I’m always happy to share my success stories here, but it’s more important than I share my blunders. I was short Eli Lilly (LLY). I hadn’t even glanced at them pre-market, but when I saw a huge loss in my portfolio, I was baffled where it came from. It didn’t take long to find out: LLY was up triple digits on news of some new Ozempic-type drug.
All of which led me to castigate myself with all kinds of denunciations. I can’t remember the last time I had an instant loss this big, and it wasn’t a good feeling.
To be fair, my positions tend to be fairly evenly sized, so since this was one of 34 positions, it was about 1/34th of my portfolio. Still, an instant 14% loss sucks. So, what went wrong?
Simple: I compromised. I already was in a bunch of great shorts, and my standards for what constituted a good setup fell precipitously. Sure, LLY is high, but there’s no clear reason to be short this, no matter what its P/E is or high lofty it seems. The pattern simply wasn’t there, and with a shrug of my shoulders, and too much arrogance of recent success, I plunged into a very “meh” position. It cost me.
The third of my trading rules, Look for Flaws in Your Setup, applied here. I let myself down, and I absolutely deserved this loss!
