1. 03/15/2013 – JPM trade
Dave – here is an example of a trade I did just out of pure disbelief of this market. It’s also a good way
to learn how I manage risk in a trade. It’s a large bank, JPM. On Thursday night, JPM passed its bank
tests but were not allowed to issue a dividend to its common stock holders until Q3 2013, conditional
approval. Today, they were having testimony on its “London whale” trade. I will explain the “London
whale” trade when I see you, a lesson on position size and margin.
Under normal conditions, JPM stock would be down much more than just $2 points considering its 52
week high the day before. While the testimony was ongoing, JPM was painting the lows of the day. I
took a stab. I entered the trade risking $400, or a stop at $48.99. My target was $49.99, because at the
time $50.04 was the high of day (HOD). I felt there was a high risk/reward when the testimony was over
the stock could rebound no matter what because this market is just that sick. When the stock started
to go my way, I moved my stop to the low of day (LOD) 49.15 risking $100. The stock challenged $50,
wanted to see if it broke the day high, it did not at the time, so I dumped it for $1,400 profit. I used up
a lot of capital on this trade (2000 * 49.21 = $98,420) to gain less than 2%. This would not have been a
big trade in a $2,000 account. That being said, this is a good example of managing risk in a volatile
trade. Intraday chart included below.