Trading Lessons Learned — Again

Hi Shoppers,


Wow, what a week for my trading


And not in a good way!


Peloton (Ticker: PTON) took a dive on Thursday — and I fell into an all-too-common trap for traders:


I kept looking for reasons and making excuses to stay in my position.


For instance, I thought to myself …



 “The stock will trade to the recent lows and bounce from there.”


That low was $99.12 … and PTON proceeded to trade down to $96.54 on Thursday.


When it didn’t bounce, my spread (being so short-dated and expiring Friday) traded down to $.45.


Then I thought, “Well, at this point, I might as well take my chances for only $.45.”


Might I suggest getting this tattooed on your forearm …


STICK TO YOUR TRADING PLAN. SELL AT YOUR STOP PRICES. DO NOT HOPE, WISH OR PRAY FOR A POSITION — IT MAKES FOR A HELLISH DAY. JUST GET OUT!


On Thursday night, a little voice in the back of my head kept saying, “I still have tomorrow, it traded over $104 yesterday.”


Don’t fall for it!


While dealing with PTON all day Thursday, I did sell my losing XPeng (Ticker: XPEV) near my stop of $1.25-$1.20. (I sold at $1.10.) It closed with a $1.35 bid, but that’s OK. I’m out and can always re-enter.


My Oracle (Ticker: ORCL) position gave me a hard time on Thursday, too. At one point, these puts were up 40% — but I wanted more. The chart didn’t look as bearish on Friday, so I closed them at $1.01 for a 15% loss.


Last but not least, there was my SPDR S&P 500 ETF Trust (Ticker: SPY) put spread. SPY gapped up over $3 Thursday morning, so my spread, expiring Friday, was in the dirt. SPY traded lower on the day — lower than the previous low — and I could have gotten out for 25% profit. I didn’t. 


I thought I saw a hanging man candlestick in SPY, so I kept my spread until 3:30 on Friday — when I sold it at $.50 for a 58% loss.


Not a great week, but it could have been worse …


And of all the lessons I was reminded of in recent days, the old trading adage of “Live to fight another day,” was among the clearest.


So, all is not lost … and now we can look ahead to get back on the gain train we’ve been riding for most of 2021.



Moving On!


No matter how long you’ve been trading, you will still make mistakes. 


Even professionals sometimes allow human emotion to enter into our trading equation when it should always be strictly about the numbers and the plan.


So, after a tough losing week the best thing to do is get back on your trading horse and ride on.


Here is my next trade idea.


I think the SPY will keep moving lower due to that beautiful hanging man formed on Thursday with a confirmation of a lower day on Friday:



For this spread I am going to give myself a little more room by going out to the May14 expiration cycle which is two weeks away.


I think SPY will be moving lower, but it could move around in between.


I like buying the May14 417.50 puts with an implied volatility of 11.97 and selling the 407.50 puts with an implied vol of 16.07.


I would pay $2.25-$2.30 this ten point spread.



I will take my loss if the spread trades down to $1.50.


I will begin to take profits at $3.50 and higher.


The best thing about trading is every day is a new day. Enjoy your weekend!


Thanks for Reading … See You Next Tuesday!


Licia Leslie

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