Lessons Learned in Nov 2019

I learned some painful lessons in November, 2019. But, then again, every lesson learned (when it comes to the Markets) is usually painful, so I suppose there's nothing unusual about that. And because I have only recently found my "niche" as an options swing-trader, I should probably just assume that I still have many painful lessons to come.

Let's talk about the positive take-aways from November first.

For the first time ever, I went a whole month without having any options contracts expire. That, for me, is a big, big deal. September and October were horrible in that regard, with 5 expired trades in September, and 4 in October. Lesson learned: Pick expiration dates that are at least a month out, and choose strike prices that are deep in the money to ensure they maintain some intrinsic value and suffer less time-decay.

Speaking of expiration dates, I also learned a lesson that was the flip-side of the one above, which is: Don't pick an expiration date so far in the future that there isn't a market for the trade. I made the astonishingly dumb mistake of trading an option for which I turned out to be the only one interested and/or trading. If there's no market for it, you can't sell it, no matter how "profitable" it looks. I bought calls at $1.19, hoping the price would rise. And it did! It's now priced at around $1.60... but it's still showing a loss, because of the initial spread (duh!) and the fact that no one is interested in buying it! (double-duh!) Luckily, it wasn't a huge trade, but it was (and still is) painful, all the same.

After a lackluster and disappointing October, November gave me nice gains. From 1 November to 30 November, I banked almost 700% in profits. Absolutely no complaints there! (My portfolio suffered a mild retracement the first week of December, but that's another story.)

In October, I made 43 trades, with 28 of them turning into gainers, and 15 of them losers. As always, I worked very hard at minimizing losing trades and maximizing winning trades but, honestly, I feel I could have done a much better job of it. I will have to keep reminding myself going forward that losses are losses, whether they are "realized" or not, and so it is better to close them out quickly and efficiently while the losses are still manageable. Bad news doesn't get better with age.

My best trades in November:

Bought Target ($TGT) 20Dec 112 Calls for $4.97 on 11/18 and sold them on 11/20 for $10.05 for 102.2% profit. Bought more at $4.14 on 11/19 and sold those for the same $10.05 for 142.8% profit.

Bought BJ's Wholesale ($BJ) 20Dec 22.5 Puts in two purchases on 11/20 for $0.33 and $0.35 and sold them all on 11/21 for $0.82 for a 148.5% and 134.3% profit respectively.

Bought Dollar Tree ($DLTR) 20Dec 108 Puts on 11/21 for $4.60 and 11/25 for $2.60, and then sold them all off 11/26 for $12.33 for a 168.0% and 374% profit respectively.

Bought Best Buy ($BBY) 20Dec $72.5 Calls at $3.95 on 11/21 and $4.23 on 11/25 and sold them on 11/26 for $6.95 for 75.9% and 77.1% profit respectively.

On the downside, I had several trades that were carried over into December which have either shown a significant loss ($DLTR -60%, $UBER -28%, and $GTT -6%), or are still pending ($NLNK, $DELL, $KEYS, $URBN, and $VEEV).

On the $DLTR losing trade, I was simply guilty of "going back to the well" one time too many. As to the UBER and GTT trades, I believe I was guilty of paying too much attention to the short term charts without back-checking my assumptions against the longer-term charts. I definitely held the losing $DLTR trade too long.

I did better in November than in October at cutting losses while they were still in the 10-20% range. Remember - due to the "spread," most options trades start out with an instant 10-20% loss from the moment you make the initial buy. That's a significant downside to options trading. The upside, of course, is the leverage that can bring you profits of 100-300% in a matter of days.

All in all, a good month.  I can only hope I take these lessons seriously and have as good a December.

Jesse Livermore's Trading Advice

Jesse Lauriston Livermore

Livermore's trades are legendary and have led to his being regarded as arguably, one of the greatest traders who ever lived. He inexplicably took a massive short position the day before the San Francisco earthquake on April 18 1906. By selling Union Pacific stock, he amassed $250,000 when much of San Francisco was destroyed. These intuitive decisions that almost always resulted in huge profit, were a mystery to Livermore as much as anybody else. All he knew was, that when he got a gut feeling, he was wise to follow it.   

In the crash of 1907 Livermore had huge short positions that could have netted him immense profits. He was, however, requested by J. P. Morgan, who had bailed out the entire New York Stock Exchange during the crash, to refrain from further short selling in the interests of the national economy. Livermore agreed and instead, profited to the tune of $3 million by buying into the rebound. 

Possibly his greatest known trade was during the stock market crash of 1929. He had amassed huge short positions before the market tumbled, using more than 100 stockbrokers to hide what he was doing. When the crash came he netted approximately $100 million and, following a series of newspaper articles declaring him the Great Bear of Wall Street, was blamed as personally responsible for the crash by bankrupt members of the public.

His advice:

"All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical formations and patterns recur on a constant basis."

"The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor."

"Wall Street never changes. The pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes."

"Stocks are never too high to buy or too low to sell."

"Instead of hoping, he must fear; instead of fearing he must hope. He must fear that his loss will develop into a much bigger loss, and hope that his profit may become a big profit."


"What beat me was not having brains enough to stick to my own game."

"The Wall Street fool... thinks he must trade all the time. The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street among the professionals who feel that they must take home some money every day, as though they were working for a regular wage."

"It never was my thinking that made me the big money for me. It always was my sitting."

"It is almost as important to know what not to do as to know what should be done."

"A man must believe in himself and his judgment if he expects to make a living at this game. That’s why I don’t believe in tips."

"Without faith in his own judgment no man can go very far in this game."

"A man can excuse his mistakes only by capitalizing them to his subsequent profit."

"The game taught me the game. And it didn’t spare the rod while teaching."

"If I hadn’t made money some of the time I might have acquired market wisdom quicker."

"There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what to do in order to win."

"A man will risk half his fortune in the stock market with less reflection than he devotes to the selection of a medium-priced automobile."

"I was convinced whatever was wrong was wrong with me and not with the market."

"I never argue with the tape. Getting sore at the market does not get you anywhere."

"A loss never bothers me after I take it. I forget it overnight. But being wrong – not taking the loss, that is what does the damage to the pocketbook and to the soul."