kelvinko.com Thoughtprints: November 2007

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Stupidtrader.com

Just spent an hour and set up my new blog - Stupidtrader.com

Why "Stupid" trader you ask? I wanted this blog to not just document my profitable trades experience, but more importantly, my stupid mistakes as well. How many articles and blogs just bragged about their winnings and good picks?

"A fool learns from his own mistakes, a wise man learns from other's mistakes." I want my reader to be the wise men and women :)

Labels: trading lessons learned

straddle (but not for earnings)

I really want to start another blog just dedelicated to document my stupid trades... so before I get my blog going, let me share my experience from today :)

Background and reason for this trade:
I was playing GRMN recently downturn when they started bidding war with TomTom. Shares were down from $110 to $85 quickly, so I bought a straddle at $85.

Starting with:

On Nov 8, I bought this

I was stupid and bought one more put during tech downturn, hoping for a quicker spread if GRMN goes down more

And, yesterday I added one extra straddle, just in time!! That put my straddle to 2 Calls and 3 Puts.

Ended with:
This morning GRMN popped +24% premarket because it had abandon bidding war with TomTom. During the morning session, it went down to only +13% and to +12% during the morning, whee my straddle was going under again:

Sold off pretty much breaking even... oh well. At least I learned something from this experience. GRMN ended today+16.6%. Right around where I sold.

My lesson learned:
1. Don't be greedy. Try to have equal #'s of call and puts. Unless you are very sure.
2. During a pop, especially premarket, options become very expensive around 9:30 to 10:00. If you sell out a straddle, act quick and you can collect some premiums there. The volume and violatility seems to die down a bit during the day and the straddle value went down, even thought the stock price is still holding up.
3. Bidding war news means violatility. It might be as good as earnings.