Friday, November 20, 2009

November Expiration

I had two positions expire worthless today and I had closed out one on Monday for a big loss. This was a bad month for me. I made $400 with naked puts on PM and $250 with naked puts on KMP, but lost $3750 on LEAP. I originally sold naked puts on LEAP at $17.50 in October, then sold $17.50 CC this month to bring my cost average down to $16.00. When it kept hitting new 52-week lows while the market was making new 52-week highs I panicked and sold at $12.25 on Monday. Today it closed at $14.25 so we're up $2,000 from when I sold and just feeling stupid right about now for both getting involved in the first place and then watching it run the second I got out. The bottom line is I lost -$3100 this month.

I never had a valid reason for entering the LEAP position, and certainly didn't have an exit strategy. I just wanted to push the button and have $1,000 sweep in to my account and then hope it expired worthless. I was just gambling and lost. The only thing I learned is that I keep repeating the pattern of going from ultra conservative to riverboat gambler. And had I made money on LEAP I would have just done it again until ultimately I got burned hard enough to force me to take a real look at what I was doing. That's pretty much my pattern.
Going forward I'm basically in almost all cash right now and not sure what I'll do for next month. I've still got 20 naked puts on XLE for Jan and Mar at the $45 strike, so I either need to buy those back or wait until they expire. I don't want to double commit that money elsewhere. I'm thinking about selling OTM puts and calls on a few selected stocks for December. I have no general feeling for what is going to happen other than I don't feel comfortable getting long at these prices.
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2 comments:

  1. AnonymousFebruary 27, 2011 at 8:08 AM

    I know this post was a while ago but it looks like you guys make some risky trades. One sizeable market crash would wipe out your account.

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  2. Jason HaasFebruary 27, 2011 at 10:11 AM

    To Anonymous, I appreciate your participation on the blog, however, you're off base on this comment. What is your definition of risky? And without knowing the size of my account, which I've never posted, I'm not sure how you can assume that a crash would wipe me out. While I might take on more risk on an individual trade relative to the rest of my positions, or a different risk profile then you might initiate, I've never put myself in a position where even a 50% down move would wipe me out. As testament to this, look at my results from late 2008 when we did experience a 50% down move and I was about 80% long at the time. Other than one trade that I ended up taking off after a few days (short GOOG puts), I've never sold a short put that I didn't have cash to cover. I chose to sell short puts rather than ITM calls to avoid the stock transaction fee. The truth is that on a portfolio wide basis, historically I'm guilty of not taking on enough risk relative the the amount of capital I had.

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