Indices staged a most impressive come back of the year after a 6+% down, the steepest sell off of the year. I came out unscratched with couple of early exits of small profits. I started to experiment selling naked SPX and RUT after watched Super Trader Karen's another video interview discussing her set up perimeters. I was under the impression that SPX, RUT required much higher margin. I didn't realize that portfolio margin reduced it drastically. Even it's at a full margin I can get much higher premium for it. I will not trade naked options exclusively but it's a good tool in my tool box. I will continue to trade credit spread in my Etrade and IB personal account, possibly my IRA accounts too.
Grains Oct options expired this Friday. All of my mistakes revealed with bunch of worthless puts. I failed to manage these positions correctly and let them turned from profit to losses.
1. Held and hoped. I had a strong belief that the grains would have set a new low after WASDE report on Oct 10. It was based on seasonality and experts opinions. One of very important skill in trading is to switch views and change plan base on price actions and market conditions. Be flexible and objective.
2. I didn't have a "what if" scenario in place. I didn't set a price level or profit percentage to decide my exit point.
3. I didn't have a clear plan for these positions, not even on how to take or protect profit. I was thinking to maximize my return and recover my losses. My corn puts were more than recovery my corn losses at one time. I was thinking about exit some positions to insure my recovery. I then, thought to use the profit in corn puts to help out on wheat and soybean. It was greedy took over.
It was a profitable week with $3600. I had over 50 positions built in couple months. But the way I handled grain options was very costly mistakes. I missed at least $6K profit and lost near $4K on top of it. I would have been disciplined or fired if I was employed in a business.
Steps of improvement from the mistakes:
A. Be ware of my mental state and emotions. When I am strongly believe a market direction or my trading results it's time to have a "what if" plan in place. Be ready to change my view and take actions.
B. Leave greed and fear out of trading. Like Karen said, It's a number game. Taking profit and stop loss are numbers, not emotions.
C. Use technical indicators and charts to help take profit and stop loss.
D. Start to look for trading pals with similar trading product and types.
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