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Tales of a Technician: The February That was

March 2, 2017

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Time for the second installment of our monthly retrospectives. If you missed last month’s, then your life is half as joyful as it should be and not nearly entertaining enough. So take a quick peek at January’s by clicking here.

As mentioned in my prior missive these monthly delights are meant to be retrospectives 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.

Bullish Delight

February was short on dips and long on love. ‘Twas Valentine’s month delivering hugs and kisses to stock owners the world over. The S&P 500 scored 16 up days out of 20 trading sessions. Its oft-watched ETF (SPY) notched a gain of 3.9% for the month. That’s an annualized pace of a barn-burning 47%.

Bullish trades one and all basked in the sunshine. Profits were delivered like clockwork to any and all traders sticking with the trend. Sometimes mother market makes life easy. February was one of those times. If you lost money it means one of the following:

One. You fought the uptrend the entire way. Silly contrarian! The trend is your friend, until at the end. Then it’s your foe, stealing your dough. And, sadly for those of a bearish disposition, last month was most definitely not the end of the trend. Look, there’s nothing wrong with the occasional contrarian play. Just don’t let it make or break your entire month. Learn how to hedge, to shake and bake when overbought markets get overbought-er.

Two. You were a fancy-pants delta neutral trader that got squeezed by the market’s decidedly un-neutral behavior. I feel your pain. Provided you minimized the damage, chalk the month up as a win. Next time hedge quicker or enter bullish trades in other securities to capitalize on the ascent and offset (at least in part) whatever Iron Condors are ailing you.

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

This month lacked fireworks. The lion’s share of my premium selling systems generated profits as expected. I suppose the best area of improvement versus January was my better handling of any hedges. I didn’t take any outsized losses on hedges and thus captured the expected return for the month on most strategies.

And, on the positive side, I was short the XOP March 38 puts and played defense like a pro all month long. First, it was the short March 44 calls, then the March 43s, then the 42s, 41s, and 40s. I rode short calls into the ground during my staunch defense of the naked puts that were losing virtually every day.

Win #1: Protected short options run amok like a champ

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

February was a refreshing month. My stupidity lied dormant, no doubt planning some future subterfuge. But, I’ll ward him off when the time comes. The only regret I have is not deploying more capital to exploit such a favorable environment for the bulls. But, really, when the market is flying high it’s always a shame I didn’t bet the boat. That’s the price of the tempered, prudent approach.

Trade of the Month

This month’s highlight was a Russell 2000 Iron Condor. While its larger brethren were monkey-hammering the bears with an unholy moonshot, the RUT was docile. It probably helped that I played a lullaby to help my beloved index go night-night.

And just like that my March Condors delivered the goodies. And April is off to a rousing start so let’s all speak softly mmmkay?


Check out the entire 2017 retrospective series:


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