Took at Loss on Nucor (NUE)
Yesterday morning, not too far from the low of the day, I bought back my NUE covered call for $0.25 and sold my shares for $56.78 in my IRA. I entered into the position back on May 14th and wrote about it then. Luckily, I sold my cc in the money, but sadly not deep enough. I wrote another post about it on June 11th, the date I should have gotten out. I was barely break even then and even said “NUE did break through a key trend line”. (I’ve attached the chart below.) I finally pulled the trigger on it yesterday (lost ~$425) when I saw NUE break through another trend line that was already falling fast enough as it was. Of course as with my loss I accepted yesterday on TV, NUE rose immediately after I exited. NUE is up nearly $2.00 from where I sold it, but that’s no endorsement for others to jump in. The top side of that latest trading channel is dropping fast and could likely hit the price like a hammer.
I’m reminded again why I prefer naked puts over covered calls. Although I did sell this covered call ITM, to exit the position I had to buy the stock back first and incurred extra commission charges because of it. That’s on top of the bad price I ended up selling it. Puts are just quicker to exit in my opinion.
I have to admit to myself that I haven’t been as strict as I need to be lately. The easy money days are gone for now and it’s time to pay attention again. I’ve entered positions too high and have not exited when I should even when I write the negative reasons here. I plan to slow the frequency of my trading down until I can get my head back in the game. I’m up to 40% cash in my IRA as of yesterday. I’m not sure when I’ll go heavier into stocks again, but doubt it will be too long as I’m sure I’ll pick some stock that has a bullish story again soon. I’m still 167% invested in my taxable account, but that should lighten itself up quickly with July expiration a few weeks away.
Click on the thumbnail to view the larger chart:
Technorati Tags: investing, stocks, options, naked puts, invest, covered calls, stock chart
Comment by Kadena
Using an analogy, I love football. Sometimes a run or pass play work perfectly, because the defense isn’t set up against it. At other times, they lose yardage against a different defense. The plays are good regardless, and not every QB will see things quickly enough to call an audible. So when the coach plans, the plan sounds good. It all boils down to timing, and of course hindsight is 20/20.
I think the same for investors. All money is good money, but when our timing is wrong on the plays, we may be on the giving side of the dollars instead of the receiving side.
A truly good athlete/investor will always dust himself off, resume play, and eventually win. Only poor ones will quit or lose. So, do we want to be winners or losers? Sometimes the results aren’t even our fault I’m convinced, but our psyche is our responsibility. So I’m sure the future is bright, regardless of bear or bull markets, as I am convinced our ultimate desire to get ahead will show in our actions. After all, if we believed we were starting to make mistakes and cannot do any better, then truly our investing days are over and we might as well quit. Or, continue to invest, diversify, preserve capital, take winners, ignore losers, and move on. There’s so much more money to be made, and look at all of the success from the past. Clearly, we are coming out ahead.
Comment by The Trader
Thanks for your comment Kadena. I agree with you. You have to stick it out to win long term.