Anatomy of a +$5,437 (+6.69R) Trade​

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Today we're going to talk about the anatomy of a 6.69R trade. This trade made over $5,437 on two contracts, and this is the kind of trade that we do regularly with the method that we use to trade. What's great about this trade is you're gonna see all these different principles, the laws. I talk about the 10 Irrefutable Laws and trading success. You're going to see several of the laws at work here, and several of our key principles that work inside this trade.

The trade we're going to examine was in the ultra-bonds and this is a trade that we initiated last Wednesday. Now, we initiated this trade on an intraday timeframe. The way we think about time is very different than how most people think about time, and I'm not going to get into that today, so we're going to keep it just really simple, but this was an intraday trade. He entered this trade right here. This red box right here represented a support zone that we were looking to go long, and it dipped down in here and we got long right here. Our stop is this red line right here we got long at 135 01 but the 134 20 stop we were risking 13 ticks, and you can see the market goes sideways for a little while and then it takes off and then it goes sideways and then it runs off again into the close. Basically, the intraday timeframe trends higher throughout the day. It came into the end of the day. This is Wednesday. We were going into Thursday, which was Thanksgiving, which is the holiday market was goanna be open for a little bit, but trade is gonna be really thin followed by Friday and then into the weekend. Because of the holiday, we elected to hedge this.

Now, one of the great things about using options is options allow us to preserve the upside that remains in a trade, and they can also be used to replace a stop. For example, in this case, we had our stop at 134 20, but then we did not move our stop all day, we would have been willing to let the trade if it went up in here, turn around, come back and stop us out. We were willing to do that. Because one of our core premises is that stops kill performance. We try to mitigate the usage of stops whenever possible. We got long an intraday timeframe. We let the trade work all day long. Now as we're coming to the end of the day, and we want to start hedging up our risk.

The Ultra bonds do not have a great option market. Instead, what we did is we hedged it with the 30-year treasury bond, which is the highest correlated contract to ultra-bonds. 30-year treasury bond is an excellent option market. We came in and we sold, can see it here. This is where we got long on it. This is on a daily chart. Here's where we got long intraday, but this is that same area on a daily chart right here. You can see the market works, and up in here we have our ultra-bond position by doing the DEC ninth 126 and a half put 131 Call combo where we bought the 126 and a half put sold the 131 call and we had to pay 30 60 force. Bonds taken 30 seconds, but the options actually taken 60 force so we paid 30 60 force to buy this combo now what this combo did is this guaranteed us, remember we're long from 125, we're buying a 126 and a half put so this is guaranteeing us that we can sell at 126 and a half. It's 3064. If we convert it into 30 seconds is 15 30 seconds. We're going to have to give up 15 ticks worst case if the market sells off this means that we have a guaranteed exit after the combo at 126 01. This means that we have about 2.5 R profit.

2.5 R profit is the worst-case scenario for our position from this point forward, and we're selling a 131 call, so we have the ability to rally higher. Now this is a 131 call in the bonds, but basically this allowed about six points of upside in the ultra-bond. This was great because this allowed us to potentially make as much as another 10 R in this trade. Okay, so we hedge this up. Now we go into Thanksgiving holiday the market actually goes further in our direction, and then we go into Friday, and we get a counter trend move. Now because of our options structure, we don't worry about this. We're out if there's a problem. This puts us in a position of strength where we can be really patient in managing our position. That's what we do.

Then when we come into Monday, which was yesterday, we started looking to sell high in exit or exit rules kicked in. One of the 10 laws of success is we try and buy low sell high using what we call positive reversion to get in and to get out. Look when we got in, we've got in and positive reversion we got in on a pullback and how do we get out? We got out with the market pushing towards the highs. We sold initially the night session right here, and then we sold again over here. We averaged out of our futures at an average price of 137 29, and then we closed our combo.

When we have option positions on a lot of times there's not good liquidity at night. What we did is we sold out enough contracts this case we sold one contract to get the risk down. We carry long one contract against two combos. The risk of that was minimal in the short run and carry that till the morning but the option liquidity came in we sold high again right here, and we closed our combo. This got us out of the position. Now that left us with a profit of $5,437 or 6.69 R. The total profit of 8730 seconds per contract. You can see it all coming together.

We bought an intraday timeframe. We rolled it to a daily timeframe. We bought it on a pullback with low risk. We rode it the whole day without raising our stop. We hedged it with a structure that eliminated the need for a stop but allowed us to still have significant upside in the trade. We took it through the holiday. We took it through the weekend, and then when the market started to weaken, we sold high to exit.

Now what's interesting is that if we actually look at what happened today up in here is where we sold. This is where we got out you probably see it better over here. Here's the same chart up and here's where we sold to get out and you can see that was an excellent exit because today the market sold off. That's how you do it. We teach students how to do this regularly. It's not cheap, but it is amazing. Tune in next week and we'll continue to teach you different ways to take your performance to elite level. God bless Have a great week. Bye.