Thursday, 29 October 2009

Rollercoaster Of Emotions (Warrants)



Above: Chart of underlying

My derivs trade I put on yesterday in the hope of a quick buck tourned seriously sour. My plan was: buy the call warrant (tech stock is underlying) at .22 and sell it at .23. After I bought it the highest it was ever bid was .22 - I didn't even bother putting in a sell limit order at .23 as I prefer to hit a bid vs. showing where I want out.

The US open was looking bit lower but nothing to really justify this tech stock being down over 5%. That's why I bought. Nasdaq was only down 1% at the open so I felt comfortable wating for the bounce this tech stock would have once the market realised there was no reason to be dumping stock in that way.

I was wrong. The tech stock and market tried a small attempt of a rally but got nowhere. My warrant was bid .19 at the european close. Into the US close the selling accelerated and I knew at the european open today my warrant would be off another 10%. It opened at .17. Nice 20% loss on my investment in less than 24 hours. Nice!

The usual thing happened: I was thinking it's time to double up. But didn't cos I gave the probability of a bounce less decent odds than falling off hard today in the US and having even lower price. So I didn't average down. However the warrant has now moved up to .21/.22 and I've dumped it. Am annoyed I didn't buy at .18!

But rather take this loss and be done with it than wait for any profit or even break even. The underlying stock moved up 5% from the low and is 1% higher than close yesterday.

As I write this I'm kind of telling myself what we had this morning was a "climactic" selloff in this stock and nice reversal. But I'm kind of worried the US will see more sellers move in today. Then this stock should fall back. If it doesn't: Fine. Another experience. ;)

Final thought: Glad not to have lost 5k USD as it was showing me this am! But pissed that I've given up the winner I had prematurely sold earlier this week! Also don't like fact that even though stock is where I bought that warrant of course I'm paying the 4%-spread to get out!!

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