lost trading weekly options

lessons to learn

1. After 2 days of rally the AAPL share closed at 665. In the morning it opened at 674. There was tremendous volatility in the options and the weekly option ITM I bought was 665 for 11 dollars. The main problem was I did not put a stop loss immediately. This is a horrible mistake when it comes to options especially.

There was selling and profit booking and the stock came down within 2 hrs to around 660 then came down to a low of 650 and closed at 656.

This was my first option trade after a long time and I was not cautious. Options can burn you if you do not have a stop loss especially when it is so volatile after 2 days of rally.

It is advisable not to buy any weekly after 2 days of rally because it is already highly priced because of high volatility. Then the options expire in 2 more days. Now I have to take loss because the options closed at  4 dollars. I got a loss of  700 per contract. Any way I had only 2 contracts and I put a sell limit on it at 6 dollars on it. hopefully the stock move up tomorrow and I can get some of the losses back.

weeklys are good when the rally starts but can be overpriced after 2 or 3 days of rally. I think it is not worth buying it at that time.

A good idea would be to sell weekly far out of money and make a lot of money. that is the easiest thing to do for extra cash.

There should always be atleast a 25 percent stop loss on options or a 500 dollar limit. To lose more than that is not worth it. These are very important for money management.

I also bought a next month option at the same strike price but it declined only 15 percent. This is because weeklys are very volatile and decay fast with time.

graph for 3 days
http://screencast.com/t/j6TlRAgB

Cannot forget this lost oppurtunity

http://screencast.com/t/2rXRyiOGMk

Past short Idea

http://screencast.com/t/sOp0wjUcu2RD

OPEN last year would given me a lot of money. The point is why we miss opportunities like this. Need to be patient at the same time understand the Earning and technical analysis and patience.

Study the past graphs . very important

Have to try our something a little different

I need to use the money more efficiently and wisely. My main problem has been putting large amounts of money in the stocks that move in the wrong direction.

There is a rule that says When in uncertainty cut your position. Especially if the stock is showing strong RS in the case of shorting.

Start with a small position in uncertain position or better do not enter the position.

There are plenty of opportunities in the market. I almost make 20 percent in ARNA but there was not much money invested in it. This is a problem because cash was stuck with other stocks. I need to have cash available when I need it.

This diversification is not a good strategy. It is good to put money where you are making money. Do not buy more unless the stock moves in you direction or you are super confident technically.

I have to put my money where I can get money. I have to choose the best stocks instead of jumping around and losing money.

Why is ARNA going up on a Down day

http://screencast.com/t/5O842XppY3f

http://screencast.com/t/M4ojCSG2

Why would a stock going down from 3 days like ARNA and having a bad Relatives strength move up on a down DOW day.

One reason I think is there are people selling other stocks and trying to get into ARNA for a fast return to cover up losses from other stocks or what ever reason.

This stock will go down on a good DOW day since people will again take money out of ARNA and go back to other stocks to trade.

Since most of the people are on the buy side this kind of thing happens with stocks moving down like ARNA. These false peaks are good time to short.

flop show with KCG

There was no need to touch this stock. It just got out of hand and there was not even a stop loss. Wow!!

Bad trade. The market did what it did. Never buy a stock going down. I broke the rule and it burnt. It was a stupid mistake.

http://screencast.com/t/j01vuvPggI

I was deceived by the early spike in price to 4.30 cents. That was obviously the shorts covering in the morning. When a stock falls this big like 50 percent don't you think some shorts are going to cover and there is going to be a initial price jump???

What a stupid mistake.

I should have just stayed with ARNA where I made good money.

Trading PCYC

I am coming to understand that Highly speculative stocks do come down from their high soon. It takes atleast 3-5 weeks for the stock to go down.

In the case of PCYC which does not have any earnings yet, this stocks has moved from 10 dollars to 60 dollars in a couple of months. I shorted the stock at 50 dollars. The stock was on the 30 day moving average.

1. One mistake I did is to not understand that the stock was consolidating on the 30 day moving average.
This is a tricky situation. How do you know if the stock is going to move up or down.

There is one way to say that which I understood now and it is very important to understand it. The consolidation took 3-4 days on the 30 MA at 50 dollars and in the mean while the DOW was moving up and down. One of those days the DOW when down 188 point. and PCYC was not at all budging. This means the Relative strength is strong and people are holding the stock and the probability of falling is low and the probability of moving higher or dancing in that range is higher.

I did not understand this point and why RS is so important in understand if people are holding or selling or buying.

http://screencast.com/t/Y246gMNCO