Anatomy of a Trade: Making 50% in the Banks via XLF

I want to go over my trade in XLF. It started off rocky, and I definitely had to stomach some pain, but it turned out to be one of my quickest and best trades of the year. I want to review why I chose this trade.

I have been short of banks for a very long time, so I was definitely taking a risk in going long XLF calls. I actually put a trade trigger in Ameritrade a few weeks back to buy a large position of calls if/when XLF was less than or equal to 6.11. Lets look at the chart:



I drew a trendline from the bottom of July lows through Nov. lows, and found support in the low 6's in March, which I though would provide a good opportunity for a bounce. I purchased the calls on Thursday, which was a couple of days early. The XLF continued down from my buy point of 6.11 to a low of 5.88. When the XLF made the move lower, my calls got crushed, and I felt the stress, but decided to stay long calls, as my trendline wasn't materially violated. I am very fortunate I did not sell, because the bounce yesterday and today made my calls move quickly to the upside, yielding a 50%+ gain in just 4 days. Of the 35 contracts I originally purchased, I sold 24 today, and am holding 11 contracts to see if XLF will move higher.