May 21, 2007 – GSK trade

What happens when the stock you have long KILLS people?


Here is a good one for you. I’m laughing now.
I was going to enter Glaxo Smith Klein today. The set up looked good for a long trade.
I was going to get in at 3 levels. The plan, Buy around 57, and marry it with a 57.5 put. Profit, Loss, and time exits set.
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At 9:08am I was filled on a 100 shares @ 57.16. I was testing the waters, “When the stock comes back up, I will put the option on for less $$.” That said, I never made the opportunity for insurance. I didn’t have my put protection in place (bad move, lesson learned). The price immediately went down to 57.02, then moved back up to 57.11.
Then about 7 minutes later
9:16am – The NEW ENGLAND JOURNAL OF MEDICINE announces GSK leading drug “AVANDIA may raise heart attack risk, DEATH RISK!!!”
The stock falls like a stone. As soon as I see this newsflash on my TOS platform, I sell. Market order, get me OUT!!! 56.34
9:26am – After I get my senses, I think holy crap, there is opportunity here. What are the June 52.5 puts selling for? I put my order in trying to shave the price,.20 I miss, .25, I miss, .30 I mis. Hell, Market order, .40 fill 10 contracts. What does the option price do??? Comes back. .35, .30….. shoooootttt.
Hang on I tell myself, This is Death-risk for goodness sake, your fine. Well then the price finally headed lower. I check technical support levels. 53.75 is major support. I do my best job of option price estimation (again the TOS platform rules). I choose .80 to sell.
GSK%20chart.gif
10:04am – As it approaches that level, I think… hmmm if it goes through this level, lights out. This stock is going down!!! “I’m going to Sizzler, I’m going to Sizzler.” So, I pull my order. .85 prints for the option. “Yeah, baby. It’s going to do it” What happens? Support indeed acts as support. The stock price heads back up. Now I’m thinkin’, stick to you plan you monkey. You may deserve to loose money on this mishap.
Well, fortunately,
10:07am – I put my order back in for .80. A few minutes later, it fills, I’m out. Well, there is no sizzler today, but I am going to make a portabello mushroom sandwich for lunch.
Until next time,
Jon from Breck

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