Feb 2, 60 points SPX drop

Discussion in 'General Discussion' started by Marcas, Feb 3, 2018.

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  1. Marcas

    Marcas Well-Known Member

    We had very big drop in SPX yesterday. I hope everybody is fine. Trades we mostly do here shouldn't be affected tremendously. Most vulnerable, I guess, would be M3 but with very developed methodology it should be fine unless psychology: 'I should do this but I thing market will to that so I do nothing', get in the way.
    If I was still in my old way, trading weeklys with full time job, I'd be probably destroyed. Again I appreciated mental comfort that comes with longer term, OTM structures. It let me observe whole event with calm and curiosity and even try to grab some profits with daytrading (with mediocre results).

    During Friday session I noticed something interesting and want to ask more experienced traders for their opinion.
    In spite of 60 point drop there was no panic on the markets. Descending was performed in very controlled manner, we did not have huge intra-day candles. Down move accelerated toward end of the day but, still, no signs of panic.
    I'd expected, as others did, that influence of algos would be such that one algo try to beat another which result in madness of selling. It didn't happen. Same with human traders, it did not feel like everybody was looking for exit. Whole thing reminded rather controlled demolition. It almost look like – my imagination here – there was some force that new how traders/algos are about to go in panic mode and controlled market moves to prevent this to happen.

    Putting imagination aside, we do not know what will happen next week but looking few days back do you also perceive market behavior to be little unexpected or is it just me?
     
  2. Trader G

    Trader G Well-Known Member

    Based on the crappy P/L in my SPX flys over the past couple of months I would say that most people have been buying puts expecting a drop. I also think that the buy the dip is so strong that we will see a snap back next week. The question is, once we start getting toward the highs again will it keep going or will it start slowing down causing more fear to come in the market that the ride is over.
     
  3. ACS

    ACS Well-Known Member

    Obviously no guarantees but my number one scenario is that the drop so far is leg A of an ABC correction in the big bull market which will eventually lead to new all time highs later this year. Friday was a sell climax so another huge down day Monday is possible but would be a little surprising before some kind of pause or even bounce.
     
  4. status1

    status1 Well-Known Member

    I am not sure if anyone was buying puts in the past couple of months but certainly something was going on in the past couple of weeks from the 12 th of January
    We had a hint last Friday the 26th when SPX went up a ridiculous amount and the VIX was going up at the same time
    I think a lot of traders were just cashing in their chips and taking profits before they evaporate although this past Friday was a little overdone. While maybe it did not feel like panic there was not much buy the dip either so the market kept going lower and lower forcing other traders to sell to keep their profits

    For those that have TOS when you look at the chart of SPX if you click on the Live news on the side tab you can watch Carter Braxton Worth on CNBC explain the SPX moves and what may happen going forward
    I think he is a pretty good with technical analysis

    I am just going by the gaps left behind and know that sooner or later those gaps will be filled it's just a matter of when
    The sooner they get filled the sooner the market can resume going higher
    On the other hand the further it goes up without filling the gaps the bigger the drop as we have just witnessed this week
    There are still a couple of gaps below so I would not be surprised if Monday it goes even lower
    I heard someone on CNBC called this thing a controlled brush fire It needed to be done before it goes out of control and than you really start to panic and have a lot bigger crash 100-200 points in one day
    I think if it goes down another 60 points that should do it but it doesn't have to do it in one day
     
  5. PK

    PK Well-Known Member

    On the daily charts the 2.670-2.700 area may work as support (also some gap to fill there). Let´s see if the 6-months regression channel will guide the price again. If the 2.700 area does not stop the correction, and looking at weekly charts, there is much room for a "minor" several hundred points correction before being able to talk about the end of the bull market.
    2018-02-04 10_09_00.jpg 2018-02-04 10_10_01.jpg
     
  6. PK

    PK Well-Known Member

  7. PK

    PK Well-Known Member

    05C3A979-DBD1-4F91-8D9A-78284EC634A8.jpeg
     
    Ice101781 and Trader G like this.
  8. Marcas

    Marcas Well-Known Member

    Nice statistics PK, there is something to hold on to.
    To confirm Trader's G BFlys observation look at COT for SPX (thanks Teddy) - short positions were growing from beginning of the year.

    Market just opened 13 points down.
     
