Not sure what everyone else was thinking/doing/cursing about during Friday, December first's Big Dipper, but it just so happened that I had set up something I expected to be far less exciting than it turned out to be. On what I thought was just another regular, normal, tired-bull-run morning where every day is approximately exactly like the one before, I had paid for expensive insurance so that I could play a little game and take my chances on picking up some goods. I paid admission so I could spin the wheel, in other words. Sure, I could have done it without paying, but I wanted a guaranteed exit, should the game go south. I hoped I would not have to use my exit ticket, and that I could sell it to someone else. Actually, my real hope was that the ticket would burn to wispy ashes and float away in the wind, with my shares rolling so far downhill that no one remembered why they liked that security, ever, in the first place.
As pictured, on what seemed like a do-nothing, experience-no-fun regular old day, I sold shares of SVXY short at 9:45AM at the price of $111.10, and then at 9:50AM bought the appropriate number of December 8th 111 strike calls to protect those short shares at a price of $3.80 each. This means I spent $380 for each block of 100 shares of SVXY sold short. The worst outcome to me, after a week, would be that I'd lose the full value of the calls, exercising them to cover the shares at just ten cents less than I had shorted them for, and my profit on the shares would only offset my loss by $10 per contract.
Imagine the expression on my face when returning from the bathroom or somewhere to see the purple bars. Although watching them intently and intensely, I didn't catch the ideal profit. I had to make a judgment call on whether the move might continue or might evaporate completely, and I exited at a place that really, only I could rightly criticize. This is because I criticize myself irrationally at times; I wish I caught the bigger profit, I wish I got the lowest tick, I wish I profited x1000. But... for a trade intended to last a week, that could have lost $370 per contract, it wasn't such a bad way to spend an hour. I bought SVXY to cover at 104.57 and then recovered $2.00 per contract by unloading the calls on some willing buyer. Tallying it up, $180 was lost on each contract and $653 gain was booked on each lot of 100 shares. Set them against each other and it came out to +$473 per group of 100 shares shorted.
Later in the day (see inset) I snacked on some pretzel stix... oops, I mean TVIX, by shorting at 7.94, then covering at 7.88, and later shorting again at 8.00 and covering during the last minute of the regular trading session at 7.79.
Traders don't say "TGIF," they say "TGIM" and like a kid asking "Are we there yet?" I wasted time reading tweets and drinking coffee until the market opened today, December 4th.
Second trading day of December, and everything feels funny. It's the perfect kind of day to go hunting for some money. Okay, I promise - no more rhymes. They're way more fun to write than read. Let's go ahead and contrast prudent caution / reckless greed.
Discarding and ignoring all the online, news story, and water cooler (if I ever got near a water cooler) chatter I'm sure took place over the weekend (let's consider some of that to be coffee pot chatter, as I chattered to myself in my own mind near my own coffee pot), I decided to do a little intraday top-calling. Let the charts tell the story:
Not one to wait and watch for too long, I took a clean shot at the tires of the bandwagon that all the Twitter bulls were boasting about so hard that their coat buttons popped and put each other's eye out. It was as if they had accomplished this gap up by their own cocksureness; to listen to them was to need to clutch a bucket.
SVXY short from 114.66 hit my account in a quantity I really shouldn't be dealing. So I bought the other side by plunking down $266 per lot of 100 shares in the form of December 8th 114 calls. This way SVXY could go parabolic and I'd know my maximum possible loss, which would be $2.66 per contract minus $0.66 profit on the short if I ended up exercising those calls to buy to cover, or $2.00 per contract translating to $200 per lot of 100 shares. Of course, I hoped I'd slink my way out of this one, too. Well - soon enough, some action got started and I counseled myself into admitting to myself that a profit right away is better than a possible loss situation every day from now until Friday. Computing that I could book a nice profit by closing the whole deal out immediately, I thought about that but instead decided to get my unwanted chaperone out of the way by paying him to leave and go bother someone else. Taking only a $66 loss per contract, I disposed of the calls for $2.00 each. Now I could let my short shares run. Tell me: Wouldn't you want to, having shorts and looking at a chart like that?
Well, having forgotten that I had saved the above graphic, I made a new one just now with information repeated, except you can see the trajectory of SVXY for the remainder of the day and the ugliness of the chart with the yellow stop-set line gone (as, once again, I returned from momentary absence and experienced outrage to see that my stop had hit.)
Note how nice and neat that turned out (and I didn't plan it that way, but orders were filled for slightly better than my limits.) Having lost $0.66 per contract on the 114 calls, I knew I could take a profit as small as $0.66 from my shorting start point of $114.66 and break even, so I simply set my stop on quote for $114, knowing it would execute for some price a few cents above or (probably not) below that trigger.
In hindsight I wish I had taken the fat profit staring back at me as I set the stop. But none of us know which way the ticks are going to go, and this time they made somebody else's dream come true. If you think I just sighed and said, "Oh well..." Well, not quite. "Trader's Revenge" for me means looking behind door 2. The next post will detail the remainder of the afternoon of Monday, December 4th.
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