1. Try clicking on the name of the most recent article in the column on the right. This will remove the "Archives" list.
2. Try right click on the chart itself and open it on a separate window.
I am sorry that I cannot always make the chart small enough to fit neatly on the left column. I want you to be able to see the details I want to point out.
I Hope this helps,
Juan
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Today I exited the DNA trade at a profit. Altough my experience was telling me that the stock was continuing down, I left myself vulnerable to big losses when I did not short the 7 May 90 puts that I was assigned. My cost went as high as $21000. I arrogantly imagine that I could short those puts at an even higher price. The consequence was that I spent a stressful Thursday, Friday and even weekend until today, when the stock made a new low. This is why I was just glad to be out of the trade.
However, this would have been the proper way to handle it: At the low of today, I could have shorted an additional number of puts to complete 4/5 Short to long relacionship. The result is this:
Note that the objective of the PCCRC is always make your trade resemble a Straddle as much as possible. As you probably noticed by now, the straddle is a volatility-sensitive trade which we leave only when Delta or Vega have given us good profits, or when Theta is hurting us. By shorting the front month, you decrease the effect of Theta. As you have seen Theta may even help. By shorting the front month, you give yourself TIME for DELTA and VEGA to do their job.
Please comment on your impressions about this trade.
4 comments:
Thanks for the update Juan,
I have been watching both trades, LRCX and DNA since exiting. Interesting ride...
RE: I arrogantly imagine that I could short those puts at an even higher price. The consequence was that I spent a stressful Thursday, Friday and even weekend until today, when the stock made a new low. This is why I was just glad to be out of the trade."
Interesting comments, because I decided to get out, as I had made a mental stop loss on the trade. Anyway you came out better, which is not surprising as you have more experience of the PCCRC.
Well done and Best Wishes.
This one is an amzing looking graph. I love these ones. Thanks.
Just received a message from Juan;
"I am in Peru until next week. I see there are a few posting, but I have only limited access to the internet. Please post this message, and see you soon.
Juan"
Have a good trip.
danny, this is no longer a real trade. The reason it looks so good is that I took an unnecessary risk and was excessively long in the put side for 3 days. The purpose of this style of trading is to reduce risk, not to increase it.
Note that on 4/25/06, I was short only 3 puts (this was the result of some assigments. Only on the 2nd of May I closed the position.
To leave the trade open, in case of a strong bounce or a continued decline in the stock, the thing to do was to sell an additional number of puts to total 16 contracts
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