Gee, Think.

Is it too late for my poor QQQUJ options? It could be. I hear that
these last two weeks are really when the time value gets sucked out of
the options. So out of the money options are not really the place to
have your money. Well, all I can do at this point is hope that the
market falls hard enough tomorrow and the day after to see if I can
recover my 8 cent cost basis.
My trading account is hanging in the balance here. If I am able to exit
the position with some scrap of captial still remaining, I will
definitely not buy current month options again. I was really playing
with too short a time frame.
If I end up losing all the money in this position, I’l have to wait
until I’ve done some more saving before I can practice again.
I think one of the biggest lessons to learn is patience. I rushed into
some poor quality options because they were cheap and I was too eager to
play the downside. Now I realize that it would have been much better to
wait until the direction of the market was more certain. Then I could
have profited more from today’s striking 70 cent loss in the Qs.
Instead I’ve lost money in my trade and also in the opportunity to
capitalize on such a dramtic move.

I’ve really placed my bet now, moving my position up to 30 QQQUJ
contracts. If the market drops, I hope to see these contarcts rise
sharply and beat my costbasis of 8.3 cents. 15 cents would be around
90% and 20 cents would be around 150% profit. I can’t wait to see how
it plays out!

Today I am still holding a position in QQQUJ because I believe that the
Qs will start a sharp decline sometime this week, or early next week.
These are the september 36 puts, which right now are trading with a
spread of 0.05 by 0.10. These are the bottom of the barrel options, but
I’m holding them because they are the only ones with a potnential return
that can cover my trading costs due to low volume.
I think it could take several days of downward action to bring these
options to a profitable position for me. I’d like to see them at 0.30
by Friday. That would be excellent since my cost basis is 0.15. It is
possible that the market will kill me with inaction thoguh. If it
remains stagnant for the next week, I could be out of luck. Some people
say that volume just before labor day weekend is quite low since many of
the traders are off on vacation.

I’m really disappointed that my puts did not increase in value on a day
when the Qs moved down over 30 cents. I checked the delta on QQQUJ and
it is -0.06. This means that the puts will increase 6 cents in value if
the Qs decrease in value by a dollar. That’s a pretty weak rate of
movement. So now I don’t know what I should do. I’d like to have an
option that will take more advantage of the downside, but my trading
account is so low, the costs of trading in and out of a position are
really biting me. It’s discouraging when the market moves your way but
you option is of such low quality that it hardly moves.

There is something about trading psychology that I cannot overcome.
It’s an enduring optimism that the decision I’ve made in a trade is
right. I tend to hold onto a trade until I’ve lost at least 30%. At
that point I start to worry. I start to read articles looking for
reasons that I can use to bolster my opinion that the market will move
back my way in a short time. When I reach the 40% loss area, if I’ve
had cash on the sidelines I want to pour it in to lower my costbasis. I
think to myself that if I wasn’t right when I placed the trade, if I
could only buy in at the current depressed level I would surely be right
that time. It’s really a horrible trading psychology to have. So far
it’s been really hard to change.
I have heard that once a trade starts to go against you, you ought to
play it the other way. Swap out of your position, and take the opposite
action. If you’ve bought a put option for 1.00, with a 0.7 delta, and
the spread is now 0.9 by 0.95, sell out and buy the opposing call.
I have been unablr to put that into practive because I always believe
that the market is just tricking me into thinking I’m wrong. I think
that as soon as I take a realised loss and reverse my position, the
market will reverse as well.
So far, my psychology has really gotten in the way of successful
trading. I’ve got to try and change it somehow before I’m out of the
game.

My bearish position on the `s, .QQQUJ got smacked this morning as the
nasdaq gapped up, with the Naz 100 adding more than 24 points by noon on
just under 60 million in volume. So far it looks like the relative
strength indicator is hitting a top and staying level as the Qs rise to
resistance levels of last week. I’m praying that this means the up
trend has stopped. I also wish that I had more in my trading account so
that I could load up on 0.40 contracts to bring my costbasis down from
0.82. Ahhhh! We shall see what happens. The Naz 100 just doesn’t want
to break that 1475 line.

I just adjusted my bearish spetember Qs position. My cost basis went
from 0.98 to 0.82. So far the trade has gone like this:
1. 7/24 Buy to open 10 QQQUJ at 1.00
2. 7/25 Buy to open 6 QQQUJ at 0.95
3. 8/3 Sell to close 6 QQQUJ at 0.75 (ouch!)
4. 8/9 Buy to open 7 QQQUJ at 0.60
I’m bearish on stocks in general and the Naz in particular. I believe
there will be significant movement downward over the next four weeks.
To avoid significant time decay, my exit date is September 1st.