I have closed my bull call spread in Altria (MO) for a loss.
music selection: “Where The River Flows” — Collective Soul
Ordinarily, I do Side Hustle posting on Wednesday but I thought it was more important today to remain transparent about my losses. Lots of options bloggers tout a system that wins 100% of the time. This isn’t realistic and frankly, not disclosing your bad trades is basically lying in my book.
MO has moved against me with the general market trend during the trade kerfuffle. I sold the 50/52.5 bull call spread on 26APR2019 for 1.65 a share. I set a stop loss at 49.5 cents, vowing I would close the position for a loss if it closed a day below that price. Today, I sold out at 49 cents a share.
I originally risked 990 in capital on this trade. I walk away with a 696 loss. This is quite a lot better than if I had stopped out of a 10,000 investment at my normal 25% trailing stop. It is where I want to be for the near term. I’m willing to give up some upside to protect my tender lizard hindquarters. The market is too frothy and has too many knocks against it (trade war, tight labor market, inverted yield curve, and steep valuations.)
The general trend will PROBABLY be up for another 12 to 18 months. But I have no way to know when the tide will turn. I only know that with the economy so highly leveraged and subject to so much sub prime credit, the turn will happen rapidly and steeply. Warren Buffet is notorious for saying you don’t know who is swimming naked until the tide goes out. A lot of traders are going to be caught without their trunks.
Spreads still open that are in or near the money include: BIDU, JPM, DAL, DISCA, ITB, MAS, HSY, BX, and HDS. All but DISCA are safely in the money and stand to earn the maximum profit. DISCA is between the strikes and I think it has a lot of potential to finish in the money. I am monitoring closely however and will honor my stop loss if it is triggered.
Devour your prey raptors!