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The Good and the Bad of Trading ICE

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Yeah, you may want a stop with that.

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There was some movement in IntercontinentalExchange (ICE) this week. This sort of encapsulates the best, worst, and most mediocre aspects of my trading strategy.


Click to enlarge


The worst? Well, I have a handful of naked put shorts that I roll each cycle. The names change, but basically, I look for generally uptrending names, and then short some puts into mini-dips. I defend them with either some stops in the stock or longs in the inverse ETFs.

ICE hit my radar a few months ago, and it worked pretty peacefully until yesterday. My position wasn't big, and because this name hadn't threatened anything on the downside for a while, I didn't bother with a stop.

Oops.

The mediocre? I ended up covering by turning the put short into a butterfly, and going long the 100 strike. The stock kept going lower, so then I had my one good idea. I just converted it to long downside gamma by shorting more 105 puts -- so that I was now short the 105-100 put spread 1:1. Then I bought an equal number of 95 puts and a little stock.

That part worked out well yesterday as the stock imploded. The only thing holding me back was ... me. I got short and shorter through 95, and was patient all the way until the 91s. This sounded great at the time, since I didn't know it would go to the 84s. By the time it reached 84, I had bought more stock, and kept the long gamma game going by purchasing some July 85 puts.

Overall, it took a lot of effort to just about break even -- although breaking even was a lot better than the initial ugliness of my put short. (That was the "best" to come out of this particular scenario.)

I'm now just long some gamma. For the moment, I'll probably sell some "wings" (OTM puts and calls) and call it a day.
No positions in stocks mentioned.
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