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Two Trades That Went Terribly Wrong


Why you should never play earnings.

The second charge is in Visa (V), which reported good numbers this morning and sees its shares up by about 3% and approaching its 6-month high. In this case, I came in holding some puts from a stale position. Two weeks ago, I bought a put spread on the belief that Visa would crack below the $60 support level. It didn't happen; the stock held and quickly moved above $65 a share. I bought back the lower strike puts I was short and hoped the stock would pull back and allow a leg out at a minimal loss. Hope is never a good strategy. Holding onto hope into earnings is just plain wrong.

Do as I Say, Not as I Do

We all have our woulda-coulda-shoulda moments, but there's no reason to act diametrically opposite as to your original thoughts or plan. My macro crime in this was not adhering to the thesis I laid out in Monday morning's OptionSmith weekly outlook, which stated

"The stock market has entered that mode in which it feels like it won't ever go down again. And of course as long as everyone says that the market is due for a pullback, consolidation or backing and filling it will likely continue to go straight up to the 1,000 level to finish off one of the best months… ."

So what moves did I make this week? I rolled up a back spread in the Spyder Trust (SPY) puts to get more downside protection. And I initiated a bearish position in Autozone (AZO).

What was I thinking? I wasn't -- and that's the crime to which I plead guilty.
No positions in stocks mentioned.

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