Day Trading on Robin Hood - Part 5
As I mentioned in my previous post, this is an update of how Friday went in closing out my Iron Condor positions remaining on FDX on the Robin Hood app. It was ugly. Recall that I had sold a put at $165 that was "in the money" and also bought a put at $162.5 that was also "in the money" but only offsetting about half the loss of the sold put. As luck would have it, the jobs report this morning was strong (bad news for the market because Fed rate cut prospects this month are dimmed significantly and now a very low 4.9% chance of a 50 bp rate cut) and so the whole market was down from before the open, but recovered some losses later in the day. FDX was no exception, opening at $161, hitting a high of $162 and a low of $160 before closing at $161. I closed out my position with a loss of $2,415 after selling / buying back the puts. That basically erased all my profits and put me down about $700 overall, for the past few weeks of trading activity. A very valuable (and costly) lesson learned to enter positions carefully (do your homework and pick the right stocks), keep a watchful eye on your positions and exit quickly to limit losses when they start going south. Trading is definitely not "easy money."
Not being one to give up easily, I decided to come up with a new strategy to try for next week.
Here it is:
1) Enter into 2 Iron Condors for small amounts (around $500 each position) to help ensure execution of the trade and limit losses if the position doesn't work out. Select low beta stocks that have low volatility.
Coke (KO) 7/12 $51.5 - $52.5 (1Yr Beta 0.48 / Volatility 1.24%)
Sysco (SYY) 7/12 $71.5 - $72 (1Yr Beta 0.52 / Volatility 0.7%)
By comparison Beyond Meat (BYND) has a Volatility of 3.87%, so the companies selected are good candidates for IC and also no earnings next week, which adds to volatility and should be avoided.
2) Set aside remaining funds for opportunistic put / call trades on the SPDR S&P 500 ETF (SPY), which is the largest and most liquid exchange traded fund. I'm currently researching strategies that can be used to make smaller profits with no more than one trade a day placed after 1pm EST, when most of the news for the day has been traded. With the right strategy, I believe you can be successful making small profits most of the time due to the size, liquidity and limited movement of SPX on a weekly basis. To do this it's important to be disciplined: set target profit (say 20% - 50%) and close out when you hit it, close all positions at the end of the day regardless to avoid "surprises" overnight that could impact you the next day and also monitor and close out if losses exceed your target (say 20%). Also, options are available that expire on Wednesday and Friday of each week for SPY, versus the typical weekly expiration on Friday, which is helpful for setting up trades. More to follow on how this works out in future posts!
Hopefully you found this insightful and it helps you Build Your Financial Fortress!
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