Devastating Expiration

by Jeff on July 27, 2010

My trading style is not a ‘set and forget’ method. You have to be aware of all your positions every day. If you can’t take the time to analyze each one each day, then find another methodology (more on that in the next few posts).

The week of expiration I had unanticipated duties that interfered with my daily routine and took a lot of time away from my computer. (No, I don’t have an iPhone and I won’t get one – too expensive to buy and own for my tastes.) That’s not really a good excuse, but it is a great lesson. Because of the distractions, I was unable to concentrate on the best action to take on many losing positions. I believe there was a bit of bad luck thrown in to boot in the form of a market bounce when I was very short.

The Weeklys had a big impact and have me reconsidering that strategy. Turns out if the trade goes against you, there is not any time left to make a good adjustment and the best course seems to take the lose and get out. That’s not the type of trading I like to do. I have back-tested a more conservative Weekly expiration methodology and I will detail that, along with a video, in my next post.

So net-net, I am down $2,181 so far for this month. Of my current open positions there is not much there to help the July 2010 number – unless the market gets very Bearish in the next few days.

I’m not going to go into all the gory details on each trade – nobody likes to hear bad news (although some might be cheering or saying “I told you so”). Suffice to say the distractions and lack of concentration (aka following rules) is to blame for almost all. Some of the big losses were at earnings, for cryin’ out loud. How many times have I said “Never, never, never hold through earnings!”

As I have said many times in the past when I have a bad month, it’s a painful but great way to learn a lesson. Education isn’t cheap. Good news is the Year-to-date numbers are still good. Whew!

◄ Jeff ►

Tagged as: bear call spread, Earnings

  • http://theoptionguru.com/blog Jeff W

    Dear Cory,nnGood one! – I had a nice hearty laugh when I read it u263annI suppose I could attempt to justify the reason why I can’t justify – like I would only need it occasionally because I am at home most of the time – but I sense I am fighting a losing battle. In the end it’s not being able to justify it, not that I can’t afford it.nnThanks for reading my blog.nnu25c4 Jeff u25ba

  • Cory

    You trade options and yet can’t justify the cost of an iPhone? boggle!

  • http://theoptionguru.com/blog Jeff W

    Bill,nnThanks for the comment and your support. You know, it’s really easy to mislead people, and I try my best to post my trades as soon as possible so that my readers can follow along, if they wish. And, as you mentioned, those people that claim success month after month aren’t believable. I get bombarded with offers, claims and get rich overnight strategies daily. I have tried a few that sounded believable, but there is really only one service/course that returned to me many hundreds of times the amount that I paid for it. Watch my blog for that detail.nnI watched the Options Rocket video and chuckled a bit. It happens to very closely mirror the strategy that I will be posting soon only using the SPY instead of the SPX. I back tested it from the point that the weeklys were offered on that ETF and it worked every week.nnLike you, I am starting to lean more towards the ETF’s in general – they don’t give as great a return but provide a higher probability of success.nnu25c4 Jeff u25ba

  • http://theoptionguru.com/blog Jeff W

    Bill,

    Thanks for the comment and your support. You know, it's really easy to mislead people, and I try my best to post my trades as soon as possible so that my readers can follow along, if they wish. And, as you mentioned, those people that claim success month after month aren't believable. I get bombarded with offers, claims and get rich overnight strategies daily. I have tried a few that sounded believable, but there is really only one service/course that returned to me many hundreds of times the amount that I paid for it. Watch my blog for that detail.

    I watched the Options Rocket video and chuckled a bit. It happens to very closely mirror the strategy that I will be posting soon only using the SPY instead of the SPX. I back tested it from the point that the weeklys were offered on that ETF and it worked every week.

    Like you, I am starting to lean more towards the ETF's in general – they don't give as great a return but provide a higher probability of success.

    ◄ Jeff ►

  • Bill

    Jeff,rnI have been reading your blog for many months now and it is one of my favorites to check in with. I like your trade plans, I got some good ideas from them.rnI have been trading BPS on SPY with some success, no losers yet in about a year of trades, but I did skip a couple months earlier in the year when things got dicey.rnI also tried a BPS on INTC in June, against my rule to stay away from individual stocks, and sure enough I got burned. I got out with a small loss as the price came down close to my short strike. If I had just held, it would have expired at $0, as the price recovered. I also had some CC trades with Alcoa earlier and had some winners but they were nerve racking, as you hve to watch for earnings, dividends, etc.rnSo I plan on staying with the SPY credit spreads. I use mainly a 3 mo. daily chart with BB and RSI to look for trend, and momentum to determine if I want to trade puts or calls and at what strikes. I want to keep it simple and just look to close out bad trades, rather than do adjustments. rnAs far as weeklies go, check out a video on optionsrocket dot blogspot dot com, he has a plan where he is only in for about 2 or 3 days.rnBest of luck Jeff and thanks for the blog.rnBill

  • Bill

    Jeff,
    I have been reading your blog for many months now and it is one of my favorites to check in with. I like your trade plans, I got some good ideas from them.
    I have been trading BPS on SPY with some success, no losers yet in about a year of trades, but I did skip a couple months earlier in the year when things got dicey.
    I also tried a BPS on INTC in June, against my rule to stay away from individual stocks, and sure enough I got burned. I got out with a small loss as the price came down close to my short strike. If I had just held, it would have expired at $0, as the price recovered. I also had some CC trades with Alcoa earlier and had some winners but they were nerve racking, as you hve to watch for earnings, dividends, etc.
    So I plan on staying with the SPY credit spreads. I use mainly a 3 mo. daily chart with BB and RSI to look for trend, and momentum to determine if I want to trade puts or calls and at what strikes. I want to keep it simple and just look to close out bad trades, rather than do adjustments.
    As far as weeklies go, check out a video on optionsrocket dot blogspot dot com, he has a plan where he is only in for about 2 or 3 days.
    Best of luck Jeff and thanks for the blog.
    Bill

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