Fast market condition today. Needless to say I get a steady flow of emails and chats today from folks with panicked positions seeking opinions on how to "remedy" the losses incurred.
Here is a very typical example, this was the main theme for no less than 5-7 emails today:
"I have -10 spreads of the ICE 145/140p spread for .55 credit each.
The stock closed at 144.58 today. I am concerned as I am down about $1500
at the moment. I don't want to take the loss, yet I can't afford to
take the max $4450 loss either. What's the best thing for me to do?"
Helloooo??? As if I have the magic wand to wave the losses away???????
First and foremost, if you can't afford to take the max loss, don't trade so big.
Ok, so you are new, and have no regard for position sizing. Alright, thats fine.
Then trade what u can afford to lose per trade. Trade 2x instead of 10x, for example.
Second, choose an online broker that allows you to trade
smaller. Switch from the ones that favor trading 10 contracts or more at a time.
You are not really saving much dough by trading big.
You are still learning. Trade 1-5 contracts and learn to average them in. Many good traders trade on probabilities and steady averages, not all in and all out.
Third, flat (no position) IS a position.
The normally tame indices are basically behaving like the GOOG/CME/RIMM and moving like monsters. You don't need to be trading in this condition if you are new. Paper trade and observe the the ebb and flow of the implied volatilities at play. If you ABSOLUTELY MUST participate in the excitement, trade small.
I played emergency room staff today, but sadly, was not able to stop the bleeding for many.
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