Monday, June 22, 2015

Binary Options S&P 500, exit

Times are New York time. See the entry post here.

Entry S&P 500 (Nadex:US500) 11:20 a.m. : Long the >2116 strike for a $77.00 debit with the index price at $2,128.76

Exited 2:09 p.m.: For a $41 credit with the index price at $2,123.61, slightly below the strike price.

Results: The index declined by 0.2% over 2 hours 49 minutes, or a -752% annual rate. The binary options produced an 87.8% loss on debit, for a -273,078% annual rate.

The chart below shows the Nadex strike price of 2116 positioned at the equivalent index market price of $2,124.26.

Click on chart to enlarge.
SPX at 2:25 p.m., 1 day 5-minute bars
Elliott wave analysis shows the S&P 500 having entered its 5th and final wave to the upside. It has fulfilled its basic requirement by surpassing the peak of wave 3. It could continue up for the whole day or it could reverse in the next five minutes, and it would still be within the Elliott wave guidelines.

I count the present pullback, which began after I entered the position, as a subwave counter-trend correction.

Elliott suggests that the B {-1} wave will be followed by wave C {-1} to the downside, which will end above $2,109.45.

Once the correction is complete, wave 5 will continue.

An alternative count would end wave 5 at $2,129.87, suggesting that my A-B count is incorrect, and that we're looking at waves 1 and 2 of an impulse wave to the downside.

As I said in the entry post, "Once wave 5 peaks, it will be followed by a significant reversal to the downside, suggesting that I should be fairly quick to exit if the price turns against me."

I followed that advice, and don't begrudge the loss one bit. The ambiguities are simply too great at this point.

It would take a strike of 2122 to go short on the assumption that the correction will continue. The bid is only $2 at this writing, giving an overly large risk/reward ratio.

-- Tim Bovee, Portland, Oregon, June 22, 2015


My trading rules can be read here.

Elliott wave analysis tracks patterns in price movements. The principal practitioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading

Several web sites summarize Elliott wave theory, among them, InvestopediaStockCharts and Wikipedia.

See my post "Chart Analysis: Nomenclature" for an explanation of my method for labeling waves on the chart.


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Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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Based on a work at s ss'ss

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