What St. Paul and I have in common

Tough week in the trading trenches this past week, self-inflicted kind ...

A free translation of Paul's words: "why did I screw up again when I know better?"

I put on the NDX trade early Monday a.m. (PST) and it went up rather sharply the first couple of days ... meaning that volatility collapsed and the trade was worth only about 60% of what I had sold it for.

Instead of taking that 40% of possible credit and going on with my life, I just let it go ... and the market continued to rocket up. Apparently this guy changed two words in one of his guidances:

That made some people think interest rates aren't going up as fast as had previously been thought ...

So by Thursday my little profit had evaporated and I was showing a largish loss had I closed it out at that point. So I held on ...

... through Friday a.m. when the uptrend softened and "collapsed" briefly ... I was short the 6900 calls and the market went down to 6882 by the time I stopped looking at it, at which I could still have closed it out for a small loss. But I did nothing ...

Here's the complete chart:

As you can see, the Friday a.m. weakening dissolved and the price spiked about 70 points in the last 2.5 or 3 hours, closing at 6949.01 For those scoring at home, I have been using 75-wide strikes (thank goodness!) but still ... I got $6.90 in credit and the difference between 6975 and 6906.90 is 68.10. 6949.01 - 6906.90 =  61.8% loss of the amount I had at risk.

Sheesh.

A couple of things become even clearer:

• I should be using even wider strikes for NDX, in accounts sized big enough to do this. I'm going to try 150 wide in my own account ...
• If I get that 40% of the credit by Tuesday profit I'm darned sure going to take it.

Your $200000  account this week would have lost about $20000, if I'd had 1/3 of your account doing this trade and you lost 1/3 of that (assuming 150-wide strikes) .... but if I'd grabbed the 40% when I should have you would have made $3500 or so.

More next week ...