Friday, December 6, 2019

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.





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