Monday, April 25, 2005

Maybe I should only trade the Q's?

I sold my QQQQ Calls today for a profit of 57.50 per contract. I'm pleased with my execution. I sold at 4.50, and I don't think I could have obtained a higher price today.

I buy or sell the QQQQ's in small quantity every now and then based on my "feel" for current market sentiment, which I get from reading the market news. If sentiment seems to bullish I short the Q's, and if sentiment seems to bearish I go long. I haven't maintained accurate records of these types of trades, but I think I almost always make money when I trade the QQQQ's, and when I don't my losses are usually small. Usually these trades are over a couple of days. I sometimes wonder if I should only do these types of trades. I would keep my entire account in cash, and just do these QQQQ swing trades in large size every few months.

The question is would I have enough discipline to do that? I would be following the markets every day, but only making trades every few months, or maybe every few weeks. I'm not sure I have the discipline not to overtrade. Furthermore, most of my Q's trades are short trades that I take on as a sort of hedge when I am nervous about my pre-existing positions in the market, which are always net bullish. If I didn't allready have bullish positions would I be able to take on the trades at timely market points without that gut bad feeling about my other positions? Finally, there is one other problem. Maybe I only remember the good trades and I'm not as good at trading the Q's as I think. This is the kind of thing this blog is for. Months from now, I will be able to look back at my trades and not only have a record of my trades, but also a record of how I felt about them at the time.

The May portfolio was down today. UNH dropped below its strike early today, but rallied and heald above the strike most of the day by a thread. Near the close it recovered a little. I am very concerned that this one position could wipe out all of my profits for the month, and maybe last month's profits too. I need this position to hold above the 90 strike for 4 more weeks...

On a side note, I have a volatility trading system I hope to backtest and post about soon. I still need to finish up some work for my main business, before I can feel good about spending a weekend programming trading strategies.

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