  9. status1

    status1 Well-Known Member

    How is everyone doing after another 113 point drop ?
    I am doing great (not) My T+0 is above the expiration so I am up 13k with theta at -922
    I am probably missing some strikes or the prices are way off

    I heard the algo machines are doing all the selling
     
  10. Marcas

    Marcas Well-Known Member

    Hi status1. Doing fine in worst case scenario or extremely well in best case. I don't trust prices in option chains thus don't trust my platforms p&l display. Planing to close my hedges tomorrow but we will see.
    I really worry about fellow traders from CD, especially those with less experience. Hopefully everybody followed sizing rules especially with AroundTM trades and survived even if with loses.
     
  11. Neil

    Neil Active Member

    I'm looking at after hours Greeks and PnL's in TOS, the Greeks look okay but the PnL's seem way out of line. I closed some positions last Friday and was able to flatten Deltas on my Feb & Mar RTTs today (in addition to long SPX Teenys and long VIX Calls that I purchased awhile ago) so I believe I'm not in too much danger tomorrow, BUT ... TOS says I'm up over 100k right now; that doesn't seem believable. I think I should be down about 5-10k. Right now /ES is at about 2560 (7:45 pm PST), which is down about 48 pts from the close. What is everyone else seeing with their trades? Any thoughts?
     
  12. DGH

    DGH Administrator

    The situation you describe happens frequently in TOS and most platforms during volatile periods. It will probably be resolved tomorrow. However, you should expect continued volatility. Look at charts of the VIX and VVIX.
     
  13. Sanjeev B

    Sanjeev B Active Member

    Hi Neil
    I hope & wish 100K profit is real. That would be late Christmas present.
     
  14. Sanjeev B

    Sanjeev B Active Member

    Futures have turned positive now
     
  15. PK

    PK Well-Known Member

    No way to reasonably quantify PnL at this point. Coincides with this morning's message from Interactive Brokers: "Market data for SPX Options are currently not available at CBOE. The exchange is waiting for market makers to send in quotes." Globex seems to be out of control, too (e.g. ask/bid for an OTM put shows 3 USD / 108 USD). Wait until the dust (hopefully soon) settles.
     
  16. Trader G

    Trader G Well-Known Member

    I was down 46k last night on a fly that has a max loss of 10k.
     
  17. AKJ

    AKJ Well-Known Member

    The experience of trying to get fills yesterday and today made me realize that it's a dangerous game to be doing these types of trades in an IRA. Having multi-leg trades that are inherently designed with a built-in hedge is all fine and good if the market is calm enough to execute your 3-4 legged order. But when you have to break them up to get fills, it's nice to have the margin and shorting ability to immediately offset your broken up trades with SPY or /ES. In my IRA, where most of my buying power is locked up in options positions, it's all but impossible to do this.

    Of course, waiting for the market to calm down a little is one possible solution, but also dangerous. When the markets really get going, you may be in positive vega/negative theta land in your trades, so waiting for calm can be extremely costly.
     
  18. Neil

    Neil Active Member

    I also have most of my investing capital in IRA accounts and have learned the hard way that 3 and 4 legged trades are really difficult to fill on days like Monday and yesterday. I only use vertical spreads in those situations, but the spreads are really wide and you have to be able to cave to get fills. My first move if I need capital for trading is to use VS's to roll the downside of some of the RTTs to free up capital.
    My big problem yesterday was trying to sell my hedges. In trying to close both my SPX teenys and other long Put hedges my allocated orders were rejected because TOS said "My buying power would be below zero". I had to call TOS and have the trade desk manually close the positions and the delay cost me over $15k (during the 30 minutes process to reach the trade desk and have them investigate the situation my teenies went from $96 to $70 - I paid 0.70 for them). I've got an official appeal/inquiry activated at TOS. They say it will take a day or two to resolve. Has anyone here gone through that process with TOS? Were you successful?
     
  19. Marcas

    Marcas Well-Known Member

    I did have such situation in the past. I called desk, they consulted with margin guy and executed trade for me. It took about 10 mins (it was quiet time). I lost some money, not much. I did not appeal. I was explained that the problem is with their computer system with some types of orders ( I was doing calendars) and learned to break orders myself to have no problems. I'm surprised that you have same (?) problem with single leg order, maybe they tweak rules a little for this time.
     
  20. Neil

    Neil Active Member

    Great news - TOS reviewed the situation; reworked the settlement prices and I've recovered almost $12k.
     
    Shin likes this.

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