Observant readers will know by now that I sold to close a block of iShares Russell 2000 ETF (NYSE:IWM) puts on Friday morning, and that I regretted doing so. Now, I’m not the first trader who has screwed up like this. And it’s not the first time in my life I’ve done so. I’ve only done it eight or nine thousand times before. But I wanted to break down what happened, for your sake and mine, just to examine how emotions can really trip a person up.
Let’s rewind to Thursday morning. I was already quite short, having about 30 bearish positions set up. I did, however, have a ton of buying power left, and the market was definitely going my way. Things were getting weaker and weaker, and I decided to get very aggressive with a very large IWM put position—about five times the size of my other bearish positions. The green circle shows about where I jumped in:
Now, let me pause here for a moment and explain something important. My account has a restriction on it. That makes me sound like a criminal, but those of you who have ever had restrictions on your account know how r-word-ed they are.
Early in February, I sold a piss-ant little position that I had acquired that same day, and it created a Free Ride Violation. This particular broker hit me with a 90-day restriction, and its implications are simple: if I buy something I must hold it until at least the next day. I am stuck with it. End of story. Because if I sell it, the restrictions get even MORE draconian.
It’s idiotic. It’s stupid. But it’s reality.
Now that you understand that important tidbit, the rest of the story will make sense. You see, not long after I acquired that huge IWM put position, the market (wouldn’t you know it………….) started getting stronger. About 15 minutes after I bought the puts, I really, really, REALLY didn’t want them anymore. But I knew I couldn’t sell it until the next day (Note Bene: please don’t leave in the comments section questions about why didn’t I do such-and-thus to clear up the restriction; I know the subject better than you do, believe me).
As the day wore on, I resented the position more and more. It felt like a toxic asset, so to speak. And I said, out loud, even though I was alone, "I’m going to dump you like a bad girlfriend" (even though I’ve had no such life experience………….). So I hated this goddamned thing, and I wanted to drop it as soon as I was able.
This feeling was exacerbated at 5 in the morning when I woke up, because I saw, thanks to Putin’s "positive developments" remark, that the market was exploding higher. So I was REALLY hating this position, and couldn’t wait for the opening bell so I could Get The Hell Out Of It.
And I did. I dumped that shit at a loss. And, boy, did that feel good.
Until……………..
I mean, Jesus H. Christ, I bought them at almost the worst possible time on Thursday, and I sold them at pretty much the worst possible time on Friday (see circles below). The only way it could have been even more horrible is if Putin had done his "positive developments" shit a few minutes after the opening bell. At least the market had a few hours to digest this nonsense and ease off a bit before I stupidly, and in a totally ghey manner, scurried out of my puts, and immediately went antique shopping and then got my hair done, just after I slipped on some pink pantyhose.
I haven’t even mentioned this, but there were four other positions (including a big one in IYR) that I dumped at the same time. Every single one was stupid.
The cold fact of the matter is (1) this is a BEAR MARKET, God damn it, and I’ve got to stop being such a limp-wristed, mincing, leg-crossing pantywaist. (2) There are going to be approximately 3,893 more instances of "positive developments," the first 3,892 of which will be total and complete nonsense.
The bottom line is that we are range-bound, and these wiggles don’t mean a damned thing. If we break BELOW the range, all holy hell is going to break loose. So……….shame on me. But stay positioned.
