UPDATE: BLPS JAN08 AAPL 160/165

Wonderful example of Trading Emotionally!

Well I’m pretty embarrassed to post this trade(s). This however is a wonderful example of trading emotionally and the cost it has on my trading.

FIRST PART OF TRADE

Trend= Bullish – Neutral
Support at 162 – 160ish
Resistance at 187 -182ish
MACD – Low
STOCH – Low in reversal zone

BTO JAN08 160 P 1.91
STO JAN08 165 P 2.81
=+0.90

BPE: $500 = ~ 6% of total account.
Max Credit = 0.90
Trading days left= 11
Max Loss = 5- .90 = 410
Total potential profit = (.90/4.10) = 22%
Short Delta = .18

Exits:
1) If Profitable:
Buy back short position for .05
Close if profitable 14-4 days left to trade.

2) If gaps down and closes below 165 buy back the short and ride the long.

3) If Closes below 170 without gap – Exit entire trade or roll down and to next month

GREAT PLAN HOWEVER I DID NOT FOLLOW IT.

Emotionally Bought back 165 Puts for 5.55 (the BOTTOM of the trading range for that day BTW!)
- 2.74
Let 160’s run – until today

FEAR of bounce and support at 180 caused me to resell the 165’s for 2.53

Bought them back for 4.00 on 1/17

On 1/16 I had entered a roll for the trade at to Feb for .45 and canceled it because I didn’t want to tie up more margin and continue being heavily sized on AAPL in FEB.

GREED to reclaim profits lost I entered an order to sell 160’s for 4.00 and was never filled.  Time Decay worked against me. I would have been filled around $3.00

BTO JAN08 160 Put 1.91

STO JAN08 165 Put 2.81

BTC JAN08 165 Put 5.55

STO JAN08 165 Put 2.53

BTC JAN08 165 Put 2.53

Total Credits 5.34

Total Debits 9.99

Loss on the trade = -$4.65

Had I held the trade and been exercised my max loss would have been 4.10  This my friends is how not to trade.

RULES BROKEN

Do not turn a winning trade in to a losing one.
Do not place any new trade with out a written exit plan.
Do not place any new trade before 2.00pm.

Do not lose more than your max loss unwinding a spread.

Update: VIP 40/35 Calendar turned Diagonal

My Long VIP call transformed last month into a 40 Calendar.  This month it transforms yet again in to a Diagonal.

The  Jan08 40 Call was looking like it was going to expire worthless so I chose to sell the Feb08 35 Call  against my current Long JUL08 40 Call knowing that the margin would only be tied up for one day until the Jan position expired.

STO VIP FEB08 35  Call @ 2.20

Cost basis is  $4.00

ROI = ~ +50%

Support is at ~30.00 (Fibonacci Retracement level and previous resistance turned support.)

Resistance is at  ~$36.00 (Fibonacci Retracement Level and previous support turned resistance. Gapped down below that level when it broke out of the bearish channel.)

MACD & STOCH are low and could turn around.  For this reason I would expect a bounce up to test the 36 resistance level next week.

Earnings should be in February.

Exits:

1) If below 35 let expire worthless – Sell at the money strike for March.

2) Buy Back if gaps and closes above 40

3) Roll to next month if trading at or a little above 35  14-7 days till expiration.