If I took my losses as quickly as I did my profits, I’d be laughing all the way to the bank… Unfortunately, the psychology of fear and greed always plays a pivotal role in trading, and when you’re looking at a losing position, the fear of missing a rally or higher prices after cutting a loss is usually what keeps me in that little extra bit longer- you’ve probably been there before- ‘just wait until the 11:30am post-Europe close ramp’, ‘just wait till the 3pm ‘power hour’,’ ‘just 5 more minutes to the half hour mark in this 15 minute downtrend… and those few minutes until the next ‘checkpoint’ become an excruciating eternity as I see my position dwindle and the loss swell larger. With my Hindsight Glasses on, I can see that I should have closed my long SPY call position early yesterday on any spike opportunity that we got. Instead, I chose to wait it out, and even added a small average down on what looked like a stabilizing base and rally mid-morning. Unfortunately, as you all know, the market plummeted in the last hour, ending on new lows, making it the worst performing week of 2014 for the Dow (another minus three hundy day!) and S&P 500. And just a few days ago we were about to breach new all-time highs just shy of Dow 18,000! My hesitation was rewarded with a LOD (low of the day) print in my position, closing it out at the last minute right before 4:15pm in after hours, when the SPY printed even lower lows and the VIX spiked higher (I was amused by an AAPL defender saying “VIX isn’t spiking, which means market sell off is aggregated to some big companies. Apple way oversold.” So 11 to 21 in a week is not spiking eh? Uh huh. Lots of levels of denial in that statement…). Fortunately I had taken gains earlier in the day on my WAG and GPRO calls, so I basically ended slightly negative to flat. I am reminded again of the very useful adage, “sell when you can, not when you have to”. Being put to a decision during the last 5 minutes of trade when your position is at the day lows is not a feeling that I ever want to repeat having.
Once again oil collapsed, hitting fresh multi-year lows to close below $58/barrel, which is a stunning 22% nosedive from just the November 27 OPEC meeting, let alone from $100+ in the summer.
It has been a very volatile and whipsaw-y week, to say the least. I loaded up some SPY puts after seeing some bearish signals on Monday, and closed them on Tuesday for a tidy profit after the market tanked in the morning before bouncing back strongly. I attempted to keep some short exposure in the market by getting back in some December 205 puts at $1.94, having scaled out of them earlier near $3, but was stopped near the day lows as the market continued to bounce. Too bad, as these puts steadily held above $3-4 over the next few days as the market continued its decline, and closed at the week’s high of $5.75! S&P 500 futures closed below 2,000 at 1,998 so this will make for an interesting week with the FOMC meeting on Tuesday and Wednesday, with an announcement on Wednesday Dec. 17 at 2pm eastern.
So, my mantra from now on is “The first loss is the best loss. Take the first before it gets worse!!!” Trade well, and stay disciplined my friends.