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GLD Case Study: Part I - The Wait is Over

I spend more time planning than actually trading. My previous blog post on GLD was part of my standard R&D. It was also a set up waiting for a trigger.

A common expression in the trading industry is "Plan your trade, trade your plan." I follow this rule categorically.

The set up for GLD, as noted previously in this blog and in the "Idea's" section of OptionPlayers was a touch to the ascending trendline in the range of $120.20. The following TC2000 chart shows my target area for entry and exit into the GLD trade.

Prior to the market open on Friday, I had the following trade plan, among 5 others that did not trigger (on other underlying's) written and ready to go:

Date: October 6th, 2017

Underlying: GLD

Strategy: Long Call

Option(s): GLD 10/27 $120 Call

Position Size: 10% of trading account

Entry trigger: Intraday price action / touch to

$120.20

Entry Rationale: Ascending trendine support

Technical Stops: 1 close below ascending trendline 1st

Technical Targets: 1 close above the daily 10 sMA

Stop Loss: 10% mental stop loss

Profit Target: Partial (75% of position) at 25% ROI

Time Stops: Evaluate Friday, October 13th, 2017

Additional: Consider adjusting to a spread or

butterfly if GLD touches the daily

30 sMA

Friday's early price action on GLD was a perfect low risk (meaning it was very clear where I was wrong), high reward opportunity. It triggered my trade plan and I was able to buy eight GLD 10/27 $120 call contracts for $1.30. As soon as the order was filled, I immediately entered a Good Until Cancelled order to to sell 6 contracts for $1.63. Then, I completed filling in my trade plan, printed it off, and posted it on my active trade bulletin board.

I love it when a plan comes together - GLD continued to fall after my entry, but rebounded before my 10% loss was hit. After it was clear we were out of the danger zone, I shut my computer down and didn't look at the charts until the end of the day, where I discovered that my order to sell 75% of my position for a 25% ROI had been filled. Most of my capital has been welcomed back into my account and I now have a position "on the house" to manage according to my plan.

Here is my risk graph:

(Courtesy of TomsOptionTools)

While trading is a "hobby" for many, we cannot forget that it is also a business. Planning, organisation, and execution as a business is what separates consistently sustainable and successful traders from occasionally "lucky" traders who watch their accounts wildly fluctuate and decline in value.