Lessons learned from a losing trade: NFLD

Phil,

my comment wasn't addressed so much to you as it was to Linda and her infatuation with collars but if we are going to talk about "blanket" statements, yours isnt any less blanket with regards to using puts as protection. You out of all people should know better than to recommend buying puts at 280 vols.

Anyway, i made my point. People will always do what they want to do.
 
I watched this whole thing unravel in front of my eyes the other day as well.

I first discovered NFLD about 2 months ago thru my implied volatility screener on IB. It had the highest implied volatility of any stock in the market back then - for good reason.

I toyed with the idea of selling some options, but decided it just wasn't worth the risk.

biotechs are difficult to trade unless you know something. and even then, still difficult. But if you like to gamble, perfect outlet.
 
Quote from optioncoach:


So you need to put the advice i the context it is being given before making a blanket recommendation that is inapprioriate.
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it is not up to you to decide what "blanket" statement is , or what others ET members should post or not. I think that Rallymode's option's posts are one of the best on ET.
 
Quote from scriabinop23:

I watched this whole thing unravel in front of my eyes the other day as well.

I first discovered NFLD about 2 months ago thru my implied volatility screener on IB. It had the highest implied volatility of any stock in the market back then - for good reason.

I toyed with the idea of selling some options, but decided it just wasn't worth the risk.

biotechs are difficult to trade unless you know something. and even then, still difficult. But if you like to gamble, perfect outlet.
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For me gambling is not taking a position in a stock but rather risking too much on that position. I trade 2 systems. 60% in System 1. In this system, I allocate no more than 10% to an individual stock. So, if I lose 100% in that individual stock, I lose 6% of my total capital. This is the way I trade. When a stock is screened by my criteria, I have to buy it, no exception. This system generates about 600/700 trades per year. I have a lot of pretty winners in many industries, including bio-tech. Because, yes, successful trading requires taking risk. The difference between gambling and trading is essentially risk management.
 
Well ACM, that was a tough loss. If your system is successful chalk it up to experience, and don't let it get you down. I would definitely make sure to at least have hidden stops on all of your positions at some reasonable support level. I really don't think options are the answer if your average trade lasts 3-5 days unless it is an extremely high risk trade, high dollar trade. Based on your concern for money management, I would not think that you would put yourself into that type of position.

edit: To me your only possible mistake was not having a reasonable stop set. Hedging your position with options just take away from profits of an otherwise sucessful system.
 
Quote from Linda Options:

ACM, you stated that Collars and Married Put Strategies are worhless. Yet, you manage to sustain a 17% loss in a day when you didn't have them on.

Is it sour apples and rage that you didn't have one of those strategies used that causes you to say this? In other words, are you saying how you don't want to take the pretty girl to the prom simply because you asked her and she said "NO!"?

I suspect that your ignorance has you stating they ware worthless strategies. Most of my friends are either professional traders or married to a professional trader. They all hedge themeselves and are not on the boards gripping how they lost 17% in a day on a lousy 800 share position of a $15 stock.

Maybe you only can afford 800 shares because you only know GARbAGe StRatEgIes like dAy TradINg and bUYandHOLD instead of worthless strategies likes collars?

I understand your frustration as I would be frustrated to if I were ignorant, but I was simply trying to help. Instead you jump on me. merry Christmas to your 600 shares (now that you lost 17%).
Linda "4,000 Share of GOOG" S

PS: Thank you RandomWalktrading.com and Natenburg for teaching me worthless strategies.
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Any jackass - like you - can come up with a trade after the big move. ACM Trader was just sharing a trade that went bad on a VERY RARE 50% one day move.

PS...It wasn't ACM Trader that stated that Collars and Married Put Strategies are worthless
 
I know that some biotech stocks can be a lotto ticket, but I see most of them just suddenly drop and added to the top losers list more often then not at one point.

This seems more like a bet at a racetrack then a trade or investment.
 
I was under the impression that their news wasn't that bad. They unlocked their test data to fix some problems, and said if their protocol was followed they would not fail the FDA requirements. I think they still plan to submit the tests for FDA approval.
 
I want to make one suggestion as I think my swing trades may be similar to yours.

I only trade a basket of 155 stocks, and this stock is not in the basket. If it were in the basket it would have come up on my potential buy scans just as it did on yours.

I assume you looked at the stock on sunday. My rule before entering that trade would have been that the stock would have had to at some point in time during monday gone above the high of friday. When it didn't, I would have not purchased the stock, but it would still remain on my list of potential buys. On tuesday I would demand that the stock at least increased in price over the high on Monday. If it doesn't do this for two days, I take it off my list and look for other candidates.

I also set my stops at either the weekly low, or the low of the last two days.

Just a suggestion. Hope this helps.
 
Quote from ACM Trader:

For me gambling is not taking a position in a stock but rather risking too much on that position. I trade 2 systems. 60% in System 1. In this system, I allocate no more than 10% to an individual stock. So, if I lose 100% in that individual stock, I lose 6% of my total capital. This is the way I trade. When a stock is screened by my criteria, I have to buy it, no exception. This system generates about 600/700 trades per year. I have a lot of pretty winners in many industries, including bio-tech. Because, yes, successful trading requires taking risk. The difference between gambling and trading is essentially risk management.
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but taking a position on this is not a matter of valuation, only technicals and fundamentals. fundamentals you can rule out because as an outsider, you have none. (in other words, no knowledge of actual drug success)

money management is key to staying in the game, at least. its worth repeating the good old game of TA will backfire immediately when the news changes. thats the game of biotech.

you sound like a canslim guy.

whatever you call it: calculated risk, or gambling, it might as well be called a 'calculated gamble'. you can apply money management rules to roulette just the same. thats still a gamble. reckless gambling or trading is the same, alike, without money management rules and strategy.

all trades are gambles, just as everything else in life.
 
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