Wednesday 4 March 2009

The Ugly

I felt a bit under pressure to trade and waited for what I thought was resistance at 3600 *on the F. On this basis my trade was a long combo or risk reversal- selling 3850 calls to buy 3200 puts. The market decided to smash upwards at the end of the day and closed 40 points above where I traded. I am looking at a cost of 23 to close having opened for a credit of 4. Annoying, and of course it is simplistic to expect these to work every time. Time decay and volatility work in one's favour when wrong. Having a plan is also key to exiting a losing trade.
Will the market describe a 'V' bottom or will we have a retest or is this just some silliness from 'quantative easing' where they subtley leak money into the market? I'm hoping for a drop, but need to be cautious if this gets out of hand.
* 3625 was the pivot level R1, and the F was wobbling around central pivot for a long time,

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