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| raped |
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| here's how I took it from behind |
Yes.
66% YTD returns disappeared to 4-5%.
Yes.
How'd it happen?
#1 - being stupid, yea.
#2 - buying everything with a shotgun, no precision shots, just blind skeet shooting really
#3 - getting out of my circle of competence, wtf was I doing with call options on Tiffany & Co? Trying to strangle medical supply companies AFTER company announcements?
The only good thing I did was calling the peak for silver and doing shorting it when it dropped from $30 to $28 something.
So yea, the biggest losses came from DOG.
DOG correlates with the Dow Jones except in the reverse. I was gonna be smart and do a strangle on the market and milk it going up or down, (mwahaha). Why the Dow Jones and not the S&P? Eh, calls on Dog were cheaper then puts on the S&P ETF.
So that's the start of the problem. Ughhh, for one, I didn't buy at the right delta (rate of change) where if the underlying stock or ETF moves, the option moves with it. Different options move in correlation at different rates and those different rates command different prices.
Homeboy here bought the cheapest possible ones.. Problem #1
Problem #2 - THERE'S NO TRADING ACTION. I failed to look at the "Volume" column. If you glance at the uploaded pic above (2nd one), you'll see there's zeroes going all the way down. No single strike price in any month tops more than 100 contracts. The daily trading volume is soooo little.
This is called, Dante's Inferno, Level 23 or something. You have no demand, no supply, your prices fluctuate literally like wild oats scattered to the wind.
In attempting to sell the losing options, THERE ARE NO BUYERS. Which is why I couldn't get out when the losses first started happening. I was like oh, must be a problem with my trading platform. I didn't see the fundamental reasons and just attributed it to technical problems.
Idiot idiot idiot.
So yes.
Yes. Now that I've had a very nice force-fed helping of Humble Pie,
I shall rebuild and RETURN to what I know best..
Silver.
Hence, more call options for when it breaks 30 soon.
Oh my god, yes, I bought as close to 0.60 delta as I could (.55 or something), given my cash situation in my account.
So yes, rebuild.
Oh yes, I took the Rich Dad Stock Success Options Course which REALLY helped in setting some good ground rules:
1) always buy at least the first strike price in the money
2) always buy at delta 0.60 or negative 0.60 for puts
3) theta (time decay) kills you, buy at least more than 6 weeks, ideally 2-4 months out
4) to avoid price gaps, you want a healthy trading daily volume of 500,000 shares in the underlying stock/ETF
I failed all of these rules for DOG...
And the kicker? I bought an option called Dog.
I thought it be funny.
Ahaha.. I'm crying cause it's so funny now.
j/k j/k, hell hath no fury like a pissed options trader
P.S. [edit]
I realized just now from either a Robert Kiyosaki video lecture that I watched or one of his books, he was talking about derivitatives like how gasoline is a derivitative of oil. Kerosene is a derivivative of oil, etc etc. The further away you get from the original substance, the more unstable you get.
Crude oil itself is pretty harmless. Maybe it'll even douse fires successfully.
Gasoline itself is harmless, you can put cigarettes in a bucket of gasoline.
However, in vapor form, it becomes explosive.
So in my case, when you buy the derivativive of a dervitative of another derivitate, you're asking for some deep shit as the final product is wholly unstable.
Yea, please don't do that.
That is all.
Back to work as a property manager.. regulating and filling vacancies 24/7, peace out
