Just Screw It

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There are few things more boring and pointless than hearing someone tell you about “the one that got away.” By its very nature, trading generates countless missed opportunities, and anyone who has done this for a while has approximately zero interest in hearing about the big fish that got away. It’s got to be as boring as listening to someone tell you about a dream they had last night.

I’m not here to write a post about the countless profits I let slip away last quarter, but I would like to share a tale of “blowing it” that I think informs my decisions in the immediate future.

Back in mid-February, I did something which I had not done in years, which was buy puts on individual stock. I had reason to believe that Nike (NKE) was going to weaken, so I bought some puts. When I buy options, they tend to be quite conservative. Specifically, I bought some puts that were in the money and didn’t expire for months.

I held on to them for a few days, and they didn’t do much of anything, but then the stock finally had a nice “down” day. Following that, the stock gapped down sharply. My options had more than doubled in price. I sold them and patted myself on the back for scoring such a sweet profit in just a few days time, even though there were months of life left on the option.

I, ummm, probably don’t have to tell you what happened next. Below I’ve tinted the profit I enjoyed which yielded the 115% gain. The yellow tint shows what happened next. For my own mental health, I have not calculated what the profit would have been, but I wouldn’t be surprised if it was 1000% or more.

Yesterday, I was curious when I had sold my NKE puts, and that’s when I discovered the fiasco shown above. I said to myself, “It hadn’t even started falling yet. ” And that is true. The moment it inched down a little, I greedily dumped the puts. It then went on to the full expression of its potential.

I have tried to embrace that lesson in my trading right now. I’ve made no secret of my attitude about the equity market that exists now:

  1. It’s a bear market;
  2. It’s going to 1250 on the S&P;
  3. Counter-trend bounces are to be sold

I managed to sidestep most of the 4,500 point lift in stocks that the trillions of dollars of Powell bucks created. I even made a little money on the lift. But, mostly, I avoided getting my nuts blown off.

Having ascended to nearly 2,700, the market seemed to be again in a place that was shortable, so I did so. I entered today (Wednesday) with 50 shorts, and by day’s end, I had 71 shorts. I will be reminding myself, by way of the NKE debacle, that “cut-and-run” isn’t what this is all about. I want to milk this bear market for all its worth.

I’m reminded of the tired old saw about “Old Turkey” that’s trotted out, and it goes like this:

Well, my response to the long-deceased Old Turkey is to cock my head to one side (which beats doing the converse……….) and declare, “You know, it’s a bear market.” And that’s all I’ve got to say about that.

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