Never fails,  break your rules and get punished. I usually don’t trade outside of market hours unless hedging an existing position. After watching ACHN trade up to almost $13 after the collaboration announcement, I decided I needed to be involved and averaged in long at $10.50. I figured the price was right and the market was inefficient . I was right on both accounts, The price is always right no matter what and if the market wasn’t inefficient, stocks would trade at the same price until new information was released.

Figuring the JNJ stake after dilution was worth about $10.40 a share I thought I would be ok. I expected some upgrades and the stock would trade back to $11 ish. At worst,  I would get stopped out at $10. The stock barely traded at $10 premarket and I couldn’t get out. I wasn’t happy where it stabilized at $9.80 so I hung on. After selling half of the position at $9.44 on the open and selling the JUNE 9 straddle for $1.50, with luck I’ll get out of half of my position by June expiration if all goes well. I expect the stock to be dead money and the shares issued to JNJ were at $12.25 so I feel $9 should be the bottom end of the range.

A series of mistakes were made here. I violated my after  hours trading rule, I didn’t take the first out when I could, and I misinterpreted the situation of expected buyout vs. a collaboration. Lastly I was caught up in the “I’m missing out feeling” since I actually was in the name earlier in the week but was out of it when the news hit and I was nauseated by the fact the stock was printing in the $12 range in size.

The old adage still holds true, it’s better to be out of a position wishing you were in, than to be in wishing you were out. lesson learned- again.

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.