Hey all!
This is a mid-week post because I have been literally flooded with questions. Many of them were similar and I have grouped them accordingly.
Thanks for all the questions and queries. I like to see that you guys are active in your learning if investments and trading.
Ok – on to the questions:
1. I have a hard time pulling the trigger on trades. I always have this feeling in the pit of my stomach that I am doing something wrong.
Fear is a hard thing to overcome, but it is a must if you are to be an effective trader. Here is a quote that I like that helps when I get that feeling:
"It is not failure itself that holds you back; it is the fear of failure that paralyzes you." - Brian Tracy
So our challenge is to stand up to that challenge. I you go through the analysis step by step and use the indices or stocks that are part of the system, then you have done all you can do. Take comfort in that and place the trade you found. Make that bold step. Then use the last step – Monitor, but don’t obsess. The more you are successful with the trades, the more that fear will ebb away. It never fully disappears – I always have a little nip in the tummy when I place a trade. But the utter euphoria I get when a trade is successful is an even better feeling. Get a few successful trades under your belt and you will crave this feeling of success.
2. I follow the system, but sometimes my trades start to go against me. I have a hard time deciding when to get out of a trade. I have an overall good winning percentage, but am breaking even for the year so far trading. How do I avoid the few REALLY big losses?
This is one of the biggest challenges in all of trading – figuring out when to pull out of a trade. Part of this the system takes care of for you. By trading in weekly options we know the expiration date will be on Friday always (Yes even for NDX & RUT. They stop trading on Thursday at end of trading but the settlement price is determined at the opening Friday).
This past week I put in some more rules into the system to further help with the issue of getting out of trades that are not successful. Here are those new rules:
A. If your trade drops so that you are losing ½ of the money you expected to gain on the trade, then it is time to sell.
B. If the market drops to within 1 strike price of your spread and stays there for more than 5 minutes it is time to sell.
I actually got this from a webinar I attended a few weeks ago. I liked it because I got caught in a loss situation because I too have a hard time getting out of trades. After all I have put a lot of work in the research and analysis and I am a smart person so I couldn’t have made a mistake right? Well, we all make mistakes, and sometimes we can do all the analysis in the world and the market will still come up with a way to thwart you. My last losing trade came a couple of weeks ago when both the Spanish Finance Minister announced that Spain would need 2x the money he said Spain would need only a week earlier, then Moody’s downgraded a bunch of Banks. If either one of those situations had occurred 24 hours later I would have been golden. The Spanish thing was particularly maddening since only a week earlier the Minister gave assurance after assurance that the numbers were good and that he was fully confident that Spain would be ok with a small infusion of cash.
Now I haven’t had to actually employ these new rules yet, but last Friday I came close. But if I do have to use them I will let it out here on the blog and I bet I will avoid a huge loss when I do employ the new rules.
3. You don’t talk of other strategies like covered calls, or cash protected puts, or strangles or straddles or many others. Why is that?
Simply put I don’t talk about them because I don’t use many of them. I don’t have many stock positions.
There are TONS of ways to trade in the options and/or stock market. I use one particular method – credit spreads. That doesn’t mean that the other methods are not good, on the contrary people around the world are making lots of money using many other strategies. I just don’t know those strategies so I don’t talk of them.
The one strategy you mentioned that I do use is the covered call/cash protected put. I do use this on occasion, but haven’t talked about it on the blog. I am considering changing this because the most asked question of all this go around was a variant of “How do I use a covered call/cash protected put strategy? (I put them together because they are really the same strategy just on opposite sides of the option chain.) I help manage part of my relatives assets. As part of this I do use a covered call/ cash protected put strategy. It is good is you have stocks that you already own (covered call) or wouldn’t mind owning (cash protected put) and don’t mind holding these for a long time.
I use the system I do because I put in many hours trying to find a way where I could make a sustainable living wage on a reliable basis.
Well, that is all for now. There are more but I will parse them out so you don’t have a “War and Peace” size document.
Keep the comments and questions coming; I will put more up later in the week.
Thanks for your interest!
L8r,
Ash
DISCLAIMER: Hashley Capital Management, LLC; as well as I are not giving any trading advice. All data is historical in nature and is intended for use as an educational tool. Trading in options is risky and can result in loss of capital. There is no attempt to sell any brokerage services or act as a broker or dealer by Hashley Capital Management, LLC. Any forward looking comments on this blog are not attempts to solicit business for Hashley Capital Management, LLC and are the opinion of Hashley Capital Management only. If you choose to follow the same path and invest in the strategies and trades used by Hashley Capital Management, LLC after doing your own due diligence, that is your decision and yours alone.
Reach me @:
Email: hashleycm@yahoo.com
Twitter: @awagel01
Stocktwits: awagel01
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