First losses of 2010

For the total loss in trade including commission, $176. I had purchased 5 veritcal Jan10 puts @ 17.5/19 at $0.90 each but the stock did not decline enough for me to profit on. I held the options for a couple of days anticipating on a further downward decline after significant gains. Instead today was the day where it shot up slightly over 1% in a matter of minutes. YGE held strong at the $17.85 and went up on strong volume. As shown in the white diagonal line in the volume section below.


It was clear to me yesterday the trade was a big mistake but I held it overnight because of two reasons. Sentiment for the broader market was neutral to bearish and the five day moving average for YGE was flat. I knew I was making a gamble, all choices in life are gambles in my opinion because as long as there is a probability between winning and losing it is gambling, and anticipated on a breakdown today. YGE at first looked weak but the broader market shot up in a matter of moments, especially the Nasdaq. Then YGE gained momentum and it was difficult for me to get out of the trade due probably to the small market cap of the stock. I lost about 39% of my total trade investment.

Next time I will probably watch for moving averages to actually decline before I go bearish. Furthermore I should purchase less option spreads on small cap stocks due to lack of liquidity.
Clearly the market is on a neutral to upward trend right now so any bearishness I have to stocks should be at a minimum.

Patience is key and I remember another trade blogger saying that, cash itself is a position. Rather than holding stocks and options overnight I should also hold more cash overnight to avoid big swings in the market. I have a gut felling that even if the market does not look like it will go down, but when it does it will be a downward cliff. Why? The trade volume for the past week is lighter than usual so bulls do not have conviction in the upward push. Yet, "price is the only thing that matters."- Brian Shannon of Alphatrends.net

I have an aspiration to not loss over $3000 this year, therefore each month not to go over $250. I know its highly impossible and I should not have such an aggressive stance on losses. However with this restriction I force myself psychologically to think twice before I make a trade. In essence scrutinize my trades a lot more than usual in order to give myself better odds in profiting.

I am also in another losing position presently, a sale of a GLD Jan10 straddle 107 and the position presently has a $35 loss including commissions. I plan to buy it back without a lost but will have to wait. Good for me is that the five day moving average has finally turned downward on GLD. Will update on this position.