I never was a fan of those old "A Funny Thing Happened on the Way to" movies that my parents loved, but the phrase was uttered often in our family. The other day, I was on the way to a retail shop called The Silk Road, accompanying a daughter who is starting a business.
You may remember that over the last couple of years, I have written about my efforts to find specific trades, adjustment styles, hardware and software options that would allow me more flexibility, more time away from the computer monitor. My efforts were going to be put to a good test that morning. That was Wednesday, May 4. Perhaps you may remember that the previous couple of days, markets had moved lower. Futures were lower that morning, too.
What are those efforts and how did they work? If I know I'm going to be away for much of a trading month, I switch to vehicles that are easy to manage via contingent trades. For example, instead of trading OEX butterflies, I might trade SPY butterflies. SPY options are so liquid that I'm able to set up a contingent order that is two or three cents off the mid-price at the time it's triggered. I would feel confident that, in anything other than a runaway market, I'd get fills on those trades once they were triggered, even spread trades. I could also set up an in-case-of-catastrophe order to buy a long position to hedge deltas, too.
Of course, I don't always know I'm going to be away. Sometimes I get called away unexpectedly, as might happen to each of us. I also don't know when my brokerage's site might be experiencing problems. That's why, these days, I always have contingent orders set up for each trade. I can't recreate my setup for the morning of May 4, but I can show the one I had for Friday, May 6. I had to scrunch it together to make it fit on this page, so you can't see all the details of those orders, but enough to see what I had set up that morning. I also apologize in advance for the dark-colored background.
Contingent Orders on May 6:
The "Wait Conditions" button on the far right side of the last IWM trade pulls up a page that reads that when IWM is at or above 85.30, the trade to sell my 3-contract 83 May11/Jun11 put calendar will be triggered. The limit order will go in at three cents under the mark for that spread at that time. The other buttons set up other conditions for those trades, with my IWM and RUT calendars circled by trades.
Often times, I can sell an IWM calendar at the mark or mid price or maybe one cent below it, so I really don't want that trade to trigger with a price three cents off the mark. I'd rather work it manually. Therefore, I have set an alert to be sent to my email and to a smart phone. That alert is set to trigger just before each of my contingent orders.
One Alert Set on IWM:
This alert was set to trigger at 85.00, with the contingent order set to trigger at 85.30, as my note to myself specifies. The idea is that the alert will trigger, showing up on my TOS screen, my email and the phone. Wherever I am, I know that my contingent order is about to trigger. I can then either get to a trading screen and work the order manually or let the contingent order trigger if I am unable to do so.
Setting those contingent orders gets a little trickier when the underlying is the SPX or the RUT, however. It's not always possible to be reasonably certain that a triggered spread order will be filled, particularly in fast-moving market conditions. I'm still exploring how wide I want to set those orders on the big indices. You would think I would know after more than a decade of trading, but my other platform doesn't allow for orders of these types, so I haven't had a lot of practice setting them and letting them trigger. In any case, such variables as the time of day, season, and other market conditions can change what works. For example, low-volume summers sometimes result in harder fills and might require more leeway in those mark +/- limit settings. In fast-moving market conditions such as the Flash Crash day, fills may be nearly impossible, although I did get some fills on SPX trades that day. In some cases, I might decide that I want to leave orders for puts or calls to hedge deltas, if needed. If my SPX or RUT position is small enough, I could also leave hedging SPY or IWM orders to trigger and hedge the position, although that's not a tactic I've employed yet.
However, I carry a netbook equipped with an air card with me so that I can indeed get to a trading screen, almost anywhere. I like the full charting and other capabilities of the regular trading platforms on a netbook rather than the mobile platforms available for smart phones and other appliances.
That Wednesday, I was to need both the netbook and the air card's connection. I got an alert via smart phone that one of my contingent orders was about to trigger. In the fast-moving markets that day, by the time I retrieved the netbook from the car, one of my RUT orders had just triggered. That was an order to sell one of the double calendars and turn the trade into a single calendar position. That trade had triggered at a limit price of $5.71, but the mid price was then already below that price and still dropping. I worked the order myself, right from that retail shop while my daughter talked to the proprietor about needed supplies. The fill was finally at $5.65. I likely never would have gotten the trade at $5.71 even if I'd been at the computer because the RUT was dropping fast at that time.
I had thought that the RUT would likely drop that morning but then would attempt to steady and chop sideways to sideways up, so I set the alert a little too close to the RUT's action, not leaving enough room in case the market was dropping as fast as it did. Lesson learned, but with only four contracts, it was only a $24.00 lesson. With more contracts, it would have hurt more.
You might have noticed, if you'd searched those contingent orders, that I also had orders in to take profits on the two spreads that made up my 15-contract SPX iron condor. I sell those spreads when they narrow to $0.20, locking in most of my profit. Barring a huge move, you almost have to wait until expiration to collect that last $0.20, and I don't want that risk. You might have also noticed that, in this case, I didn't have any contingent orders for a catastrophe, a flash-crash kind of day. That's because my SPX iron condor included put insurance that I always buy when the VIX is as low as it had been and I also included a few extra OTM SPY puts as part of my portfolio insurance. I also knew that if any of my contingent orders were triggered on the downside, I'd be keeping that netbook nearby, which I did.
I learned some things on that trip to The Silk Road. I learned that I had set my alerts too close for the kind of abrupt drop we had about midday that day, so that they didn't allow me quite enough time to get to the computer before the contingent order itself triggered. More importantly, I learned that even with several trades open and a rotten open to the day's trading, I could still manage to get away from the computer. I learned, as many of you have long ago done, that it's possible to trade and still maintain balance in one's life.
I recommend that balance. I have some regrets in my trading life. One relates to last spring's losses, of course, but the ones that really sting are the times when I couldn't be available to my family because of open trades that needed tending.