Monday, January 29, 2007

Options Trade: Goldman Sachs Group Inc (GS)

This trade had a subtle mistake that I only realized after reviewing the trade.

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1. Why did I take this trade?
I bought Goldman Sachs Group Inc (GS) Mar07 230 calls because GS broke out of the morning pullback and looked like it had enough volume to break above friday's resistance @214.25. The Mar07 230 calls had decent volume in the past so I stuck with the same ones. I actually am happy with how I executed my entry.

2. What was the initial stop?
The initial stop was just below the low of the initial opening pullback @212.50

3. Why did you exit where you did?
No particular reason, other than the fact that I finally realized that this trade was not going to work out.

4. Is there anything you would do differently?
I did not honour my stop loss level and it costed me. GS actually offered me two chances to get out - the first was when it broke below 213.50 @1pm, the second one was at my stop loss level. I was distracted by fighting with the IB webtrader at the time, but I can't use that as a valid excuse. Just was not mentally focused.
I think I also started to lose my objectivity when I saw that it was trying to recover above the 214 level. Kind of subtle, but that was probably the turning point for me. The best thing that I could have done was simply to unconditionally honour my stop loss, plain and simple.

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