I should have known — that the day being Friday, and me wishing the weekend was over and get to Wednesday fast – was a bad sign! (Crazy! ) Until yesterday, I was restless. I really just want to be right. And for traders, that was wrong!
You see, as of Friday’s post, I mentioned paper profits, what I probably did not say, even admit to myself, is I want to spend them already! 🙂 It’s “back to school” and you know what that means. Plus we are heading to start of End of Financial Year Sale here in Sydney with attractive deals! 🙂
Anyway, going through the possible decisions for the trade:
1. I could have closed STOTO7 so that I can still keep the small profit on the option, be happy with the increased value of the shares. The next step is to take another position, but what will it be?
2. I can just leave the option alone, sensing that the market is still unsteady anyway. The profit on the shares will be higher offsetting my decreasing profit on the STOTO7 option. If the value of shares fall, my option will be more profitable.
Which is the best scenario? Actually, I can profit both ways, such is the beauty of holding shares and writing the option. The payoff is just a little better with the increased value of the shares because the option’s value (or delta) is lagging a little behind the value of the shares itself.
Why I wanted it to be “Wednesday” already is because that follows the first trading day in the US, and I am expecting a “seasonal tendency” for a bounce coming from a long weekend. The tendency is to cut position i.e. sell before a long weekend to avoid downside risks and resume investing or buy again following the long weekend. Anyway, the idea of being right was so strong and this morning, I had come to remember that I was wrong in “wanting to be right” (or relying on prediction for trading profits). What I need to get right is following my system (rules), which fortunately, I had done so by taking no action when there was no trade satisfying my rules on closing which is whether the Stop was hit or profit target is reached and if opening, that I have to make 3x my initial Risk.
What saved me was following my Trading process daily, which I share in my book “High Heeled Traders”. Investing and trading is a disciplined process and I’ve worked on it for years and years. Save time, money and the frustration, you need to get this right!
More about my book “High Heeled Traders” here.
