Well, ouch. Here’s a sad little tale for you. It involves this chart and three arrows. Let’s read them from left to right:
- Entry: Cognizant of the CPI number coming Thursday morning, I decide on Wednesday mid-day to do something very out of character, which is buy some ETF puts with a very short expiration time horizon. As I’ve said countless times, I normally buy options that have an ungodly amount of time left on them. This time, I bought QQQ and SPY puts that expired this Friday. So this is pretty much YOLO type stuff, although in my defense I’ll hasten to add these were small positions.
- Hesitation: To my delight, the market went into a small free-fall in the final hour of Wednesday. This was, I suppose, due to fear about the CPI. I did NOT intend for these to be day trades, but the profits accrued so quickly I started to consider it. I mulled it over but was in deer-in-headlights mode. 1:00 PST came and went, and that was that. And I immediately started telling myself, “You shoulda taken the money and ran with it.” And I told myself that all night and through the morning.
- Loss: The equity futures climbed all night long, and when the CPI came out, they shot higher. I figured, well, ya dope, told ya so. After about 10 minutes, the futures started falling fast, so I thought maybe I’d pull a rabbit out of my hat, but that didn’t last long. Anyway, I got out not long after the opening bell, turning a profit into a loss for both the SPY and QQQ positions. As I said, these were small positions, but, boy, did I feel like an idiot.
I guess there are a couple of lessons here. First one is that it’s obviously hazardous to go out of your comfort zone (mine being very long-dated, very deep in the money puts). The second more important one is, if by some dumb luck a gift rolls up to the gate of your castle wall, open the damn thing and take it!
Holding on to a couple of positions into a binary event which magically became instantly and handsomely profitable was just plain greedy, and I got punished for it. Oh, and just to add salt to the wound, as I am typing these words, the market is in a free-fall. So – – even worse!!
What a dummy!
