Interesting day! A 889 point rally. Dow was nicely up. So all you call holder who are profitting did good. Congratulations. My own MSFT options were bought at a high price at the time of the last rally small rally. The trade was opened on the 21st. However, the price kept going down and after many red days, now, the trade is down 88%. Very stupid move. Very careless. Here’s is how it happened.
I bought 10 at .53. It went down. So I bought 10 more and averaged at .50. Thinking that when 20 options are sold at .70 it will be better profit. This was done out of desperation. Not by looking at the charts. Never looked for confirmation on whether the market is headed up or whether the security is headed up. Then it went further down. Bought 6 more and averaged at .45. Then it went down and bought another call at averaged all at .44. So in total 27 Nov 27 calls. Current value is .10. At one point it was .02. Luckily, I never looked at it when it was lower than .05, I think. Maybe .04. Now, I’m looking at this and realizing that it will need multiple green days before the option price starts moving up. The option price is derived from the security. That’s why options are derivatives. However, it has many reasons for staying. If no one believes the MSFT will go up enough, then what’s the point in buying the option. So it doesn’t increase much. If it has the possibility of going at least close to 27, then the price will increase. Now, I’m praying that I will be able to get out of the trade profitable. These expire on Nov 22nd. Current gameplan is to pray and hold.
This mistake of going all in and averaging down has been eye-opening. You can’t trade without identifying your risk/reward ratios and without having rules that you will adhere to. Will this work? In the long run? I don’t know. It depend on my ability to follow the rules that are carefully made and to make good trades. God willing, I will be successful. My current goal is to go from $1,000 – $2,000. So far I am successfully somewhere around $200.00 in account value. So very much in the wrong direction.
Let’s see below the DOW chart. Notice the first rally was with the pink circle. RSI showed oversold and MACD showed no buy signal. Today’s rally showed RSI heading up but well out of oversold territory. The MACD was sort of sitting around. Now it’s shows the buy signal. These two signals alone don’t say anything matching. So further green days will show whether this down trend is temporarily gone or really slowing down to start trend reversing action.
