I hit my stop loss on GM.
music selection: “Don’t Dream It’s Over” — Crowded House
I sold shares of General Motors (GM) short on 10OCT2016 for 32.32 a share. The thesis is the growing amount of deep subprime lending is destined to end badly for the big auto makers. I still believe in that thesis and see used car prices are beginning to fall. But Mr. Market is feeling euphoric about Detroit. I hate to realize the loss but I respect my stops. I’ve learned the hard way on that point.
I bought to close today at 40.42 a share. The trade was in force for 353 days and yields a negative 26.49% annualized. I am recording a loss of 1,255 on the transaction.
I am still in Ford (F) and have a 13.68 stop loss on the short. Shares closed yesterday at 11.96, so I still have some wiggle room. Here’s to hoping F works out better for a lizard.
Devour your prey raptors!
Hi Lizard,
I’m curious, do you calculate your long-term ROI by strategy? E.g.
-covered calls
-cash secured puts, non-UVXY
-cash secured puts, UVXY
-other options strategies
-short stocks
-long stocks
-high yield bonds
I hate to disappoint but I’m not that sophisticated. I target 12%+ for non UVXY options strategies.
Raptor,
I remember this trade of yours well because I had the opposite belief. We’ve all been there. In the fall of 2015/spring 2016 my lack of stops on oil companies hammered me pretty hard. It happens to the best of us!
MDP
It is a hard market to be short in. But that is when you need the protection most.
Thanks for the update. It is indeed hard to respect stop losses, mental discipline is key. I just learned the hard way, I am short XLE and TXN call options and ignored my stop losses.
The hard part for me was to switch from a long-term investor’s mindset inspired by Franklin Graham, John Bogle, and Warren Buffett to a more transactional, risk-managed approach. In one of my first options trades, I slowly lost $5k on a big bet with GLD puts because at each step I still believed in the underlying rationale of the trade. With each loss, there was less to lose by waiting to see how things turned out next week, so I waited. My puts expired worthless before my rationale played out years later.