I closed out three June trades today, all for a win, but absolutely threw away $27 on one solely for the purpose of psychological capital. I paid .02 to close some naked $560 calls on GOOG when its at $498. I closed a SPY 114/116 call spread for .11 that could have been closed for .05 last week. I also took a small profit in a naked put sale that was a mistake of a trade to begin with. The problem I'm having is I don't have a locked in plan on when or why to close a trade. Intrinsically it makes no sense to pay .02 for something that is worth nothing with 3 days to go, but psychologically it was worth $27 after commissions to close it out so I can concentrate on July trades.
Once I closed that out, and seeing that the other two are profitable as well, I felt the need to just close them all out, call it a month, and start looking for my next trades since the vast majority of the potential profits could be booked. While that's one way to look at it, the other is that if you consistently throw away pennies, they add up over time. It isn't the case that the trades I took off were eating up available buying power, if that were the case it makes more sense. The actual risk posed by leaving these trades on for the remainder of June expiration was very small, yet I found myself wanting no more risk and moving on. Where I'm struggling is that after I've taken trades off the books and thus risk as well, I start to question myself as to why you just threw away money. I think some of this has to do with being an electronic interface. If I had a $100 bill sitting on the table and my choice was to rip it up or come back and pick it up on Friday at 1pm, I wouldn't rip it up, but yet that's essentially what I did today. Another way to look at it is I paid $100 to not have to worry about a damn thing for the next three days. So now the question is, is that really worth it? Does that make sense to continually on an ongoing basis leave money on the table on trades that have lower risk now than when they were put on? If you asked me what to do on a similar trade I would probably say let it expire, why buy something that is worth nothing.
Here is another part of the psychological game, the $100 I left on the table on its own as a dollar amount isn't the issue. I guess its that my total take this month might be something like $1100 so I'm looking at leaving that $100 on the table as roughly 10% of the profits for not being patient. I was trying to squeeze the remaining pennies for record keeping purposes and not looking at risk/reward on each individual trade. Hmm, I have a lot of work to do in this area still. My concern is that I'm making mistakes and not having a solid game plan while playing small. This means that if I had larger positions on the psychological aspect will be an even bigger burden. I had exit strategies for two of these trades and they weren't triggered, yet I deviated from the plan and closed out early. What good is a trade plan if you don't stick to it? especially if there isn't a compelling reason to deviate.
Once I closed that out, and seeing that the other two are profitable as well, I felt the need to just close them all out, call it a month, and start looking for my next trades since the vast majority of the potential profits could be booked. While that's one way to look at it, the other is that if you consistently throw away pennies, they add up over time. It isn't the case that the trades I took off were eating up available buying power, if that were the case it makes more sense. The actual risk posed by leaving these trades on for the remainder of June expiration was very small, yet I found myself wanting no more risk and moving on. Where I'm struggling is that after I've taken trades off the books and thus risk as well, I start to question myself as to why you just threw away money. I think some of this has to do with being an electronic interface. If I had a $100 bill sitting on the table and my choice was to rip it up or come back and pick it up on Friday at 1pm, I wouldn't rip it up, but yet that's essentially what I did today. Another way to look at it is I paid $100 to not have to worry about a damn thing for the next three days. So now the question is, is that really worth it? Does that make sense to continually on an ongoing basis leave money on the table on trades that have lower risk now than when they were put on? If you asked me what to do on a similar trade I would probably say let it expire, why buy something that is worth nothing.
Here is another part of the psychological game, the $100 I left on the table on its own as a dollar amount isn't the issue. I guess its that my total take this month might be something like $1100 so I'm looking at leaving that $100 on the table as roughly 10% of the profits for not being patient. I was trying to squeeze the remaining pennies for record keeping purposes and not looking at risk/reward on each individual trade. Hmm, I have a lot of work to do in this area still. My concern is that I'm making mistakes and not having a solid game plan while playing small. This means that if I had larger positions on the psychological aspect will be an even bigger burden. I had exit strategies for two of these trades and they weren't triggered, yet I deviated from the plan and closed out early. What good is a trade plan if you don't stick to it? especially if there isn't a compelling reason to deviate.
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