$-5089 (~80%) Realized Losses
This week emotion and a lack of discipline got the best of my account. It was a busy week for me outside of the market so I wasn’t able to monitor as much as I usually can and this shows why overtrading with no strong plan can blow up a trader’s account.
I started the week with my bearish position in QQQ. Initially the market pulled back a bit Monday and it looked like things were going in the direction I needed them to.
Then cam the CPI report Tuesday. Inflation came in slightly lighter than predicted fueling the conviction for a September rate cut and it poured rocket fuel on the market. When I looked at the numbers I didn’t interpret them as that amazing of news so I decided to see if my put position would start to be right again.
When the market continued to push higher my plan was to open a bearish call spread selling a shorter dated QQQ call anticipating the run would lose steam and buying a longer dated call for protection. I did not do the math for the trade and understand that I ddin’t have the collateral to make it. With this on top of the losses I made a boneheaded trade that could’ve absolutely taking my account to zero. After buying the $615 QQQ calls (planning to sell lower calls that I couldn’t fill) I loaded up in weekly lotto puts. This is a trade that I absolutely know better than to make and was purely a revenge trade hoping to not have to accept the loss. A good portion of the proceeds for this potion came from selling $620 calls against the $615 QQQ calls.
The market continued to rip higher. The $615 calls were up $1400 buy Tuesday morning. The problem? I was down $1000 in the $620 calls I sold against the position. I’m up about $400 in this trade but down nearly $2400 in the puts. This unplanned revenge trade ended up taking out account balance down another $2000.
I didn’t stop there (yes this is embarrassing). In addition to adding another $1,025 (I’m now $1,025 over my planned deposit for August) Wednesday I took the proceeds from the calls and opened a more respectable $581 10/17 expiration put in QQQ. I then took the remaining proceeds and bought 5 9/5 OTM $570 puts in QQQ. I offset these with 3 short dated calls in case the market rallied for Thursdays PPI report. Thursdays report wasn’t as favorable and by Friday I was able to take some profit in the open put positions. At this point I decided that I would take one more much safer shot at a pullback in QQQ before walking away from this trade all together.
I ended the week with 3 $580 QQQ 10/17 puts selling 3 $565 8/18 puts against them, with one QQQ covered call – $590 9/19 call with one $620 9/19 call sold against it. This is still a fairly aggressive trade but the October expiration gives us a chance to close it out should the market continue higher in week 9.
A week like week 8 marks a major turning point for a retail trader. Do we stay on a path of destruction making similar trades with similar mistakes hoping for a massive win? Do we accept the losses and make behavioral adjustments to become a better trader? Or do we walk away completely recognizing the complexity of the markets?
My plan is to make the hard adjustments to become a better trader.
Going into week 9 my main position is the 3 QQQ $580 puts expiring Oct 17. I have a $590 9/19 call as a hedge and I’ve sold options against both positions. QQQ ended the week trading around $577. If $QQQ crosses back above $581 I will close the position and establish a new trade that fits within my long term goals and framework. I will accept the decline in the account balance and start building going forward. No more revenge trading.