Taking Myself to Task

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Ever since yesterday afternoon, when META’s earnings came out and sent the stock blasting higher, I have been ruminating on a couple of big errors I made yesterday and how I got there. I’d like to talk about those, and we’ll begin with this chart of the /NQ, which shows, by way of 1-minute bars, the activity on the /NQ over the past twenty-four hours or so:

The key points, from left to right, are as follows:

  1. At the leftmost arrow, I decided – – and I didn’t plan on this at all until the thought hit me – – to do something very out-of-character and buy short-dated put options on the QQQ. As you can see from the price point, the position became profitable almost immediately. It simply “felt” like the right time to be short the cubes.
  2. The options grew in value and were up almost 70%. I decided, around where that area I’ve circled to dispose of one-fifth of my position. That was a good choice. The mistake was plain as day: I should have dumped the entire position for two good reasons. ONE, for God’s sake, these things only had two days of life on them, which is super risky, and TWO, the /NQ hit an important Fibonacci level, which is a completely logical and sound place to assume support will be found. I got GREEDY, since making 70% in two hours felt so good, and I held out, assuming the gravy train would just keep cruising.
  3. After the META earnings, I was a goner. The /NQ shot higher, and it climbed all night long. I figured I’d just hang on tight, but the point came were I just couldn’t take it anymore, so I dumped them (right arrow). What was a 70% gain was now a 30% loss. Nice job, Timbo.

Now I realize it’s easy to “coulda, shoulda, woulda” something, but for goodness sake, this was just greed, pure and simple. That Fibonacci was a gift from heaven, and I simply failed to take my profits. Shame on me!

The other screw-up, although I don’t chastise myself for this one quite so badly, is having puts on META in the first place. If you watched my tastylive show yesterday, I actually said out loud, and off the cuff, that I was long these puts even though it wasn’t that great a chart. Umm, Tim, if the chart isn’t special, why have a position? Because you’re just guessing and hoping? C’mon, man!

I’m glad I dumped those QQQ puts, because the loss simply would have become even worse. It also is utterly at the mercy of what AMZN does tonight, and I frankly don’t have a high degree of confidence one way or the other about that VERY important earnings announcement.

In sum, I’m down for the day, but it’s nothing devastating. I am simply disappointed in myself for the above events, particularly with respect to my failure to take “manna from heaven” profits on QQQ. Now, you know as well as I do that if META collapsed and those puts were up 300% right now, I’d be writing a similar post about my lack of bravery and boldness in my failure to not triple the position. Traders are never happy, right? But, joking aside, this is a real error on my part, and I hope the lesson sinks in.