One Step Forward, Seven Steps Back..

If you are financially secure and decide to go out on a limb and trade options, just remember you’ll often feel like you’re taking one step forward and 7 steps back. It very much a double edged sword. It’s highly, there’s liquidity dynamics, varying expirations, there’s primary greeks, and secondary Greeks, and so much more. I think options are most exciting for people like me. It’s a vast sea of infinite possibilities and a very very deep learning curve, it basically never gets boring. But with all those great qualities and exciting adventure, usually comes complexity, more risk, confusion, too many possibilities, changing landscapes, and of course a deep learning curve.

I find myself doubling down on some trades recently. Maybe it’s because I’ve been wrong on the past few trades, or that my time horizon has shortened. Either way I find I am often placed in front of 3 paths after I make a big trade. Path 1 I’m right and I decide to sell for a profit, path 2 I’m wrong and I sell for a loss (usually I’ll just wait it out) or the company goes bankrupt and I’m forced to sell, Path 3 I decide to double down. Why would I take path 3? Well I’ve got some rules like it has to be a stock in the S&P500 otherwise I will NOT double down. But if it’s a fairly reliable and steady company and is in the S&P500, hell I’ll double down. Doubling down will actually lower my cost basis. Sure I may have to stay invested longer than I would like and wait out a recovery, but if I start lowering my cost basis or DCAing into that stock on the way down, ideally I’ll be able to exit my original position earlier and with greater scale.