The last couple of months have been really good for bear calls and I did very well. Since I've been posting my good results I need to be fair and post the losers as well.
This month I placed a stupid trade, SPX 1300/1315 bear call. The reason it was stupid was because it didn't really meet my criteria. I knew it was a bad trade when I didn't even openly post it in the forum; I hid it in a response to someone else. That should have told me immediately that I was not comfortable with the trade. I placed it out of greed, because I had booked July and August spread credits in July (almost doubling my typical monthly intake). I wanted to keep it rolling.
The day after I placed it, the SPX was up 22 points. I had the chance to get out about a week or 10 days later for a $0.20 profit and didn't.
Fortunately, it was only a relatively small position and isn't affecting my portfolio value too much. When I closed the position, I adjusted to another bear call (a day later at much lower credit than I would have gotten the day before) and added a bull put spread. Poor adjusting on my part.
So what did I learn:
1) Adjusting is necessary when the price gets close to the short strike and I need to not fear it. It's part of the arsenal and has to be embraced as part of the strategy.
2) Greed and hubris are probably the two largest factors that can separate a credit spread trader from his money.
I wound up losing 7% on margin this month. Again, fortunately it was on about 25% of what I normally commit per month.
This month I placed a stupid trade, SPX 1300/1315 bear call. The reason it was stupid was because it didn't really meet my criteria. I knew it was a bad trade when I didn't even openly post it in the forum; I hid it in a response to someone else. That should have told me immediately that I was not comfortable with the trade. I placed it out of greed, because I had booked July and August spread credits in July (almost doubling my typical monthly intake). I wanted to keep it rolling.
The day after I placed it, the SPX was up 22 points. I had the chance to get out about a week or 10 days later for a $0.20 profit and didn't.
Fortunately, it was only a relatively small position and isn't affecting my portfolio value too much. When I closed the position, I adjusted to another bear call (a day later at much lower credit than I would have gotten the day before) and added a bull put spread. Poor adjusting on my part.
So what did I learn:
1) Adjusting is necessary when the price gets close to the short strike and I need to not fear it. It's part of the arsenal and has to be embraced as part of the strategy.
2) Greed and hubris are probably the two largest factors that can separate a credit spread trader from his money.
I wound up losing 7% on margin this month. Again, fortunately it was on about 25% of what I normally commit per month.
