The guy didn't "lose profits", per se. He just closed his trade too early and missed out on what happened next. We all have done it. Oi! Enough with the guff on the lad! I fucking hate options. @Baron and @Magna Yes, I know I am a fun thingy of the forum, but I cannot STAND options. Please, divert my eyes! Don't you have the power to do so? (Oh, this is the trading section, not options... GOD DAMNIT.) The longer I see mention of Options, the more time they have to destroy my soul.
Not many option traders in this thread I guess. $750 worth of options (not $7.50) Also he was down $300 and odds are this wouldve expired worthless had the news not come out. Not necessarily a dumb move. Just bad timing.
A guy posts it on Reddit, where most amateurs lurk. A Reporter from MarketWatch who has nothing to write about scans Reddit and decides to exercise the most creative art of writing with his editor skills AKA "Copy and Paste". Brilliant. Financial writing at it's finest. In all seriousness, if you remove the baby, the drama, and time difference, the guy just made a decision based on the information that he had without knowing the final outcome. His decision was also based, in my opinion, on his net worth, which seems to be low. This trade for him was not a fundamental play but a bet, and he wanted to preserve the capital for his next bet. Clearly, this play could have changed his net-worth, so he is hurt. You can only judge a decision based on the information you have, not after the fact.
No he did incur losses. He bought the options at a dime each and closed them at 6 cents each. So for each option, he lost (0.1-0.06) = 4 cents, times that by 7500, he lost totally 0.04*75*100 = $300 USD, not the whole $750 but still $300 when he could've made $50,000 profit after the news broke out. That was the hardest for him to swallow and that would've been hard for anyone to deal with. So many times I kick myself when I made a profit and my partner is all confused like "you made money why are you angry?" It's never about how much you made; it's always about how much you *could have* made but didn't. For this trader, it's even harder for him to deal because he is stuck with a loss, not even a profit. But the thing is, you never know what could've happened either. Nobody knew this news would come out and would come out before the expiration of his options. If the news hadn't come out or came out after the expiration of his options, like many posters said, he would've lost the entire $750 and not just $300. At least in this case he still salvaged $450, 64% of the invested value of the option, not an unwise move given that there are only 2 days left to expiration. It's just that comparing to magnitude of profit that he could be making, $450 pales now in comparison but then again you can't look at everything from hindsight. Because from the other side of hindsight, $300 loss is also better than a $750 loss.
If you would learn options it could change your life. I have five weekly SPX iron condors expiring today that is paying out 950 dollars on ten thousand margin. 9.5% on capital in 7 days is worth learning about. Many tons of free info on the internet to learn.
This is really interesting and very useful for all the traders. Emotions must be controlled while trading.
Its human nature to take credit for the good things and blame all the bad things that happen to you on something else. This guy decided to blame his baby for his poor outcome on this trade.
No thank you, options are too many unknown scary bits. I'll stick with discovery channel dot com which is my guidebook for life. No need for changing my life. They also cured my dandruff.
Nothing to do with distraction or stress. The guy made a prudent decision at the time as a trader. I would do the same except save 10 lots as a lottery ticket. Think about the other 100 occasions that you don't close the position and watch all the pennies down the drain.
I agree but I don't know why he decided to cite "being very emotional" and "being woken up by the baby crying" as the reason. If he wanted to close the option to salvage some of the cost, he would've done it regardless of anything.