Thursday, October 14, 2010

Bookkeeping: Sold Additional Batch of SPY Calls I Entered Yesterday

Throughout the day I've been selling in 5-6 pieces the SPY calls I added yesterday as the market has weakened.  I was looking for a breakout once we cleared S&P 1170 which was my view of the "top of the move".   Instead we've enjoyed a reversal, so having an overweight in near term options when the market is not going your way is a very bad thing.  These were very much in the green yesterday, and today have caused a nice drawdown.  These were SPY 118 Oct calls... I still have my SPY 117 Oct calls which are a smaller stake of about 1.6% exposure.  There is a great possibility I will regret this tomorrow when we are 'surprised' by Bernanke's QE declaration, but I always put protection of capital ahead of potential profit opportunities and the 10%ish drop is at the outer bounds of what I'll accept in this type of stake.

Tactically I should be buying index exposure on pullbacks, not breakouts in this type of contained melt up.  The strategy I utilize with these are better suited for big up days rather than 3 steps forward, 1 step back rallies.  So that was an error I'll blame on excessive Kool Aid consumption.

p.s. my string of top ticking solar stocks looks Cap Ripken like

Long SPY 117 calls in fund; no personal position


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