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.

My first trade based on the forecasting service offered by elliot wave
international has been a huge loss. I think this is because for my
part, I didn’t wait until the price data had passed certain price points
which would have exposed the market’s next surge. I added to a bearish
position after reading my first forecast, eventhough it specifically
stated that the near term trend would be uncertain until after having
breached particular price levels. Oi vey.
What’s the moral?
“Patience young grasshopper!”
I’m still not giving up. I’m well on my way to losing the entire
trading account, but I’m sticking with it. I’ve not replensihed the
account. I don’t want to continue to lose moeny, but instead take these
loses as reinforcement for the lessons learned.
This education in trading is expensive!

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.

Today was a typical pre-fed meeting day showing volume around 60% of the
average. To my delight the Qs slid a bit downward, and my QQQUJs
touched 0.75 for the third time in 5 days. I couldn’t bring myself to
take defense action by selling again. I really think the Naz is going
to suffer tomorrow, rate hike or not. If there’s a hike, cash gets more
competitve versus the stock market, which at this point in the hiking
policy could do some damage. If there is no hike then the Fed is saying
that the economy is slowing enough that they don’t have to do any more
damage themselves. Hike or not, inflation is running hot and company
earnings are going to drop next quarter. They weren’t so great this
time around anyway.

Today the non farm payroll numbers came out. We had only 114,000 new
jobs created last month. This was about 30,000 lower than the
estimates. This information was released around 830 am today. As would
be expected, the market gapped up. It continued to rally until around
1230. Then it started a serious downtrend into negative territory. The
Qs covered 60 cents of movement from plus 30 to minus 30 intraday.
I had opened a position in QQQUJ. That’s the september 36 put. I got
into this postion on the monday and tuesday before last. That’s
somewhere around the 24th. My cost basis for 16 contracts was 0.98.
When I checked the position after vacation, it was worth around 0.55.
Wowza! That really hurt! I saw it move up to 0.75 earlier this week on
movement around the time of inflation data coming out. I did not sell
out at that point though.
Earlier today the position was worth 0.45. When the market was
sufficiently dipped, I sold 6 of the contracts for a 120 dollar loss.
At this point though, I’m trying to reduce the amount of capital I have
working in this trade. If it goes further against me, I certainly
don’t want to lose more than 23 cents per contract. I should never have
lost more than 10.
So I still have 10 contracts out there. I’m pulling for inflation fears
to kick in big time on monday. Then hopefully I can exit at break even
before tuesday.