To extract every last ounce of goodness from market movements this year, I’m launching a new feature here at Tales of a Technician. It will be a retrospective where I look back on the previous month to highlight what I did right, what I did wrong and key trades that defined my bottom line.

By systematically documenting my analysis no lesson will go unlearned, no mistake uncorrected. You’ve heard us teach the importance of journaling and reviewing your trading systems. This exercise will allow you to see me practicing what I preach.

A Premium Seller’s Perfect Storm

The market gods finally heard the cries of Condor sellers begging for some sideways action. And boy did they deliver. The Russell 2000 Index (RUT) traveled a circuitous route to nowhere. With yesterday’s pop into month end, the RUT was able to eke out a minuscule 0.003% gain for January. Profits reigned not just for Condor caretakers, but premium sellers of all stripes.

And it wasn’t just the markets mindless meandering that had theta raiders hootin’ and hollerin’. It was the utter lack of realized volatility. Want to know how much actual movement we saw in the S&P 500? Look no further than the historical volatility indicator. A 20-day reading for this “actual movement measurement” closed out the month at 6%. In case you didn’t know, that means the stock market exhibited the pulse of a corpse. We’re talking deader than dead. And here’s the thing. The CBOE Volatility Index spent most of the month at a 12%.

Selling 12% volatility in a 6% volatility world is the bee’s knees.

What I Did Right (aka why my mommy should be proud)

For starters, I efficiently used my capital by deploying the bulk of my portfolio in well-thought out trading systems. In favorable environments the more trades I have going, the more coin I bank. This principle was on full display this month. Admittedly, this works against me in hostile environments but let’s cross that bridge when the time comes.

Win #1: Took Risk, Got Paid

For my next back-pat let’s talk about my process. Traders should be process oriented, not results oriented. If the process is sound, the profits will come. Rather than obsessing over my P/L column each day, I did a decent job on simply focusing on executing my plan.

Win #2: My Process Reigned

What I Did Wrong (aka the last vestiges of stupidity)

My principle mistake this month was the mismanagement of a few hedges. Given my good fortune over the first few weeks of the year, I was looking to reduce exposure at the first sign of market weakness (my portfolio was leaning bullish). So, when the RUT slid below minor support at $1,354 on Jan 12^th, I promptly sold a Feb 1410/1420 bear call for $1.60. Fast forward a week (to Jan 23), sprinkle in some time decay and choppy-chop price action for good measure and voila! The position was thriving. The call spread had fallen in value to 60 cents netting a $1.00 gain per spread. Rather than exit, I let it ride. At that point, I should have placed a stop to bail of the market ripped returning me to break-even on the hedge. Instead, I gave it too loose of a leash and ended up taking an unnecessarily large loss on Jan 25^th. I had equally horrible management on bear calls in IWM and SPY.

Loss #1:  Manage your hedges better, ya dummy!

Trade of the Month

SLV was the largest contributor to my bottom line this month. My experience reinforced the necessity of process. I got hit on my SLV naked puts in December and stuck to my plan of allowing assignment and then selling January covered calls. This tactic allowed me to extend the duration of my position in hopes that silver would finally straighten up and fly right.

I netted the max gain for the covered call in January and then reverted to selling puts for February (which I just exited today at my target). A double dose of wins for SLV made it the big winner of the month.

---

Check out the entire 2017 retrospective series:

• The January that was
• The February that was
• The March that was
• The April that was
• The May that was
• The June that was
• The July that was
• The August that was
• The September that was
• The October that was
• The November that was
• The December that was

---

Financial freedom is a journey

The Tales of a Technician series is brought to you by Tackle Trading.

Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.

# Sign up now for a 15-DAY FREE TRIAL #

---

Legal Disclaimer

Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses, and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.

All investing and trading in the securities market involve a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax, and accounting advisors, to determine whether such trading or investment is appropriate for that user.