Folks, two trades in current portfolio are bothersome and warrant attention. Not everything we will do is going to pan out on the winning side. The important thing is to cut your losses as soon as possible and let your gain runs as long as possible. Specially when you're dealing with front month options, one of my strict rules is, similar to how you should sell half when you have a double, you should cut your losses and exit position completely when you have a 50% loss or more.
AZO - We bought March 170/175 call spread and 165/160 put spread. This was an earnings play and the expectation was for a big move either way. Didn't happen. With less than two weeks remaining, the spread has shrunk from $3.1 to $1.65 (about 45% loss). I think its time to cut loss and move on.
GRMN - Similar to AZO, we bought March 34/39 call spread and 34/29 put spread. Also an earnings play but the stock is dead. The spread has shrunk from $3 to $1.85 (about 45% loss). Its time to cut losses and move on.
About Me
- Fahad Khalid
- Chicago, IL, United States
- I have Masters in Business (Accounting and Finance 2003) from Michigan State University. I have been trading the market since 1998. Prior to picking up trading as a full-time career in 2008, I was a management consultant at Alvarez & Marsal and Conway MacKenzie for four years. I provided turnaround, crisis management and restructuring services to financially distressed firms. Prior to working in turnaround, I worked in Audit & Assurance at Deloitte & Touche for two years. Trading in the market has always remained my side business ever since I started college. 90% of the time, I trade through options. I love volatility skews and positive Theta plays. While I make a lot of directional bets, in general my favorites are to take advantage of high implied volatilities through calendar or butterfly spreads and vertical credit spreads. I never buy straight calls or puts and I do a lot of exotic multi-leg option trades.
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