Some Thoughts On Untimely Market Exits
Tim Knight | Dec 06, 2012 01:18AM ET
Just a quick post to put forth my frustration at closing profitable positions too early. The past several years of Bernanke-induced insanity have definitely messed with my head, and it's gotten to the point that when a position has a decent profit, I am inclined to take the money and run before the Chairman snatches it away from me.
This is a mistake, and it is illogical. I suppose one of the reasons I carry such a ridiculous number of positions (presently 80) is to curtail myself from screwing up too universally.
Today's big mistake was to enter the day short Apple (AAPL) and cover for a profit. Why would that be a mistake? Because I took the profit for the stupidest of reasons - - - because taking a profit feels good.
The stock hadn't reached a technical target; I simply wanted to cash out. I've marked with an arrow the approximate point where I did so. This was really stupid, particularly since my view is that AAPl is headed to about $450 or so.
The worse mistake, percentage-wise, was New Oriental Education & Technology Group, symbol (EDU). This is the kind of stock that might fall 90%. I decided a 15% profit was just oh-so-dandy, so I ran with it.
I've made a similar arrow showing how hasty and illogical this was. The old saying is that you'll never go broke taking a profit. I submit to you that this is a very dumb saying.
As I continue this exercise in self-flagellation, I leave you with my Market Vectors Gold Miners ETF (GDX) option trade. As you all know - - particularly Sloper "pecuniary" - I have been a raving bear on gold miners for many, many months.
Precious metals topped out in mid-2011 (although kooks refuse to admit it), and miners have been peeing all over themselves for months. I bought put options based on my long-term bearishness; they happened to be December $55 GDX puts. Below is the graph of this option.
The blue horizontal line marks where I dumped them (out of fear, panic, and uncertainty as to whether I was right..........a foolish mistake). I think they are up 200% or so since I ditched them. GDX could absolutely collapse this month, so this percentage gain left "on the table" will probably go much, much higher.
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My point in all this is to remind myself to stick to my convictions. This month is treacherous for those of steadfast mindsets, because every minute brings new rumors, press conferences, and political volleys.
December could be the most stomach-ache-producing month of 2012. A refusal to stand fast next to trades based upon reasoned principals has been, and will continue to be, a costly mistake.
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