BIDU picking the top

Its been a week since BIDU's crash back to near 400s. The initial drop in BIDU began three days after the gap up. There was an immediate gap down on day four and I scalp the trade for a small gain. (A very similar trend happened in AAPL, it was day four after its initial gap up did the stock go up. I find it very interesting.)


I was unable to capitalize on such simple move down on the stock because most of my capital was settled in, Goldman Sachs, GS options. I was on the wrong side of the GS trade and got whack pretty hard. I had 175 Feb10 calls at 5.10 and sold them for about 1.95. I also purchased call vertical spreads that total my lost to nearly $5,000.

I held the GS's calls until they reported their 4th quarter '09 earnings, and as trend was a tall tale sign, the stock dropped like a rock that day. (JPM and INTC both had positive earning reports for the 4th quarter, but their stocks dropped after the announcing their respective reports.) I closed all the calls I had on GS and turned bearish immediately.

My emotions took the best of me in the GS trade. I broke many rules that I tried to enforce. First was to control my lost, which I was unable to do because the day GS open to trade right after earnings the stock price fell within minutes. My asking prices had to be changed every few seconds but I was unable to catch any bids. Out of desperation to get out of the trade I went with market order. I should had set a trail stop on the trade to control my loses. This trade was just dread awful. Still I cannot dwell on the mistake, instead I must repeat to myself to learn from this and move on.

Another reason why I know it was a bad trade was because the day I purchased the GS calls I wanted to recoup loses I had in my GLD strangle spread. Arrogance got the best of me because my calls never got a positive gain after the day I purchased them. After my consecutive loses in YGE and GLD I should have walked away from trading for the week or at least control my amount of capital to trade so that I would not again, yes again, fall off a cliff. (Metaphorically speaking of my capital.) Foolish me.

Furthermore not only did I lose capital in hold the GS options I lost the opportunity to gain some impressive capital if I could have shorted BIDU. One mistake automatically leads to another. A chain of events that clearly were all hurting me.

There is a bright spot to this. I was able to flip bearish right as I left my GS options and used whatever capital I had to shorting the market and have recoup almost 2/3 of all my loses in the GS options. I also felt comfortable with my shorts when I executed them, which I did not have as much as when I purchased the GS options. I should take note of my comfort levels in certain trades. Until next time, G.L.T.A. in trading.