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Strategies & Market Trends : 1999 Year in Review--Talk about your trades -- Ignore unavailable to you. Want to Upgrade?

To: F Robert Simms who wrote (2)	12/24/1999 2:21:00 PM
From: Lee Lichterman III	Read Replies (1) \| Respond to of 7

Good Lesson but much of that could be due to options. I traded a stock (KEA) back in 98 for about 9 months turning 1K into 8K trading the short term swings nailing them perfectly. Finally decided I had this stock figured out and switched back to options after not having traded them in years. Very first trade, I bet the wad and was early, I thought, so waited it out like I would a stock trade. Premium erosion was eaten away leaving me almost right back where I started. Options are a completely different beast than stock. Always bet small when switching styles trading and with options take your losses quickly. If you are proven right after cashing out, dont think about how much you left on the table, but how much you saved by avoiding the extra risk. It took me months to get over that trade and hone my skills at trading options again. The market changes and trading from 1982-98 was easier than trading from April 98 to now. This year, you have to be quicker, babysit positions more and use hedging more effectively. My trades this last couple months have been much quicker and more volatile than earlier in the year. This week alone I was happy getting 3 point moves in your average 50 dollar stock. If I had held for more than that, I would have turned winners into losers. My trades this week were mostly in one stock taking 54 1/2 buy ins on 60 strike options for 4 1/2 and selling for 5 1/2 to 5 3/4 as the stock bounced between 55 and 57. Swinging for home runs is dangerous and I have had to learn to make the quick hits. The guys hitting the home runs on QCOM are the exception and the options premiums on the fast movers are too high for most traders. This year I have learned to stick with the stocks no one is watching and especially the DOW stocks since the premiums are tiny in comparison with the NASDAQ high flyers. Also buying ahead of the curve is most profitable. A very good trader here on SI showed me that buyinh puts when the new is rosiest and selling them just as the mood changes is more profitable than going with the trend albeit much more risky. Even when batting 500, the swing in premiums as the mood changes is more profitable than the drop in price. A climbing stock's put premium is negligable but once the fall begins, the premiums on some of these makes the option double just in price due to the intial demand alone. Good Luck and great idea for a thread. Good Luck, Lee

To: F Robert Simms who wrote (2)	12/24/1999 8:45:00 PM
From: HeyRainier	Respond to of 7

Bob, Good lessons. It's a pretty good bet that greed and impatience will play big roles in detrimental trades for numerous participants--it's the nature of the markets. On Lee's note, I have to say too that on some occasions, some of my wins turned into losses because of greed, and losses never turned into winners because of impatience. One of the theories I hold is that the average human is hardwired for failure in trading the markets unless he (or she) learns to control his emotions through some form of market discipline. My readings in human behavior in the markets tend to show that traders (1) secure gains quicker out of a great fear of losing a sure win and (2) put off recognizing losses longer due to the psychological pain involved of admitting a mistake, which translates into holding losers longer and cutting winners quicker. These two combined are a formula for trading disaster. Instead of letting the winners ride and cutting the losers quickly, this behavior promotes just the opposite. It's no wonder then that various reports claim that as much as 80% of traders lose money, while only 20% make it. I'd bet that this 20% has learned to control their emotions, or at least establish a trading system that leaves no room for it. Does anyone have other instances that can illustrate this point? Rainier