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We just saw the opening bell. We are taking a look at our aggregate position, on our review for the day. So far, it looks like we’re going in the right direction.
We’re still very close to the center, but not exactly on the center. I would like to see our position get down a little bit. I would like to see a little bit of a market decline here, but you know what? It’s not too bad. I’m not going to worry about it too much.
The thing I am keeping an eye on here is the VIX. We have come down from these very high levels we started trading in, between 17 and 22, which I had mentioned in a previous video. That looks like it wants to trade in this range right now. If the VIX goes back up to this 23 level, which was the support line before, then it will become resistance here. We will probably get a stop here, and it will trade back down, into the 17 to 22 level.
That would be ideal for our position, actually. If it trades down a little bit, I think we would be looking good. There is an upturn bias to the market, right at this point. We are talking on Monday, April 28 – I think there is a little bit of an upside bias, here. We have been going up in this stair-step fashion for a few months.
We could be trading up a little bit, here, but even if we went up, there is a major resistance point, right around 13,000. I suppose that if the market does break above that, we could have a roaring bull market, here. We could end up doing something to adjust our position.
Based on the VIX, I think we may have a position that we will begin trading up here. If not, at least we could hit this $17 level here, maybe around $18.5, and then go back up from there. That would mean the market would have to go up a little bit, and then it will go down a little bit. Remember, the VIX always trades in the opposite direction of the market itself, normally.
Here we are. We’re just going to take a quick look, and monitor our current position. We have had it on for a couple of weeks, now. We manage by the numbers. The numbers, in the case of the kind of system that we are doing on the Money Every Month system – we use Delta, Gamma, Theta, and Vega, to determine what our current position is.
We are currently short 71, which means that we are short 71 shares of our overall portfolio. If stocks were to climb, we would make an extra $70, just on that. We are short stock. We make money when it goes down, right?
With Gamma, we don’t have to worry about it too much. It is -62, which is normal when you have a positive Theta. Theta has increased quite a bit from last week. If you looked at the previous video… You can see the date up here. Today is the 28th. We’ve been doing the review videos for the past week or so.
We’ve gone from about a 35 Theta to a 44 Theta, which is really a nice position to be in. You can see that Theta is increasing almost on a daily basis, here. That is very positive. As long as the market does not give us too much of a price risk here, either way – as long as we have positive Theta means that we are collecting $44 a day on our position, the prices being relatively stable and within our trading range.
Our Vega is a positive 62.70. I’m looking just at the overall totals. This means that we are long 62 shares of Vega. Being long Vega means that we actually make more money when the stock market goes down. As I mentioned, Vega moves opposite to the stock market. If we are long 62 Vega, that means when this goes back up – which means the market would go down – we would make an additional $62.
Our current profit and loss is still relatively small, but we are not out of April yet, and these are all May positions. We still have quite a ways to go. We are up a little bit for the day, but that will increase, as I mentioned, over time.
What happens is, our profit and loss for this particular day, each day that passes, that we stay within our range – which is absolutely huge. We have a really big range, all the way from 136 to 154. We have quite a bit of room to move in this position.
Let me just show you what the Day Step looks like, at this point. Right at the current price range, if price goes… We were just talking about, just after May 5, we’re up to around $400. After that, on the 12th, about a week before expiration, we’re around $900. If we hold this all the way to expiration, we are going to be up around $1200, on this demo account.
This is such a small position. You’re talking about making $1200. Look at the margin requirement, down here. It’s only $1600, for all of our positions. We’re talking about close to a maybe 80% return on investment. It’s unbelievable.
All we have to do is keep an eye on this, and monitor it. We need to make sure that we stay within a relatively decent range here. If we go way above, or we go way below, we need to make some adjustments. Remember, all of these positions – it’s very rare that you put them on, and this is where the majority of traders go wrong. You put these positions on, and then you just walk away from them, and don’t even check them.
You need to check them for at least a couple of minutes a day, just to make sure that you’re within the range that you need to be in. Traders make this mistake of just putting on a position, and when it goes against them, taking it off and saying, “It doesn’t work. I’ve lost money.”
I’ve had to make a couple of adjustments to these positions so far, this month, within the last 2 weeks. We are in a better position now than we have ever been. We haven’t lost any money. We have rolled positions out. We have overlaid some other positions, on top of other positions, so that you’re always in a profitable position.
If you act when it’s too late, and you have already got a loss on the position, that’s your fault. You really need to take a look at the timing of your adjustments. If you do it at the right time… If your price starts to approach close to your breakeven, which is beyond this line, and down here, then that’s when you need to make your adjustments, not after you have a loss on your position.
Adjustments are really everything. There are a couple of different things. One is that we don’t do one-dimensional trades. In other words, we’re not taking just vertical trades. We are not just taking calendars, and we are not just taking spreads. We are taking a multidimensional approach to trading, which gives us the widest possible approach to profit.
Eventually, all we have to do is cash in at the end of the month, just before expiration. That is absolutely the goal.
On a very low margin of $1600, we’re getting a nice return on our investment here. If we had a $16,000 margin, we’re talking about $11,000 in profit here, in our center position. That’s only after about 3 weeks. The profit potential could be absolutely huge, guys.
That’s it for today. I’m just going to keep an eye on the VIX. Right now, it’s up a little bit. That may be an indicator that we are going to move down in the market. I don’t know.
I can see the VIX moving down around 17, which would be okay. It could bring us up up to the 150 level. But then I see it heading back up toward this blue trend line on the VIX. It could hit resistance there, which means it would trade back down again, into our sweet spot.
I think we’re in good shape. I don’t think we need to make any adjustments, at this point. Remember to go through each one of your individual positions, and take a look at it to make sure that you’re not off. We’re pretty good for the day. As long as the price remains relatively stable at this point, we can expect to start collecting much more money, as Theta increases, the closer we get to expiration.
Okay, guys. That’s it for today. Trade with confidence.