Good Morning, Well Tuesday I took a small loss on a rather large AMZN position. I guess I will have to take the rear-view mirror and turn it around and look forward!
You will get this feeling often trading options. They are so powerful with the leverage factor that you can not risk letting a small loss turn into a disaster. That was the rational of me closing a position even though I had lots of cushion. I was sure it was safe but as the sign taped to my monitor says " DISCIPLINE TRUMPS CONVICTION" The obvious meaning of that saying is, to not let what you want to be true obscure what is really happening.
Of course AMZN is up today in anticipation of good earnings. So my 200 or so loss would probably be looking pretty good right now. Try to avoid falling into the trap of thinking "next time I am holding the position longer." When option prices are dropping, it is easy to tell yourself "OK, just a little more and it might turn around" It becomes very hard to pull the trigger on a loss. Use my rules or your own, but have rules and follow them. DISCIPLINE TRUMPS CONVICTION...
3 comments:
thats a good move. With AMZN trading at 165 this morning, i took the courage to sell a few 135 strikes on AMZN. What u say?
Probably very safe. Even if they announce disappointing results for the qtr they can't drop over 30 points..or can they? If disappointing results, you will have Friday to roll out to the next week options. You can then go down a ways to a safer strike. Especially so that the main drop in the stock will probably be in the past. Moves such as Apple's drop then recovery. Good stocks that sell off nearly always come back quickly. That is one reason that I generally avoid stocks such as Pharmaceuticals, that can have a major long term item such as FDA statements etc.
Thank you. I also sold some BAC puts with 11 strike. Looks like BAC just hit their 52 week low yesterday and looks like it is rebounding today. HGSI has an FDA advisory meeting on Nov 16, just 3 days before expiration. I'm hoping to close the position before that, although their new drug has a good chance of being approved.
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