here's a story.
i think it was the 1998 time frame. taking a look at the charts over the months, you could see a steady decline in the charts of most of the big companies..... symbolizing broad weakness. it was as clear as day.
i had something like 50k worth of puts against the dow. as time passed, the value of my position slowly declined.
doing overlays, you could see the dow was tracking the classic crash pattern, using 1987 as the underlying example, though all crash charts look pretty much the same. it was nearly tick for tick following the pattern. the 10 day ma cross over of the 20 da ma was classically the tip off point for major selling.
in this instance however, as history rhymed instead of repeated, the 1998 event took almost precisely another week to occur.
well, i didn't wait the week. my position was down to 7k in value.
i made the classic mistake of watching the money, and watching the time. automatically, i was no longer doing my trade. i exited with my 7k in hand.
the following week, the event took place.
it would have been worth a net profit before taxes 400k.
a well crafted trade makes money. watching money and time, rarely makes money. the trade is art. money is banal and over rated.
i also in this instance allowed time to destroy my trade. time was running out.
had i been straight short, that of course would not have happened. however, i suckered myself yet again, by thinking cheaper puts, and less capital on the line, were advantages.
neither was in this instance an advantage. both were a hindrance.
end of short story.
J |
