DislikedS-G: Thank you for the posts. As a learning example for us, can you talk about what happened in Nov-09 to get the minus return. Ken.Ignored
1) I was sitting on a short USDJPY put at 87 with a DEC 17 expiry. Over Thanksgiving, the markets freaked out because of Greece's debt default and the USDJPY spiked down to 84.81 as a low, before closing at 86.52.
2) This price action was a pin / doji bar and is a sign of a reversal.
3) Combined with a divergence with the internals indicator, I had confidence that the USDJPY would rally over the next 1-2 weeks or until expiry.
Attached is screen shot of the situation:
a) The black line is the put strike. It is between the two red lines which are the start and end of the option.
b) The red lines are where I entered the position and when it expired.
c) The purple lines are the lows in the actual price of the USDJPY and the lows in the Internal's difference. You can see that the price of the USDJPY reached a new low, but the Internal's didn't. This divergence is USUALLY indicative of a reversal, but combined with the price action, I stuck to my guns.
However, the price of the USDJPY at the end of the month was 86.37, since the spike happened on the 27th, and then the weekend hit right after. I was thus holding an option that had an open net of about -$1500 at the end of the month. This is what caused the small draw down on a monthly basis.
We should not however that the market did rally, the option expired, I captured all of the profit back and Dec therefore came in at +42%. I hope that helps explain the issue.