Wow. I can seriously be a dope at times. Allow me to explain!
I stumbled upon a stock today I had never traded before called Credo (CRDO). I became instantly enamored of the pattern, and I did a post about it shortly after I acquired some June $125 puts.
Unbeknownst to me, the stock was slated to report earnings after the close, and the moment it did, the stock EXPLODED higher by over 20%!
Now, the “dope” part isn’t that I went bearish on a stock that went the wrong way. I stand by my analysis 100%, and I am not angry with myself for buying those puts. My actions were perfectly sensible based on the information I had at the time.
What I am angry about, big time, is that I managed to make things worse two different ways on this!!!
Way #1: I got greedy. Specifically, shortly before the close, I decided the pattern was so nifty that not only did I want to own puts, but I’d short the sucker too. Dumb, dumb, dumb! That is putting TOO much risk on one specific item (particularly one I’ve never traded before and whose personality I do not know). That was just plain stupid to over-expose myself.
Way #2 is even worse. Shall we take a peek at a particular portion of the trading rules page?
The full text of that second rule reads as follows, with some emphasis by me………
AVOID THINLY TRADED INSTRUMENTS AND OFF-HOURS TRADING – Low-volume symbols and off-hours trading, is nothing but trouble: the bid/ask spreads are obscene, it’s difficult to get in and out, and big moves after hours often get reversed by the time the opening bell rings. Tempting as a given chart or event may be, be patient and wait. Stick to regular business hours with highly liquid symbols.
When the stock was moving from 125 to 130 to 135 to 140 to 145 to 150, what did I do? Can you guess?
Hey, you know what, let’s make it even WORSE. Let’s see where I covered my short position, shall we?
Yep! Almost the worst possible after-hours price!
So, I actually managed to screw up three different ways:
- I over-exposed myself;
- I broke my rule about trading off-hours, just to stop the pain;
- By doing so, I paid an absolutely shitty price and worsened my loss
Just to add salt to the wound, there’s really no “good” news that can happen tomorrow with CRDO. If the stock stays sky-high, it means I’ll take a bath on my put options. If the stock, for whatever reason, loses its gain and actually starts moving down, it’ll mean my idiotic loss above is even more unnecessary.
I’m not the sort who pretends he gets everything right. On the contrary, I want to point out when I’ve screwed up and tell you all about it, not just because I deserve the humiliation, but in an effort to encourage you to avoid doing the same stupid crap.
Now, if you’ll excuse me, I’m going to write an entry for today’s Trading Diary in which I tell myself precisely how badly I suck.
