Monday, November 12, 2007

My first month of option trading is almost over.

Option trading is definitely not for the faint of heart, or the fumbled of fingers. That slip on POT last week has all but crippled me today. While the DOW only dropped 55 points, POT fell 16 points on no news. In fact they just released their third quarter results last week, and they were sterling.

Every where I look though, high dollar stocks are taking big losses. Of course like I said, it's only a loss if you sell it...Except with options.

My intent was to go into the last week of options without holding any, as I knew this would be a volatile week, and I am so new to this. But with my POT options down fourteen percent, I figured I would wait until Monday. It might be an up day after all, with the market selling off so sharply Friday afternoon.

So I got up nice and early, made my coffee, read my message boards, some news articles, and e-mailed a bit with my dad. 9:30 am eastern came, and my eyes were peeled, watching my POT and PCU level II's. I watched the Dow head up, and POT plummet, for what reason I still don't know, testing 110. You can't even sell options until 9:45 eastern. Those 15 minutes were some of the most helpless I have ever felt. There I sat, watching the investment I had inadvertently doubled up on, plummet before I could do anything about it.

Had I known then what I know now, I would have taken first hit and sold when I came on, because as the day progressed, while the DOW slowly rose, POT kept getting battered. When it tested 110 the second time, I decided to buy the puts, as there was no support for another 10 points. I found an out where I made a 74 ROI on that investment. Some sold after mine for .20 higher, but then the stock headed back up, and the options back down. I was ready for at least a bit of a rally. Nothing. As the day neared end, I was able to pick up some 100 puts on the cheap. By the end of the day the stock was down over 16 points. I have been checking in all night, looking for any sign of why POT got hit so hard. I looked at my portfolio, and realized my blue chips were getting battered. NOV, PCU, MDR, and some I didn't own anymore, FWLT, DRYS, RIMM. Heck, even GOOG was down 35 points!

So, what will tomorrow bring? Well, I see no reason for POT to have dropped 16 points, but there is also nothing holding it up at the 100 level. POT may see 90 before the week is over. If it does, I'm ready for it. However, a part of me can't help but see the game. You scare people out of their trades on Monday, dropping the price 16 in one day, and then you have 4 days to make that 16 back. Well, it could happen. At this point, the worse thing that could happen to me, is that POT languishes in this 100-105 area for the next 4 days. That being said, the worse case scenario is that I loose the money I invested on that downside, which would bring my losses to 27% instead of 25. Worth the risk when you are looking at no support for another 12 points. While you can't really judge how a day is going to go based on after hours, there were a lot of sales of POT in the 100-101 dollar range, so the mild resistance at 101 has already been test, technically.

Or I could lose it all by Friday. I'll keep you posted. I am playing the downside as well, on this one, to try and minimize my losses. My portfolio took a dramatic hit today. With last weeks losses my portfolio is at the lowest level I have seen since opening this account in February. I am down 37.5% so far in the month of March. So much for making that 10% gain this month! The good news is, that some of that is in stock I still own, so the money is recoverable eventually. Stocks, took a beating across the board. The harsh part was the options. 25% of this months options expire on Friday. I have 4 days to recoup as much of that as I can, lick my wounds, and come out punching in December.

I'm slowly purchasing a contract here and there of these battered stocks, to try and catch a Christmas bounce.

Always perform your own due diligence before making any investment.


Anonymous said...

I hope today the markets were kinder to you!


CaPrincess said...

It was, thanks!