Alright here is a trade a fucked up this month that had a lot of potential. I am trading with about $500 per trade Commissions are $5 per trade one way. SE - Spectra Industry Corp. http://finviz.com/quote.ashx?t=se On Nov 6th I looked at the SPY ETF and decided the market was bearish so I looked for bearish stocks and SE looked like it had potential. It had a upside down teacup setup and a lot of bearish candle sticks and below the moving averages. So I bought 1 SE Mar 13 29.00 Put at $1.55 on 10/31. I got out of the trade on 11/06 at $1.75 total profit of $10. *** My first mistake I only bought 1 contract should have bought $500 worth. I set my stop at $1.15 which is about $50 Risk. *** My second mistake this is +10% risk. Within the first day of the trade the stock price drops and I am plus +$75. Nice. So I adjust my stop to $1.60 which allows me to break even on 11/02. On 11/05 I adjust my stop to $1.85 On 11/06 my stop sell at $1.75 So I got kicked out of the trade after a small retraction and a few days later the stock falls through the floor. Maybe I should have got back in... This is my usually process for any given trade.
My roommate trades with more money than I do. He just took a big hit though with AAPL. So he is licking his wounds right now.
Thank You NoDoji Did you use your paper trading experience to develop a trading plan with rules for entries, risk management and profit-taking? I did paper trading enough I think just to get familiar with options. I know how to setup trades with STOCKS where I had Entry, Risk and Profit taking Rules. I will link a excel stock worksheet I made/modified. I think I need to adjust it so it works with options. https://docs.google.com/spreadsheet/ccc?key=0AmiCebg7z4w3dFhCZS1WZDdkX0NqUHVsT2pITlNTUkE To quickly summarize what this sheet does... You input your variables which are: Current Price High Price(The price stock needs to be to be near bullish trend) Low Price(The price stock needs to be to be near bearish trend) ATR(Average True Range) Small Profit Target Medium Profit Target Big Profit Target Current Capital Risk Allowed Allocation% ATR Buffer(Breathing room on initial stops) Commissions And it Outputs: Entry Price Quantity Initial Stop Risk: Reward Ratios and Dollar Amounts Profit Taking Targets I am starting to realize how important this sheet is because when I do not have this plan in front of me... My brain goes crazy and I just do unpredictable stupid things. Swing Trading most appeals to me. Where I am in a trade on average to a week to monthish period. With out my plan I was setting up the trade to be like a "Swing Trader" but I would exit like a "Day Trader". So does anyone have a Options Worksheet they could share/recommend? Thank You
There can be situations where you show a mtm loss, but if held to expiration a profit - it's a bit different than showing a loss on a long ES position. Though I agree with you, a loss is a loss, mtm or otherwise, just feel that the "it's not a loser until you get out" mentality is more defensible given certain option positions when compared to an outright in the underlying.
A loss is a loss. It doesn't mean you have to cut, but to pretend that a mtm loss isn't real is intellectually dishonest and being intellectually dishonest is a hurdle to being a successful trader. A trade that's down money is down money for a reason. The market thinks you are wrong. It's a case for cutting, adding, or doing nothing. But you can't deny the loss.
well, to go the other way, I've had some big profits unrealized. Where are they now? I never took them and poof they were gone. I don't really consider them profits. Maybe "Irrational exuberance." That account balance has been all over the place. The only time to get an accurate reading is when I am 100% flat.
Thank You NoDoji Did you use your paper trading experience to develop a trading plan with rules for entries, risk management and profit-taking? I did paper trading enough I think just to get familiar with options. I know how to setup trades with STOCKS where I had Entry, Risk and Profit taking Rules. I will link a excell stock worksheet I made/modified. I think I need to adjust it so it works with options. https://docs.google.com/spreadsheet/ccc?key=0AmiCebg7z4w3dFhCZS1WZDdkX0NqUHVsT2pITlNTUkE To quickly summarize what this sheet does... You input your variables which are: Current Price High Price(The price stock needs to be to be near bullish trend) Low Price(The price stock needs to be to be near bearish trend) ATR(Average True Range) Small Profit Target Medium Profit Target Big Profit Target Current Capital Risk Allowed Allocation% ATR Buffer(Breathing room on intial stops) Commissions And it Outputs: Entry Price Quantity Intial Stop Risk:Reward Ratios and Dollar Amounts Profit Taking Targets I am starting to realize how important this sheet is because when I do not have this plan in front of me... My brain goes crazy and I just do unpredicable stupid things. I think Swing Trading most apeals to me. Where I am in a trade on average to a week to monthish period. With out my plan I think I was setuping up the trade to be like a Swing Trade but I would exit like a Day Trader. So does anyone have a Options Worksheet they could recommend? Thank You
The right value is the price at which you can liquidate your book. It's always an estimate. But those gains were real if you could have sold at those levels. Of course, if you didn't realize them, then you lost that money. You are deluding yourself if you think that marked to market isn't real. Many traders, firms, and banks have blown up that way.
you're probably right, but if I can't use that money to pay a bill it's not real money. They don't accept shares of IBM at the local liquor store. So yes, I can use the unrealized profit to collect a management fee, but I can't actually use it to spend until it goes from that unrealized column to the realized column. at anyrate, I think rosy was just making a joke but sometimes those things are funny because they are true
Smith & Wollensky used to accept Citi shares, maybe short IBM long Citi? I guess we can agree it'd be pretty awesome if brokers calculated margin based on the "it's not a loser until you get out" model.