It is 06/06/2011, a Monday. I did not write the dairy I scheduled to write yesterday. I was just too sad, too relunctant to write it until today. Too many lesson for me on this Monday.
1. Risk managment is so important!!! When you trade, plot the best trading plan, when to cut loss, when to take profit. For option trading, at most 10 percent stop limit should be set once the order is placed no matter what. For stock trading, at most 3 percent stop limit. I do not like to trade stocks with price less than $10 dollars.
2. Never ever buy an option on Friday. Because the time value decay so much. It counts on 3 days decay. So the theta for spy call option is 0.5. Then when you buy the option at the Friday close at 1 dollar, on the next monday the option is worth 0.85 at the begining of the trading, given that there is no gap up or down.
3. Trading plan for buying option on one day close ahead. If the next morning gap up, hold the position even though there is some selling in the first 15 minutes given that the volume and drop is not much. Take profit at the first push up. Do not count on the luck for a nice consolidation for another push up. Book profit for a winning trade. If the next morning gap down, sell the option immediately or at the first little bounce in 5 minutes. As it is not a good trade at the beginning, there is a no need to keep it. Cut as early as possible.
The market is really weak. There are so push up or gain in the intraday before 3pm, then hard sell off from 3pm until the close, as nobody wants to keep the position overnight. Trade less and cash is the king.
No comments:
Post a Comment