First, let's start with two traders and their dialogue to me on yesterday's signal:
1. Hey Floyd...
I am assuming that you did not play the put today since you would have paid much more than prior day close. Am I correct...or did you get in?
I'm having a bit of a problem with that rule in particular.
Don't get me wrong...I love the rule...BUT do you ever make exceptions to the rule...as in a day like today.
The DOW opens 80+ pts. to the downside and hits -160 in 5 minutes. Early afternoon the DOW hits a double top. at about 11,580 area ...after that I just KNEW she would drop again and this time take off below the morning lows...especially after the 300+ day the other day, the 60+ day yesterday and the fact that we did have puts as our signal. .
So what do I do? I purchase (15) 585 puts for 4.20...this was a one afternoon trade...no second buy allowed...with a stop loss for about $600-$800...
Long story short...I held out all the way to S3 and sold this puppy for 6.80...made $3900 on the day (62% profit).
I should be celebrating correct? WRONG!!! I feel like I got lucky!
Because I don't KNOW anything about what the market is going to do. And the problem is that there are times when I think I know...like today...and I'm actually correct in my thinking...which makes me feel like I can do this again tomorrow BUT I know I could just as easily lost my cute little rear end tomorrow!!!
All I keep thinking about is how that trade was ANTI-Floydian...would you be in support of that trade...why or why not? And what do you recommend about a trade like this in the future? As far as I can see...the only "bad" thing about the trade was the I paid more than prior day close...other than that...I believe there was good evidence for my decision..which is why I chose to take the edge...and it worked pretty good.
Your thoughts?
This trader read the market correctly and "broke" the rules because of extenuating conditions. It worked.
2. This trader works the market professionally:
Started scaling into a position yesterday, at an average cost of 5.9. Sold partials this morning up to 7.5. Purchased more on the up tick at 5.3. Top sells today at 8.5.
Vix dropping below 20.00 yesterday confirmating Dow projected tops and PF double tops......
Very nice profits this week.
Cheers....Bill
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This comment below is enough to open your eyes. Bill Gross is the Warren Buffett of bonds, and the greatest bond manager of all time. This person I would trust, not the kids in government still arguing about recession:
"Aug. 6 (Bloomberg) -- Bill Gross, who manages the world's biggest bond fund, said the U.S. Treasury will probably be forced to buy as much as $30 billion of preferred shares in both Fannie Mae and Freddie Mac to help shore up their capital.
``By the end of the third quarter, the preferred stock in Fannie and Freddie will be issued, the Treasury will have bought it,'' Gross, co-chief investment officer at Pacific Investment Management Co., said today in an interview on Bloomberg Television. ``We'll be on our way toward a joint Treasury-agency combination.''
Gross adds to a growing chorus of investors and analysts predicting U.S. Treasury Secretary Henry Paulson will need to use his newly won power to prop up Freddie and Fannie. Freddie posted a second-quarter loss that was three times wider than analysts estimated and said credit losses doubled in three months, heightening concerns it may not be able to weather the worst housing slump since the Great Depression"
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Floyd's recent comments on FEAR and GREED hit home.
First a testimonial from Indonesia:
Always leave profits on the table, and NEVER sell at the high. This is GREED in action and will fail you.
When I saw your e-mail ev'ry time... I usually look at your comment about yesterday trades.
last Tuesday for example the Aug Call , I hold from $ 9.00 and set as per your top sell less 15 % . but the greed within and seeing the market euphoria waiting for FOMC annoucement , I re-set at full top sell @ $ 14.90 , and the greedy bear came again , slide to $ 15.50 and the market quickly grab that 3 minutes after FOMC announcement at 2.18. and i slept after all my order done.
in the morning when i rcvd your alert and seeing the high-low-close OEX on Thinkorswim i saw about $ 18 something....
Frankly speaking there's a natural mankind feeling ........... why didn;t we reach that point for higher profit..
But this is what we still learn from you.. Floyd.
I am learning and learning everyday when i read your e-mail.
I didn't wrote you for 2 or 3 weeks .
That is the time where I feel I am "Done...... Finish ........ with my Option trading Career...
And feel maybe this is not my way in these fierce investment world.
As you know I am start with minimum $ 4850 .... and in the first 2 month it boosted to about $ 14200 in my account with your help.
Suddenly .. June and July became a nightmare...
I didn't do well in cutting my loss early ... plus being a naughty student on playing on RIMM earning.
My account in TOS ended in $ 900....... mid of July..
I was very shocked, ashamed ( b/c i have a good teacher but still loose........ ) , and didn't know what to do next......
I stopped... step back . and started to view .....
Even today my losses is still not paid back,
( Yesterday it reach $ 3000 again.... , without top-up any new investment )
Thank God I 'am still in those fierce option world with you...( Once i thought , to stop my subscription on OEX.... because low of those low option buying power .....)
Greed and fear ,,,,is that we have to fight most .....
regards
BK
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And second...
I've got several questions for you my brother...the expert psychologist!
NEVER look back. I NEVER let greed enter my mind on "what I could have done." Instead, I review what I did do, and what money I did make, and do analyze if I left too early, but not to think what I could have earned, rather to understand what I could do better.
Always leave profits on the table, and NEVER sell at the high. This is GREED in action and will fail you.
Hey Floyd, You sound like the Apostle Paul when he wrote, "But one thing I do: Forgetting what is behind and straining toward what is ahead, I press on toward the goal..." (Philippians 3:13-14).
"
When you wrote in the manual (confessions story...when you lost 250K)...you mentioned that you had "patterns and rituals for failure." Can you remember or share what some of those patters or rituals were?
Floyd: I traded when I did not know what to trade, and Just to WIN. I broke rules by holding too long. I traded as I "knew" what would happen" because it "should".
You also wrote that you "quit focusing on what you were doing wrong and started focusing on what you were doing right." Initially, what was the main thing you did correctly?
Floyd: When I followed the rules I succeeded more than failed, and profited well.
I am finding that one day I do wonderfully as a trader...the next day...I make the most immature and inexperienced mistakes (yet I know better). There seems to be a real lack of discipline in my life in general...let alone trading...What did you find most difficult on your road to success as an OEX options trader? Was is figuring yourself out? Coming up with the rules of engagement OR actually following those rules with consistency?
Floyd: Actually following the rules
What part of your personality was most detrimental to trading and hardest to overcome?
Floyd: I learned that "being right" has nothing to do with the market. When I thought the market "should go up" because....I began studying what made me think I was right vs. "what is".
I know that you lose trades...because we cannot be perfect. But at this point in your career...do you ever lose because of "poor" trading decisions. Since I've been a subscriber...several months...you've had few losses and none of them were really "bad" decisions because of the edge that you played...they just didn't work. What is your record since April by the way?
Floyd: We are at 88% win ratio for the year.
I've been talking to my brother about you (he is in California...breaking into the film industry...not a trader at all) and he is really rooting for me! He is aware of my lack of experience and he knows of your success. All he keeps reiterating to me is that I should just do exactly what you do. He keeps asking me the question..What are you paying this man for if you are not going to listen to what he tells you?" A question that I don't have answer to.
So my final question to you is..."WHY the hell would an idiot like myself decide to place trades that I KNOW for a fact you wouldn't place? WHY would I do such a thing?"
(Your answer cannot be "Because you're an idiot!")
Give me something legit here!
Floyd: Ha ha. Often we self sabotage our behaviors and actions subconsciously. One must learn by identification when this occurs.
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