Summary: Big drop in past 2 days nearly reversed the rally from Monday to Thursday morning.<br> <a href="http://i0.wp.com/www.lifestyletrading101.com/wp-content/uploads/2015/12/img_0286.png"></a><br> And here’s my wave count for today’s action:<br> <a href="http://i0.wp.com/www.lifestyletrading101.com/wp-content/uploads/2015/12/121815-skitch.png"></a><br> <br> As you may know from <a href="http://www.lifestyletrading101.com/2015/12/17/thursday-121715-spy-1-52-post-fed-rollover-good-prediction-puts-up-over-100/">our post yesterday</a>, we bought SPY puts when ES was trading around 2065 — we bought those at $.79. Today, they close well over $3 — and we cashed out our last piece at $3.11 (we cashed out the first half at $1.81 yesterday).<br> Today we also realized our 207.5/209 call spread since we had gains of $1,000 and the max profit on that trade was $1,200 — so we were close to 80-90% of potential profit. Given the action after the close (big drop) – we could’ve held on, but not worth the risk with profits on the table.<br> <br> We posted 2 videos:<br> <br> * How and when exactly to execute a buy put order<br> * Live trading – closing out a call spread on my mobile phone<br> <br> <br> <br> <br> Transcript<br> Today is Friday December 18 — expiration Friday —<br> <br> Last week we talked about how we realized $2500 by betting that the market would stay below 210 in the SPY – indeed it stayed well below 210 and thos optionso expired worthless, which means we collected our full premium of $2500 — the way we collected that weekly premium — was just like the way insurance companies make money.<br> <br> Insurance companies bet that you won’t get into an accident, –and they have information about you.<br> <br> Likewise, we bet that market would stay below 210 at expiration — and we had information about the markets — historical wave pattern information. And based on that information, we we made that bet and collected our weekly premium.<br> <br> <br> and we also said we bought puts and did another short call spread with short strike 206.5.<br> <br> Now how did these two trades from last week do?<br> <br> Well, initially earlier this week on monday and Tuesday, they were up big–the SPY went all the way below 201 — but then the market rallied into the Fed meeting on Wednesday — where they raised interest rates for the first time in some 6+ years.<br> <br> Because of the Fed announcement and the rally into it– we had to exit the put at puny profits — and the short call spread, we lost a tiny bit — so it was basically break even — in order to reduce risk. Reallyl, we should’ve realized gets especially when 90% of our maximum profit potential was hit on Monday. But instead, we didn’t close out — and the market rallied our gains evaporated. But didn’t want continue holding into the Fed meeting — because crazy things happen on Fed day.<br> Sometimes, that’s what you gotta do if there’s some big news event like there was this week on Wednesday.<br> <br> <br> So what happened during the fed announcement? The ES (S&P futures) were around 2045 –they initially dipped down to 2030–then rallied into the close at 2065. Overnight, it hit over 2070. <br> <br> Lots of people were saying that this was a super bullish pattern and that we were going to hit new highs.<br> <br> We really looked carefully at the wave patterns posted on our blog our prediction for what exactly the wave pattern was with this fed announcement. We were convinced, that this rally —would turn over. In fact, we specifically said that if it ever touches 2045 on the day after the Fed announcement, the entire market would turn down.<br> <br>
