Tuesday, August 18, 2009

Absolutely crazy day trade

My friend Harry from Texas, the 4th guy that was invited to join our club but hasn't yet, just called me with a play he thought I might be interested in. He typically sits in cash and waits for the last week of expiration to try and jump in and snipe some remaining time value. The ticker was MRX, he paid $16.50 and sold the Aug $15 for $2.10. So you looking at making .60 on $14.40 or 4.2% for 3 days and 1 hour of time premium. Common sense and experience tells me that obviously something is up. They either have an announcement coming where someone has place their bearish bets, or someone has inside information. A quick search showed Najarian blogged this same thing, but had no information, just informing that somebody is bearish in a big way. So I sold 10 $15 puts for .60 when the stock was at $16.50. This is the equivalant of buying the stock and selling the ITM call. So as I'm sitting there still talking on the phone the stock runs up to $18 in literally 2 minutes. I put a bid to cover in at .15 and they got filled. I have zero idea what was up with the stock, it was not a technical or fundamental play, just a small gamble that paid off and made $450. It helps offset the $5000 loss I took on the SPY puts. It's time like these that I question why I would be long when you can make money in minutes. I know not everyday will be like this and it's not my norm, but at this juncture of my life as I move towards a large cash percentage I like the idea of short term trades better than longer-term.

Oh, the kicker, I was literally walking back to my house when I got this call on my cell. I forgot my notes to study for my final. Had I not forgot my notes and was away from home, I would never go home and put this trade on. It was just luck, either that or god loves me.

2 comments:

  1. I think you meant to post this in the "gambling" forum. ;-)

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  2. That is what I consider myself to be doing, only I don't perceive the game to be rigged against me. I can't possible control what happens, I can only control my risk but now my reward. In that respect I have to consider it gambling or speculating.

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