It was a wild ride today with Bank of America. This was the day I felt would definitely come and this was the day I was expecting for when I bought into Bank of America. Unfortunately I missed it and I missed it too hard. If you were following me you know that I brought 1000 shares of Bank of America yesterday at $12.06. I mentioned that I felt the upside momentum of this stock. But I sold it too early this morning at $12.23. After I sold it I quickly jumped into a short position at $12.43 and later increased my short position at $12.58. For the rest of the day I was carrying 2000 shares of shorted BAC and watching my account balance going down when BAC price was skyrocketing
Thoughts About Taking Suggestion:
All kind of wild thoughts came into my mind with the wild ride of Bank of America. I thought I shouldn’t have got up so early. If I gave myself more time to sleep I could end up making a profit and at the same time I could have a better sleep. Too bad I followed Rpena’s suggestion. =) However when I sold my shares too early I thought it was too bad that I didn’t follow Rpena’s suggestion. If I took the suggestion I wouldn’t take the short side today and ended up with a lost.
There were three reasons that I chose to sell for a small profit. First, BAC didn’t react well to the upgrade in pre-market. Its price just went up a little in pre-market and I thought that was it. Second Repena reminded me there was a 30 year Treasury bill auction today and I thought it was not going to be good. Again it was Rpena’s fault. =) Thirdly I felt I should follow my guidelines. Of course I know I shouldn’t blame anyone for the action I decided to take. I felt I wasn’t a mature trader and Rpena is far more experience than me.
Thoughts About Recouping Lost:
My wild thought went on and I found today’s Bank of America was very much like Wells Fargo on the day when I lost $10,000 trading it. That was the day after the government announced the stress test results and Well Fargo announced its secondary offering to raise capital at $22 a share. I increased my short position two times on Wells Fargo on that day causing me a big lost. Today I dare not to increase my short position on BAC for the third time. In fact when Bank of America’s price jump to $13.19 I was about to click the button to insert an order to short 2000 more shares but I didn’t when I thought about the Wells Fargo trade. Later on I regretted I didn’t do it when I saw BAC closed under $13.
My thoughts went on about selling 100 contracts of BAC June 12 Put at 0.22 to recoup my lost today. That was only 100*100*0.22=$2,200 involved. But what if BAC price drop under $12 next week say to $11.50? I could lose more than $5,000. So I sold 20 contracts instead. That helped a little bit.
Thoughts About Lesson Learned:
Now I am pondering whether there are some lessons I learn today? I really don’t know. Because I found the lessons I learned are seemingly more and more contradicted with each other. I thought one lesson I learned out of today could be that I acted too early in the trading session. I should’ve waited to act till the latest market hour. But this was not always valid though. I was thinking about this post, “I Have Got to Treasure Selling Opportunity”, in which I could make money if I acted early.
Another lesson learned could be I got up too early and I should just take it easy and have a good sleep. I am not sure if that was a good lesson. The third lesson I thought about is not to panic and close a lost postion in a hurry and wait at least three trading days before you throw towel. I actually wanted to write about this for a while but not sure if that was a good one. From my past lost experience if I were able to hold the losing position long enough say three days I could at least see an opportunity to close it without lost. I found that was right for my previous two big losts.
- Trading Out of Discipline and not Knowing How to Stop Caused Big Lost and
- Wells Fargo Is Over Valued at $25.70
I am not sure if this is going to be right this time. Anyway we will see if BAC can get down to $12.50 in a couple days which was my average.
Another lesson which should be positively right. Life is much better on the long side. This is the third time I lost big on taking a short position and I want o highlight this. I should be very very careful about the entry point when taking a short position
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I lost about $400 for the day and am holding USB and BAC puts and 2000 share of shorted BAC at the moment. The lost on shorting BAC is more than $10,00 but off set by the gain on the USB and BAC puts and gain on previous long position on BAC
Account Balance Change: -$405.85
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