Fall Clean-Up

Sometimes you have to accept that you were wrong. I accepted that a while ago on GS and FB, but not to the point of doing something about it until yesterday. A few days ago, I mentioned I was debating my next steps with FB and GS and I finally swallowed my pride and took my loss on FB yesterday afternoon, but was too busy to write it up until now. I sold 100 shares of FB at $133.05 and received $13,303.82 after paying $1.18 in commission late yesterday morning and left my call option in place with a trailing order to sell if it rose $0.50. FB fell more yesterday and then dropped sharply this morning again. Those declines cut the premium sharply on FB and when it came off the lows this morning, my order hit. While FB was trading at $129.54, I bought to close my one FB January $145 naked call for $2.42 and paid $243.56 including $1.56 in commission.

A “trailing” order is one that you enter and it changes its trigger price based on the stock’s movement. In this case, my FB call was trading around $3.50 when I entered my order and I could’ve bought it then, but by using the trailing order, I was able to ignore the position, knowing it would sell if FB moved against me (higher) after I sold the shares. Since I received $569.33 for my FB call that I sold less than a week ago, I knew I’d lock in some profit with a trailing order that could not get more than $0.50 higher before being triggered and I had a shot of riding it down to $0. I could’ve bought the call back for $0.50 at the lowest point today if I happened to be watching at that minute, but since I wasn’t, I still locked in a profit of $325.77 on the option. Sadly, FB fell more than $7 during those few days. So, I should’ve taken my loss last week, if not months earlier. I’m rushing through this post right, so I haven’t double checked my numbers, but I think I ended this series of trades with a realized loss of $5,617.86. The lesson I learned is to get out when a scandal/sentiment shift is upon a stock, even if they are still making boatloads of money. If the desire to be in bed with them financially has left the masses, I should leave too.

The $5,600+ will help me a great deal for my taxes and capital gains in 2018, but I figured I should take more losses and move on elsewhere too. This afternoon, after seeing GS’ attempt to rally from it’s ugly opening low failed, I sold my 100 shares of GS for $191.86 and received $19,184.75 including $1.26 in commission. Without double checking my numbers yet, I think this will give me a realized loss of $5,198.55 and push me to a net realized loss for the year to date in this account. It’ll be nice to save on taxes, but I’d be much happier if I had the gains and paid tax on the profits.

I’m kicking myself for being so greedy on my AAPL naked put mistake when I sold two puts instead of one weeks ago. Those puts are $33 in the money now and instead of taking a loss on them today, I decided to sell naked calls on the shares. Technically these calls are naked since I don’t own the shares, but I know I will soon. The naked puts could (and likely will) be assigned before December expiration, so I don’t think this new trade is a big risk. While AAPL was trading at $177.41 this afternoon, I sold two AAPL January $200 naked calls for $2.46 each and received $491.23 after paying $0.74 in commission. If AAPL rallies and my calls are assigned, I’ll have $5,009.23 more than I had before today’s trade. I need it since I’m sitting on a paper loss of around $5,000 as it stands even after deducting these new premiums from my losses. I’m not worried about AAPL longer-term and expect the stock to recover, but it could be more than a few months before we see it above $200 again. I would’ve gone with a lower strike if I owned the shares already and will consider lowering my strike after the shares are assigned.

The lesson learned on AAPL was one I thought I had learned before, but apparently I didn’t heed my previous lesson. When I made a mistake of selling the extra naked put by mistake, I should’ve eaten my loss then. I actually had a few days when I had a profit on the extra put and could’ve pocket a few bucks gain then. Since I didn’t, I’m only partially facing reality now.

I do think the market is overreacting in the broad market, but these three stocks had legitimate reasons to fall. I have $7,161 in cash that isn’t backing other puts and will sit on it until I believe we have hit a bottom.  The catalysts that could turn things around could be something from the Fed that says they will slow or even pause further rate hikes after December and for the administration to reach an agreement with China on trade. The former has a much higher probability than the latter in the next few months.