Market Posts Largest Weekly Decline of 2012

Dow -2.69%

S&P -3.09%

Nasdaq -3.70%

Russell -4.45%

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MARKET UPDATE:

Markets got creamed this week posting the worst decline of 2012. After an "ok, the world didn't explode over the long weekend" rally on Tuesday, markets reversed course posting losses the rest of the week. The losses culminated with a bloodbath on Friday with market down >-2% across the board.

All 4 major indices gave up their 200 Day MA's closing below them with Friday's decline. Volume expanded during the selling which is encouraging. The bottom is not in but a relief bounce may be in store. We could see another violent push lower next week. Economic data releases are fairly slow so that will give the bears less opportunity to pounce.

This has been a tough year and the market is now giving it to the bulls that rode the Dec - April rally expecting it to continue in perpetuity. A long time ago a trading mentor taught me that in markets like this the trick is to try to lose less than the guy next to you. Not very encouraging words but oh so true.

Navigate wisely and stay profitable, my friends. Happy trading!

BOOKINGALPHA UPDATE:

Monthly Trading Service Commentary:

We took advantage of the volatility again this week deploying a new June NDX Iron Condor as well as closing the call sides of the previously opened IWM & SPY Iron Condors for nice profits. We booked +80% and +77% of the maximum available profit on the calls 2 weeks early by closing them for small debits during Friday's bloodbath in the markets.

The puts of the NDX Iron Condor and the remaining IWM & SPY positions remain far OTM and are still quite comfortable, despite Friday's downdraft. Using "market puking days" like Friday are great to close Iron Condor legs for small debits. This is precisely why we opened the Iron Condors for large credits originally, to allow us the opportunity to take advantage of volatility if it occurred.

Closing the call sides also allows us to re-open new call spreads (to re-create Iron Condors) if a bounce occurs next week.

While losses are unfortunate, they are a part of trading. Looking at past trading years you will see drawdowns like this do occur and ultimately, how we prevailed. This is not a justification, merely a reminder that this situation is still within the realm of normal portfolio gyration. While it may be uncomfortable and is surely no fun, my position sizing allows for these drawdowns providing enough capital to recover. See past year's results and let them speak for themselves. For more information please read: Generating Alpha Comes With Volatility

Monthly Trading Service YTD vs S&P 500:

-13.83% YTD BookingAlpha Monthly Advisory

vs.

+1.52% YTD S&P 500

See Trading Record

Weekly Trading Service Commentary:

Bottom line, we got kicked in the face this week on our SPX Iron Condor. We anticipated weakness and placed our strikes below the 200 Day MA and far OTM. We expected a weak payroll report Friday but the market made a knee jerk reaction plummeting at the open and weakening throughout the morning/day.

Once our short strike was in jeopardy during the late morning we pulled the rip cord and closed the trade. The market was so weak that an adjustment to next week would not have moved us far enough OTM to be prudent.

If we had held the spread into the close that would have been nothing but a gamble and that would not be prudent. If we had "hoped for a rally" the trade would have been a 100% loss with the SPX closing below our long strike. Cutting our losses, although painful, was definitely less painful than holding through the close would have been and ultimately the right thing to do.

The trade got blown out and we will simply move on to next week. There really isn't much more to say in a market like this. It is a volatile game in the Weekly Options trading world and we are ready to put this week/trade behind us.

While losses are unfortunate, they are a part of trading. Looking at past trading years you will see drawdowns like this do occur and ultimately, how we prevailed. This is not a justification, merely a reminder that this situation is still within the realm of normal portfolio gyration. While it may be uncomfortable and is surely no fun, my position sizing allows for these drawdowns providing enough capital to recover. See past year's results and let them speak for themselves. For more information please read: Generating Alpha Comes With Volatility.

Weekly Trading Service YTD vs S&P 500:

-23.77% YTD BookingAlpha Weekly Advisory Portfolio

vs.

+1.52% YTD S&P 500