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.