I covered my USO (oil ETF) long shares with two USO puts this afternoon. Oil was a bad trade to get in for me and I’m stopping the bleading for the next few days. While US was trading at $64.00 I bought to open two USO October 66 puts for $4.30 each and paid $871.49 after commissions. $400 of that purchase cost is intrinsic value.
I’m long 100 shares, so on any fall deeper I actually profit with two puts in my hands now – one to cover and one to gain value as USO falls. I went with the nearest term options because I think oil’s fall will continue to be rapid and expect a lot more damage in the next week. I bought these puts in the money to give me a little intrinsic value if oil flattens I won’t lose the entire purchase. If oil comes back somehow I’ll profit on the 100 shares I kept long. This afternoon oil came within a few cents of its limit $10 limit per barrel fall per day. I had never heard they had a limit like that, but just heard it on CNBC. Someone correct me if I misunderstood.
I continue to look at my account with regret, knowing I should have hedged much earlier and on more of my positions. I’ve learned a lot during this bear market and will not repeat the same mistakes next time around. That’s how I’ll sleep tonight, thinking I’ve actually learned something. The nightmare is how expensive this lesson has been. What I haven’t learned is where the bottom is and how much more pain we have to feel before we get through this.
A specific example of regret is the mistake I made on the DRYS put the other day when I sold instead of bought protection. I flipped the trade, dumped the option and took a small loss and didn’t get back in like I should have. DRYS has fallen $7 since then. I own 200 shares. Now it’s trading down under $17 and I think could be near a bottom where the upside outweighs the downside. I’m staying long. Selling now to bring in less than $3,400 does little for me versus waiting patiently for the rebound which could take it back to the $20s, if not to the $30s, $40s or $50s where it was a few weeks ago.
It’s unfortunate that nothing that was working before works now. Many people that are in the dark about the current market conditions and where we’re going are losing a great deal of money. I wish you all the best with your trades sir.
Trading is all about learning and trying new things. We all have regrets here and there. Just remember not to let them get to you.
Thanks guys. What’s the fun if you aren’t learning.
Hedging costs money. Why hedge when I’m already down 20%? Well, last week answered that question. Now I’m holding short puts on INTC and XLF with strikes at 18. I want to just roll them from Oct. to Nov., but I’m truly scared that there will be no bounce back in the near (3-5 year) future. After getting burned bad by WB, my wife will be pissed if these get assigned. And with the IMF fanning the flames (IDIOTS!), next week could be as bad as last week.
Is it too late to hedge now? Or will I be kicking myself even more when the Dow hits 5,500? I feel frickin’ paralyzed.
Not Herbert, It’s a weird feeling isn’t it. You know hedging is right, but you hate to spend the money and lose when it rebounds, but it might not. I suggest a hedge and if you lose on the hedge in a rebound, you gain on your stocks. The only path to new losses is not hedging. Sorry you’re going through this.