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July 22, 2012 / redman59

Murphy At His Finest on Friday

This is a follow up trade result to a previous post titled “Sometimes You Got To Ask Yourself…“. I wanted to come back to this trade as it shows Fridays (6/01/2012) price action and is a great example of how Mr. Murphy lurks around and will get traders despite what seems extreme.

The position I had on was a 1280/1275 Weekly SPX credit spread. I put this on Wednesday morning after there was selling in the SPX. Looking at the option premiums I was happy with the price I could receive for the 1280/1275 credit spread as I expected some basing/grinding throughout the week into Fridays employment numbers (NFP).

I was comfortable with the rest of the day Wednesday but Thursday saw further selling on the open, just relentless. While I was getting close to an adjustment point near the low of the day at which my position was at -$43.00 per contract, the market ended up rebounding and even putting in a inverse head and shoulders. But this did not bring confidence given the news to be distributed on Friday morning. With the market trading above 1310 near the end of the day I thought:

“What are the odds tomorrow that we close 30 SPX points lower and would I sleep better at night if I removed the trade”. I actually wrote this thought in the post highlighted above that I wrote early Friday morning.

So I closed the trade for a profit at which I was happy and went to bed with ease. As you can see on the chart below my thoughts of what are the odds closing 30 points lower? Apparently they were very good. and this trade, without closing or adjusting, would have resulted in max loss. Just remember, anomalies do happen and sometimes at the worse time. Notes are on the 15 minute chart below.

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