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July 21, 2012 / redman59

Feeling A Little Left Out..But Patience Pays

So am I the only one today that is feeling a little left out. I subscribe to a trading and the head trader was calling out good trades and it probably had to be one of the most profitable days that I have seen within the room. But for me…I did nothing. I did not make one trade. Early in the morning I did consider taking the Apple trade with weekly call options, but instead I marked at what price I would have gotten in at and just monitored the trade.

Apple is one stock that if I trade it, it will be for a daytrade or for 2-3 days max. No longer, unless I have an options spread trade on that reduces some risk and lets it move around some without seeing the wild swings of single call or put options. I choose short time periods due to the extreme time decay. So with this specific trade I chose the May 540 Call and would have gotten filled at 7.00. While the option did go negative a little bit from entry it took off from there. Below is a screen capture of the risk graph and profit of $1392.50 (+198%) taken 15 minutes before the close.

Below is a 15 minute chart showing the entry point early in the morning.

So overall I missed out on a nice profit of nearly $1400 trading just one contract. But there are several reasons why I did not take the trade.

As stated, when in AAPL with single call options I look for 1-3 days hold, max. This is due to rapid time decay and the wild swings that AAPL can take. To follow that, I knew that I had other commitments during the day that would take my attention away from the trade and I would not be able to watch it.

Further and one hour into the trading day I made the decision that I will not be active this week, besides a day trade or two. I made this decision knowing that I have a busy personal schedule and if I get over involved here my full attention will not be towards the market nor towards my other commitments. So I will sit back and observe and not feel bad about missing out on some trades I would have otherwise taken. My main goal here is to maintain my mental capital and be ready for when time allows me to fully monitor positions I have on.

I have wrote in a recent blog post on how I am expecting some up and down volatility titled The Markets and Whiskey are More Correlated Than You Think. It basically explains that I am not ready to allocate a lot of capital here as I think the moves will be bigger up and down. The most recent post I like is from @chessNwine and his Stock #Market Recap 05/21/12 {Video}. This has to be one of my favorite recaps as it explains several things to look for and states on more than one occasion that one day does not make a trend….and I couldn’t agree more. I have learned to become more patient (still struggle some) but here I want the market to confirm its move and then I will allocate more capital. I also remember in reading the trading books I have of great traders, not one of them made their money by picking the top or bottom but catch the meat of the trend.

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