Tuesday, August 18, 2009

8/18

We had a good pullback yesterday, but the market rallied back a little today. This has been a very tough trading month for me due to the market rally. My account is negative delta for the past month.

With just 3 days left before options expiration (OXP) this week, I'm ITM in several of my call spreads. This reminds me of a spread I had on RIMM last year. I thought RIMM would go one way, but I was completely wrong in direction and the position was deep ITM. I wanted to get out of the trade, but couldn't get a fill despite putting an offer price higher than the market. This was a good lesson on why I shouldn't try to hold positions too close to Friday. Liquidity can really dry up and you may not be able to get fills at fair market value.

I have a feeling that I should just bite the bullet and take the loss and not hope for another 3-4% decline in the RUT. I also have am short the 115/120C IBM spread. IBM has been oscalating between 117-119. The ideal situation would be for IBM to be at or below 115.

The biggest mistake in this months trade has been that I didn't follow my trading rules. I had a plan in place, but I just didn't follow the rules. Many beginner traders who initially start trading don't have the discipline and allow emotion to take over any rationale thought. Something I learn and hear from professional traders is that they are not afraid to take losses. The key is to take small losses and not allow losses to snowball and wipe out months of hard work, this is the key to being a successful trader.

Maybe this month's loss will be my wakeup call that I can't trade without putting in a physical stop on ALL of my trades.

0 comments: