todays trade,and an option lesson

[rdking647]

i was short GMCR from $55. If they came out with good earnings the stock would rally huge and i would get crushed,so last week I bought the $60 calls expiring tomorrow for $1.10. this means if the stock soars I could cover my short at $60.
earnings came out good and the stock soared. up to $66 at one point. around $10 am I looked at the stock and it was around $63 The calls I bought where trading for slightly over $3.00 with a fiarly wide bid/ask spread. that is not unusual for an option in the money like the $60 calls were. I looked at the %60 puts also. these where trading at $0.65.
so I sold the same number of puts as calls I owned.
the result of the trade is I reduced my cost of the calls from $1.10 to 0.55.
so in effect Im stopped out at $60.55 instead of 61.10

I still lose money but its slightly better,I end up losing about $5 a share so I reduced my loss by 10%.

[dixiegrrrrl]

1. I figured out why I could not be a trader.

I HATE to lose money.
Just hate it.

I don't mind spending it when necessary, but I really really prefer to save it and watch it grow, and make nice plodding safe investments, like money market.
Altho I did invest in REIT from 2000 to 2005 and it did very well.
However, I had a stop price in mind and got out when it hit, took my winnings and left the table.

Nowadays, that kind of investing is not to be trusted, as far as I am concerned.

[rdking647]

2. believe me I hate to lose money

but as long as the winners outweigh the losers Im good.
back when i was trading on the floor we had a rule
out of 100 trades (and as a floor trader you could easily made several hundred trades a day)
scratch 50
make 1 tic (the smallest price move) on 30%
lose 1 tic on 20%

if you do that you'll be a success