10/30/2006
1.Trade: bought 4 contracts of SPY Dec 137 call at 2.95; bought 4 contracts of SPY Dec 137 call at 3.1. Then sold 4 at 2.85; sold another 4 at 3.2.
2.Evaluation:the first bought is right, the second is a disaster. Both sells are right.
3.Idea: I obtained two useful thought through today's trading:
(1) Before enter a position, I should clearly know the potential loss, and have to evaluate whether I can tolerate the loss, if not, reduce the quantity to a comfortable level. Today's second buy-in is a great example, when the major indexes went up, I just followed in the second 4 contracts; but when the indexes went down immediately after I entered this position, I was scared of the possible loss of the total position; then I sold 4 of them with a loss. The conclusion is that I should have not bought the second 4 contracts. And there is another reason I should not have made the second buy; I decided before the market open that I just bought 4 at this level, if the index goes down, I bought again, because I was quite sure at this time the index would not go down intensively. So after I had made the first buy, the index went up; the logic should be like this, because I was prepared to buy only when the index goes down at a certain level, this implied that there is quite a possibility that the index will go down; so when the the index goes up, I should not follow that to chase higher profit, it is just against my original schedule.
(2) It is very possible that the 3 major indexes appear to be strong one by one. In last week, the sp500 and Dow Jones were relatively strong, so I decided to buy spy this morning which was unwise because at the opening, it was obvious that the QQQQ looked a little bit stronger than spy, and the whole day's performance continued this difference, so the result is: although I am right on the direction, I made no money today (of course (1) should be also responsible for that). Next time, when I decidec to buy, it is better to observe which one is stronger right now and should have the idea that those indexes perform stronger in turn.
4.Forecast: The stock market seems to be a little bit weak these days, so I expect that it will mainly ossilate and if it goes up to much, I will consider buy some puts.
