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Friday, September 18, 2009

Options Expiry

Today is options espiry for September, so it's time to look at the progress (or lack of) that I have made as an options trader. My September 14 puts on XLF are going to expire worthless. I have October 106 puts that I bought this week (the first large postition I have taken) are down 25%. I may or may not be right about market direction in October, but my timing was not good, and I'm suffering the consequences.

These are the transactions since last months expiry. I had one profitable position, 95 calls on GLD, which had a small profit when I sold them, but as it turned out I made a good decision as they never went much higher. However, investopedia's simulated commissions ate most of the profit.

Among the lessons I have learned so far are: 1) Options are not "buy and forget" instruments. They make huge moves in a short time. 2) Setting stops for options is a lot harder than setting stops for stocks, which are not easy. You have to be willing to take much bigger losses. So far it's been a lot of fun trading them, thanks to the fact that it's monopoly money that I have been losing.

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