I am a complete discretionary trader, a dinosaur if you will. I have no mechanical system for entries or exits. Many of my positions are event or news driven and I use options to take advantage of changes in volatility related to these events. Almost all of my trades will be swing positions with duration of 1 week to 3 months. I exit positions when the chart and fundamentals change to my disliking.

Twitter (TWTR) is a perfect example of a name I will be in until next earnings. After the 25% break after the earnings announcement, I checked the chart and decided where I wanted to buy stock . My next step was to decide where I wanted to buy the next round of stock at a lower price. Then I pick calls to sell also. I will usually write puts and calls on half of the amount stock I’m holding. This allows me to have some upside contracts if the stock decides to bounce and I average in at a lower price if I am put the stock on the puts that I sold if the stock continues lower. However if the stock drops, at least I took in some call premium.

Obviously, this strategy only works for someone who is committed to owning the stock.

Dupont ( DD ) is another example of where I put this strategy in place this week.  Though I’m always partial to double Ds anytime (.) (.) . In a rare victory for the target company, Dupont was able to elect 12 members to it’s board and block activist shareholder Trian Management from getting any seats. Here again is a quality company taken to the woodshed where I got buy stock below 70 and sell high option premium.

As far as stock trading is concerned, I  am amazed at the amount of daytraders out there these days and can’t believe that it is a winning strategy in the long run. The thought of trading against the algos in real stocks and  competing against other traders who follow  pump and dumps in unsavory chat rooms where they trade against their followers sounds like a recipe for disaster.

Back in the days of fractions, when stocks were controlled by specialists on the NYSE or a group of market makers on NASDAQ, stocks had personalities. Especially the NYSE stocks where the action was centralized and usually the same specialist or someone from the specialist book with the same trading philosophy was running the stock. The stock action I found was more predictable then with much less of the current noise surrounding trading these days. Day trading then was a viable strategy, I don’t believe it is now.

I try these days to trade as little stock as possible since I feel I don’t have an edge. It’s one of the reasons I feel being long gamma and expecting to trade your way out of the time decay is very difficult. The only way to profit is from a gap opening.  That’s another blog post though.