When all the systems and mechanics run like a well oiled machine, you need to be vigilant. That is the time that greed can come and say hello. I do have the feeling this is happening with me right now.
Is this a pattern that happens to others? You are running your race, all feels good, and then, you decide to tweak a little bit.
For the last few months, the system of trading options was working just fine. With 12pct annualized return, I should not complain. And yet, I thought I could do better, that I needed to do better. I started to stretch a little bit the system. Why not..!
In my system, I close my trades early, to realize my gain. I aim for 50pct of the max theoretical profit (the premium received). The last few weeks, I have been deviating a little bit.
I was sure that nothing could happen, that the stock was strong and would remain strong. So, why close the positions? Let’s go for max profit and publish a new record!
This sounds all to familiar… I had the same about a year ago… That is when I lost 1000USD over the summer. Not again!
Good that I have the experience from last year. I immediately took action as soon as I realised what was going on.
I closed one position and still managed to make a profit. Less than I would have made when following my system. More then just doing nothing and keep going on my conviction. That stock is now going lower.
I had a gamble trade that went against me. Rather than thinking: it will be ok, I closed the position and made a small loss of 13USD. That is ok.
I still have one trade that is on the dance floor. It should have been closed a week ago, when I had my 50pct of max profit. I decided not to, you know, strong stock, can not go down,… I have now 5 trading days left. Let us see what happens.
A last one has been rolled. Nothing much to do about this one. It has always been on the dance foor, never reached the target profit. I should not have written the same strike in the next month before closing this trade.
To a certain extent, I am mad at myself for making yet another mistake. All mistakes are part of the learning. The good thing is that I realised this time that sometihng was wrong and took corrective action in due time.
When trading or investing according to a proven system, you should stick to the system. Tweaking is not a good idea.
Action plan for myself
- decide on the right time to start the monthly investing again. This was stopped when I took the job in the startup. to accumulate more cash. How much more do I need?
- Stick to your trading system and stop chasing yield. The returns will be what the returns will be. Other traders and bloggers will have other returns. just make sure that you sleep well at night. that is goal one!
Do you have similar stories?