Today was the day when the mkt (DOW) was up 1000 points. I was holding puts on GOOG. I had bought those puts last Friday in fact I had bought too many, then I could afford. Once I take on too much risk, which I do realize soon after, I am unwilling to face the outcome. Under these situations I avoid looking at my account, I would not act to reduce my losses, I just pretend that the stock will turn around soon and everything will be ok.
The problem is that if I have experienced some event the day or week before I expect (or more like hope) that it is going to repeat. I end up basing today’s trade on yesterday’s mkt. But the mkt changes everyday.
Today I was holding GOOG puts bought friday. It has already lost 30% of value. I already was ‘regretful’ of buying too many contracts out of fear (trying to avg down). Over the weekend I had made up my mind to sell the puts as early as the mkt opens and reverse position but unfortunately I didn’t act on my thinking. As soon as I saw the position being down and saw a loss, I told myself to wait and see. It will soon turn around.
There was a little voice inside my head saying "the mkt will turn around soon just like it did last week" and that "VIX is at 60, the mkt is supposed to make big swings". So instead of selling the puts and loading up in calls I ended up buying more puts? Finally, near the end of the day I did buy some calls, but it was late, late enough to take advantage of the 1000 points move.
What I conclude is that I need to stick to my plan no matter how painful it may be to take a loss.