I took my 2nd largest loss in the past 12 months, a 4% drop in the Acct. I goofed on BBBY. I was sitting on a 4% allocation of the Jan/Feb. I was trying to get out of positions yesterday (prior to earnings), but I had to go to work (on the hill). I knew I was going to be punished this morning. And I most certainly was.
The losses would have been no problem to deal with other than this BBBY allocation. I escaped the trade about an hour and a half after the open. But I had to take the loss. I sold the spread for .03.
The worst part about this trade, was that I put too much on for what I consider to be a speculative play. This was in a defined downtrend, but I put too much on over the Christmas week. Try to keep speculative plays below 2% acct value. Lesson learned.
I have been working with my Profit Source program, and picking more directional trades of late. I am up right about 65% percent of the time with system I am using. And Money Mgmt is an important tool for me. My winners are from 4-10x the sizes of my losses. I am very pleased with that type of ratio. I have been letting my winners run. i.e. COH, DSL, SGMS, and ZMH. And cutting my losers short. i.e. ACS and DRQ
The Bulls had their head ripped off today. SPX – Down 35, Dow down 280, and IWM down 2.24
The good news:
AIG is working beautifully. Jan/Feb 55p. The growth there has nullified the BBBY loss on paper. I am starting to unwind this trade as it printing as a double. Bought for .53, selling for a little better than double.
The other trades:
OMX – exited 1 unit of 22.5p for .05, 1 unit of 20p jan/feb for .35. I ended up taking a pretty good hit on this, as the stock dropped nearly 20% in 2 weeks. Ouch.
ADCT – Exited 4 units of 17.5p for .10. I lost .03 on these units, however the trade was a winner in total.
INTC – I took a 200 sh stab with a very tight stop 22.95, stopped 22.76.. There was a downgrade early in the day. After a $2 drop today, and repeated drops in a days prior it was worth a 10:1 reward to risk shot.
SCHW – Bought 2 units of 22.5p Feb/March play for .30.
C- Rolled 2 units of short Jan 32.5c to feb 32.5c for .25. I am just taking a little off the table for this speculative play to the upside. There was not much premium in the Jan 32.5c short option to provide much protection for the long March 32.5c. I now have .51 of risk.
With this radical selloff today, I wanted to wade in to some trades.
CHL – I made my stand on the uptrend line 83.51 with a June 90-115c spread for 5.25. I have missed this repeatedly over the past year. Mainly because I was chicken of putting on a position. Silly me. I decided to put a 1 lot spread with lots of time to be right. I also have stops in place.
DLB – 1 lot @ 45.88. Mar 45-55. The chart looks positive. Stops are set.
Here is a great video of the Lake Chutes
Mentally I am disappointed for not getting out of BBBY yesterday. Work got in the way of that one. And Ironically, I lost more in 1 trade, than I make in a month of teaching. Hmmm.. maybe I should get a clue about financial priorities, or find a internet connection close to the locker room for emergency trades.
I was pleased with my post reaction to the beating. Although, I wanted to GET IT BACK through trading, I decided to pick my points objectively. I didn’t take any “On Tilt”‘ losses, which I have before.
This time next year I will probably only teach private lessons and/or go in to teach on days that are not pivotal days. I.e. earnings, announcements, busy trading days, and weekends
right about now, I wouldn’t mind a little Fed 50bps rate cut, and a corporate tax cut announcement. That would help my positions. I would have also shorted FNM today, but I am wary of this scenario.
Cramer had this to say on Real Money
Its confidence in the face of this market and this economy frankly frightens me. You know you can lower rates and cut the discount rate big and take them back up when the real crisis is averted.
But no, not these guys — they wouldn’t know prudence if they were beaten over the head with it.
I am ashamed of them. They truly are like all of those professors I had who have no knowledge of the real world.
They are right out of 1930.
They know nothing.
Here is a counter point to Doom and Gloom
QQQQ (Nasdaq 100) Chart – I have a long term trend channel drawn, and two sets of Fib numbers. One set of numbers is from the August lows. Today we closed on the 61.8% fib # from August. The second set of Fib numbers are from July 2006 lows. The bottom of the trend channel is lining up with the 38.2% Fib retracement from the July ’06 low. Interesting place for a counter trend rally I think.
At this time we are within a longer term uptrend. That has not yet been violated YET, however I think that is just a matter of time before the uptrend gets breached.