is shows that price is now moving up.. market is bullish right now. This is in agreement with my simple eyeball analysis of the recent price movement.
This shows when I enter my trade (the blue vertical line) and how price was climbing up pretty hard all morning. I also tried to show that I want price to continue to climb cuz I win my trade if price ends the market day ABOVE the strike price I sold.. by selling what's called a Put Credit Spread. (PCS)
Another factor in my trade is the VIX. (volatily index) It's also called the fear indicator and shows me if prices are on the tamer side, or will move more wildly.
I would say a nice, calm, pretty average VIX is around 17-18. The market is pretty volatile at VIX 29. :( But luckily, the credit we collect for selling an option is also increased the higher VIX goes. The tradeoff if you can lose a winning trade in just minutes.. even seconds!
Here's my trade order after it triggered..
I like to take a pic or two as the trade progresses..
(You can see that price hasn't continued climbing, but is now ranging up and down. It's all good for me as long as it stays above my strike)
Here is one thing I look at to track the POP (pobability of profit). The lower the delta (last value) the better. It's already very good here..
A delta of 2 (or .02) means the broker calculates there's a 2% chance of price touching this price. Just because the delta is low now, though, doesn't mean that's for sure the way it will be. Price could move and change the deltas in a heartbeat.
This is the delta 5 minutes before that trade ended..
I wasn't too concerned at this point. :P
Finally, here's the chart of the finished trade..
and the final result..
$100 (actually 2 contracts X $50) - 4.38 (fees) = $95.62
I know it might be confusing to some people, so feel free to say any question or comment.
:)