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Disaster continued, but navigated my account well thru the storm

Mr.MarketLast week loses mounted in my account. At first I started panicking, but then took a deep breath and told to myself: “Hey, calm down, you have a plan!”

Sharply falling stocks are an arch enemy of a put selling strategy. If stocks decline smoothly, slowly and not too fast, you can navigate the trades well and roll them. On the other hand, stock falling like a rock can kill your effort.

That’s what TASR positions did to me. The stock lost another 8% on Tuesday and it was too much for me. My cash reserves evaporated and my account hit a margin call. I had to act.

If you read my previous post, you remember what my plan for this situation was.

I didn’t want to touch my dividend growth stocks as they are my precious diamond in my account. They are my golden eggs laying goose. Although I was thinking about an option of selling some positions and later buy it back. But I completely dismissed this option.

The next step was to close my winning trades. Why selling winning trades and leaving losing trades on? There were two reasons:
 

  1. I preserved the gains I already had. There was a risk that those winning trades may still turn bad and I could leave money on the table.
  2. I raised much needed cash to satisfy a margin call and also have enough cash to consolidate the losing trades and make them winning trades.

 
So I bought back the trades, raised cash, preserved the gains, and rolled losing trades, so at the time of this writing they are no longer losing trades.

If you follow my blog and my account, you may know that I had $17,035 account value before this selling started. During last week, my account dropped down to $14,890. At first I was shocked and pissed off, but that is the part of the game and you always have to stay calm and have you head clear.

For almost two years (since June 2012) I had only winning trades. I haven’t lost a penny and all my trades turned or ended as winning trades. This week’s drop was a remainder from Mr. Market, that I have to stay humble and calm, and that he is still the master in the pit. It was a gentle, friendly nudge from Mr. Market and I hope it will stay like that.

By consolidating my account I was able to recover majority of my previous loses. I actually didn’t take any physical loss. I only closed the winning trades and have trades which are showing loss, but recovering. I believe, before they expire, they will turn positive and end as a winning trade.

I recovered my account back to $16,280 as of today and if the market stays calm or it can even slightly lose next week, I should be able to recover everything by the end of the next week.

Here are the trades I decided to close:

Realty Income (O) put selling trade

This trade was a winning trade. It was supposed to expire in June 2014 and I decided to close it earlier and take 2.17% gain.

Coca Cola (KO) put selling trade

This trade was a winning trade. It was supposed to expire in August 2014 and I decided to close it earlier and take 2.83% gain. I only paid $16 to buy the trade back.

AT&T (T) put selling trade

This trade was a winning trade. It was supposed to expire in October 2014 and I decided to close it earlier and take 3.48% gain.

Teva Pharmaceutical Industries (TEVA) put selling trade

This trade was a break even trade or a small loss. I still had to take it to raise enough cash. It was supposed to expire in June 2014 and I decided to close it earlier and take a small -0.08% loss.

Now, I am well positioned in the market, so, hopefully it will turn into gains.

Happy trading!
 
 





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