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Trade exit – AAPL long call for a loss (-24%)

I once read a story about a trader who was quite successful trading futures – E mini S&P 500 and he was making a lot of money. Later he wanted to start trading different markets and he decided to trade currencies at Forex. Guess what. He almost lost everything. So he got back to trading E mini S&P 500 and continued making a lot of money.

I once traded advanced options. Some of the strategies were long options and all sorts of spreads. I was making money a bit, but at the end I lost almost everything. So I started trading short options and I became successful. I recovered my account and even doubled it twice.

So I decided to start trading long options and spreads again. Since now I was a lot better trader and making a lot of money, right? Guess what?

All trades I took turned out to be losers again.

I had a trade against GLW (3 long calls) and AAPL (1 long call).

Both trades quickly turned against me and I started losing money. I closed GLW trades for a loss quickly a few days ago. Yesterday, I sold a short call against my long AAPL call (as a calendar spread), but today I couldn’t bear enlarging losses on the long call. Not only I was losing due to shrinking intrinsic value, but also a time value was eating up my trade. It was supposed to be a swing trade. I wasn’t ready to hold it for a longer time to go over a stock price drop and hope that time decay won’t destroy the value so when AAPL recovers I won’t make anything.

AAPL will post earnings next week. Will the stock skyrocket or sink even more? Who knows? And I do not want to hold an option I am not comfortable with. Be it a short option I would feel more comfortable even though some consider it riskier than long option.

So I decided to close my long call for a loss and keep the short call offset the loss. And hopefully next week the short call expires worthless and offset the loss by roughly 50%.

I bought the call for $855 and today I sold it for $650 creating a $205 loss (-24%). If my short call expire worthless next week, my loss will only be -$100 (or -12%).

If the stock spikes up on earnings, then I will be screwed.

Next week will show.





2 Responses to “Trade exit – AAPL long call for a loss (-24%)”

  1. Paul N says:

    I like following your posts. I enjoy your easy to follow way of explaining what you are trying to accomplish with each of your trades. Just looking at this from the outside it looks like a lot of work for what seems like a mixed return. A lot of stress too.

    I like to dividend invest for the most part but have a few etf’s and even some mutual funds that I have had for a long time with decade long returns of about 9 % so I have mixed feelings on unloading them and buying something else.

    For me it’s what income I can generate fairly steadily monthly (when added to my gov pension) and having a fairly clear mind about it going to bed. I know there are many arguments that my choice is not “the ideal” way to invest. But I can throw a nice chunk of cash at a dividend stock or add to one of my dividend etf’s every 2-3 months and that average monthly payout goes up steadily as I go towards that goal presently.

    It just seems your putting yourself through a lot of extra work and maybe looking back in 5 years your return may be no better then the index returns? I have to assume you get a kick out of all this :)

    • Martin says:

      Paul,
      Thanks for stopping by and sharing your thoughts. Thanks for following my posts about trades I take. It doesn’t create any hassle to me as I like it and I like the excitement options trading provide. So it may seem to other as too much work, for me it is not enough I would like to trade more.
      Of course I still invest in dividend growth stocks as these are my portfolio core and every year I will invest a portion from options gains into dividend stocks.
      I also understand that my approach is not for everybody. If you like your strategy and it brings you satisfaction, then great. It is awesome that you have found your way of investing which makes you comfortable and makes you money. It is a big step as many people have no clue and in some case it takes years to find out what actually you want from investing and what works best for you.
      Good luck! And thanks again for following my posts!
      Martin



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