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February was a 100% profitable month, but it was a difficult month to invest all of our cash in our recommended
credit spreads. Most MCTO subscribers invested less than 60% of their cash this
month. The reason was that the market was continuously trending UP on tight candlesticks, below average volume and on
relatively low volatility. Below is the daily and weekly charts for the
S&P 500 index showing the non-stop uptrend. (these charts were
borrowed from our Feb 20th advisory)
In order for us to open our desired "safe and
low stress" credit spreads that allow us to sleep at night, we need a
market that has a reasonable distribution of UP and DOWN days throughout the
month. The strong DOWN days, for example, allow us to open the bull put credit
spreads with strike prices that are near or below certain technical support
levels, and this provides us the low risk and low stress trades that we desire.
Unfortunately, we had only two stronger DOWN days during the February cycle that allowed us to
open our desired bull put spreads. Markets don't climb forever and sooner
or later this market will revert back to being more choppy and pseudo sideways where it will start to provide us
with a more even distribution of UP and DOWN days, and this will allow us to get back to
business of "hitting singles" each month.
In general, it's best to play it safe with credit spreads and iron condors
as they are highly
leveraged and represent a long-term trading strategy. Our goal is to hit
safe and low stress singles each month, and if the play isn't there or if it's a little too
risky, it's best to get walked to first base and move on to the following month.
Credit spread trading is a 12 inning game and what matters is that we avoid the
big losing months through robust analysis, patience and conservativeness, and
that our returns are positive, targeting 30% to 65% annually, after adding
everything up over 12 months.
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