I tweeted earlier this week regarding an e-book that Rob Hanna wrote about FOMC days. I highly recommend it and without giving away too much of Rob’s book, here’s how I played the FOMC this month.
I was looking for a weak close yesterday but that didn’t occur and I admit I was a bit gun-shy about entering this trade so I took a smaller position than normal. At any rate, I place an order to buy some weekly calls at or near the 13 EMA. With some quick and dirty math I calculated a price of $6 and was filled on the order as the day progressed and the market weakened.
Shortly after I bought the calls the market took off and the thought crossed my mind about taking 1/2 off the position as I was looking for a weak close and was getting a strong one instead. My plan called to exit the trade the next day and I stuck with it knowing that FOMC days are historically bullish.
Anytime I get a nice gap in my favor it is always part of my plan to take 1/2 the gains at the open and FOMC days are no exception. Today’s gap was pretty extended above the +2 standard deviation trend of the weekly price action so odds were good we’d see a pullback at the open.
Sure enough, the pullback occurred and my order was filled at $12.50 on 1/2 my position. My plan was to offer the remaining calls out when the $SPX hit 1300 knowing that it is so close and on a historically bullish day the odds were very good we’d hit it. Using the same quick math I figured the price of my calls would be worth around $15 so I put the order out there and went about doing other things. What I didn’t account for was the pop in housing data and that took my remaining calls away at $15.
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Good trade. I also enjoy that you posted the order as a graphic. Helps me to learn better.
Nice trade. Thanks for breaking down your trade.
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