It’s never the losing trades that hurt. It’s the missed opportunities that piss me off more than anything.
Here’s a real world example from my personal trading this week:
On Monday, I bought shares of $MJ, the Alternative Harvest (read: marijuana) ETF at $24.09. Within minutes of my purchase, it began to take off. It was starting to look like another one of those short-squeeze traps. By Wednesday’s open, $MJ was trading at $34 per share — up 41% since my entry in less than 48 hours!
The options trader in me began to think about ways to keep this long stock position on, while simultaneously locking in some gains.
I considered three possible strategies:
Buy Puts — didn’t like this idea because the premiums were jacked.
Sell Covered Calls — this seemed more practical as I could take advantage of the juiced premiums. But the reality was this wouldn’t protect me much on the downside.
Collar — this one made the most sense. With MJ trading at $34, I was looking at selling the March 40 calls and using those proceeds to buy the March 30 puts for a small net credit. Basically, a free hedge that would buy me some time to let the volatility cool down a bit before deciding whether to hold longer or just completely exit the position.
So which trade did I execute?
None of the above.
I froze like a deer in headlights — caught up in my own toxic brew of Fear and FOMO. And here I am, still holding my stock position, still up net… but WAY off the highs.
Next time you’re beating yourself up for lost opportunities, take comfort in the fact that you’re not alone. We all make mistakes. I’ve been in this game 23 years, and I still make them. You will, too.