I had a perfect setup on (PCLN) Priceline. I was just waiting to collect a nice chunk of change. But it didn’t work out as I wanted because I broke one of my investing rules and pulled the trigger too early. My total profits yesterday were only $300 instead of $900 or so as a result of this mistake. Scheiße!because the rest of the day you start to feel like you are on a bike with no gears.
And as a precaution to a trade doing the reverse of what I want and I end up losing money, I always set a desired target in terms of how much I want to make on a trade. And that target on yesterday’s trade was $300. But sometimes that back fires and I regret setting that up as it did yesterday.
So instead of collecting up to 300% on the trade, I ended collecting only a 90% return. I try not to be greedy because greed is how people end up losing money. But a little greed would have been nice on this trade.
I generally err on the side of caution and I prefer to stay in cash position over night when it comes to options. The majority of my trades I do not hold for more than five days since I trade weekly options most of the time. I have certain exceptions of course depending on market sentiment and what’s happening with the company.
The reason for this is because of Option Decay.
Decay is a bitch that just keeps taking. Decay is when you are losing money as a result of holding on to a position too long.
Since options expire and a position could go to zero, it makes them riskier than stocks. On the other hand, you make a lot more money than you would on a stock. But the longer you hold a option position, the more time eats into it; the closer the option is to expiring the hungrier time gets and eats more of your money away. That’s option decay.
Anyways, since this week’s goal is to make $300 and $92 of last nights profits went towards this week, I still have to make $208 today to meet my goal for the week and everything else is extra. That’s this weeks challenge.
But I will try and make up for it tonight. AAPL – Apple seems to be pulling from the slumps so I will look at the chart on it tonight and see where it might go. It’s very likely to be my trade for tonight. AIG – American International Group and Netflix are looking good as well. The volume is coming back into them. Why not, after all Alcoa kicks off earnings season on Monday.