Good morning, traders…
I almost missed a 3x overnight winner this week.*
A textbook VWAP pullback on Cisco Systems Inc. (NASDAQ: CSCO) that ran in the morning, rested all afternoon, and continued higher the next day.
At the end of Tuesday, the position was barely up. The stock had stopped moving.
The easy decision was to take the small profit and move on. That’s what I would have done earlier in my career.
Instead, I asked myself one question: “Has this setup done anything wrong?”
The answer was no.
The pattern was intact. The stock was just resting after a strong morning move.
So I held overnight.
If I had taken that small profit on Tuesday, I would have walked away with (maybe) 10-20%.
Instead, CSCO gapped up on Wednesday, and I closed the position for 240% gains.*
This gets to something critical about how I approach options trading:
Being rigid with my rules, but flexible with my expectations.
Here’s How A Little Flexibility Led To 240% Overnight Gains…
The Setup
I called out Cisco Systems Inc. (NASDAQ: CSCO) on Monday, February 2. The daily chart looked amazing. The stock had bounced off support at $73 and was reversing back toward all-time highs.
On Tuesday, February 3, the intraday pattern developed exactly how I wanted to see it.
If you want a snapshot of the perfect VWAP pullback chart, look at this:
I entered the Feb 7 $61 Calls at $1.00 as the morning session showed incredible strength.
Run, Forrest, Run…
Then, from 11:30 to 2:00, the stock just rested.
Rest, Forrest, Rest.
A “Run, Rest, Run” setup was in the cards…
After 2:00, it pulled right back to VWAP, bounced back toward the high of the day, and then … sat there.
No dramatic move higher. No breakdown. Just sitting near the highs.
But by the end of the day, the calls were only up slightly.
And I had a crucial decision to make…
The Decision
Some traders would look at that chart and think, “It’s not moving. I should take my small gains and move on.”
I looked at it and thought, “It hasn’t done anything wrong, so I gotta stay long.”
It ran in the morning, then rested. The stock didn’t break support. It didn’t reverse. It didn’t show any signs of weakness. It just consolidated after a strong move.
The question became: Am I willing to take on overnight risk?
The stock was holding near the highs, not breaking down. The setup hadn’t given me any reason to exit, it just wasn’t moving as fast as I initially expected.
So I held.
The Result
Wednesday morning, CSCO gapped up and continued the move.
The Feb 7 $61 Calls I bought at $1.00 ran to $3.40.
I closed the position for a 240% gains.*
This is what I mean by being rigid with my rules, but flexible in my expectations.
The Lesson
Traders need rules, systems, and processes. Otherwise, we’re just guessing, gambling, and throwing darts.
But we also need perspective and flexibility.
You can go into a trade with one plan and see another pattern emerging.
If we’re rigid in our rules, but flexible in our expectations, we can recognize when a side path is opening in real time (and adjust accordingly).
CSCO ran, then rested. That’s normal price action. The only thing that changed was my initial expectation.
I thought “this will move fast intraday” and adjusted to “this might need overnight to develop.”
Only you can decide if you want overnight risk. If you need to sell at the end of the day because you can’t take overnight risk, there’s no shame in that.
But if you can hold and the setup is still working, don’t exit just because it’s not moving on your preferred timeframe.
I’m not sharing this win to brag, but to help you recognize this moment the next time it shows up in your trading.
The next time you see a stock run in the morning, rest in the afternoon, hold near the highs, and maintain its daily trend, you’ll recognize it…
You’ll ask yourself, “Has this setup done anything wrong?” And if the answer is no, you’ll know you can hold for the next day’s continuation.
That’s the level of perspective I want you to harness in your daily trading routine.
Happy trading,
Ben Sturgill
*Past performance does not indicate future results
