Options and Forex Update

April options expiration has passed and I learned a new lesson...If, it's the next to the last day of the options cycle, and your short on an index option is close to ITM, spend the small commission and close it out! Here's what happened: The Russell 2000 index appeared to be OTM on Friday, so i assumed that my short calls expired worthless. Wrong! The quotes that are shown during the trading day for indexes are based on 60% of the stocks opening up in that index, so it really doesn't show the true price of the index. So when I thought the Russell 2000 index closed less than 780, the settlement price was actually 783.08!!! Ouch!! So, I got bit for 3 points on that one which means I lost $2.40 a contract. Since the Russell 2000 is what I play the most I got a big chuck of my year-to-date profits eaten up. I was up 17% on my account year-to-date, but now i'm up only 10% year-to-date. Still not bad for 3 months I guess. It's an expensive lesson worth learning in the trading business.

Forex Trade upate:

My short on the USD/CAD is working out nicely, but I think it's time to take some profit off the table. I can see that the pair is a bit oversold and should make a strong correction before ressuming the trend back down. Closed half of my position for a profit of 51 pips. Moving stop for other half to break even. My forex account is actually starting to look pretty nice.

Forex Trade - USD/CAD

Here's what has been happening with USD/CAD:


The pair made a couple of closes below the fib lines I pointed out on the previous chart. If you stuck with the short trade it would have netted around 125 pips for a very nice profit.

USD/CAD is a "commodity currency" which means it is correlated with commodities like oil, metals, etc. We will probably continue to see commodites rise which means a continued drop in this pair. I'm looking to short 10 pips below the previous day's low with a stop above the previous day's high, and target the bottom of the channel.

In my options account, the Russel 2000 index has been going strong which brought the index dangerously close to my short Apr calls. So, I adjusted the my calls another strike higher from 770 to 780, which reduced my profit from $2.20 per contract to $.60 a contract. The index has dropped down to about 756, but I think I did the right thing in protecting my position. Also, I bought calls in IWM to hedge and so far they have made a pretty decent profit. We'll see what happens at the April expirations!