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TFC Commodity Trading Forum

defined risk trade set up I just saw

First, let me say that I haven't been here in maybe 12 years. I swear I remember "Spike" posting back then. "Wayne Fisher" had just shown up posting all his spam crap back then. 3 or 4 pages down, I saw one other name that looked familiar. "marcus" and "bassakerds" are the only 2 names I can think of right now.

I was poking around looking at charts and I saw a replay set up of my first ever commodity trade (options) that I made something like $2200 on. Look at May Cotton, CTK20. It has hardly moved for 5 days. Now, back then, 20-something years ago, the markets may have behaved quite differently. But anyway, I had quite a few winning trades by buying an option "strangle" on 4 day periods of little movement. I think it is a "strangle" and not a "straddle" to do what I did, buy a Call a couple of strikes above and a Put a couple of strikes below.

Back then, I was super scared of taking a huge "unlimited" or "uncontrolled" breakaway loss and wiping out my account. I had read all sort of cautionary tales of "don't rely on a Stop-Loss order, the market can gap past it". I identified a situation where if there were 4 days of little movement, then after that, more often than not, the price moved far enough that one of the options was worth about 1.5x the total entry price, and sometimes I could get out +50% in one direction and then it would reverse and I could get back some on the other option. Maybe 1/4 or 1/3 of the time taking the first 50% profit ended up costing money because it went on in the same direction significantly. Other times it never got to 50%, then reversed, so taking 35 or 40% would have been the top, but instead I took a loss or very small gain.

Getting to the 4th day of little movement was the hard part. 3 days happened quite a bit, but 4 was rarer.

I post this just for information for any new people, maybe call it thought experiment material. Of course, these days trading lessons / systems / info / methods are all over the internet, so this is probably pretty much useless.

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defined risk trade set up I just saw
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