Well, it wasn't truly a "fat finger" trade but I did manage to accidentally put on a trade that was 10 times the size intended..so it's pretty much the same thing. Tuesday, I scanned for potential weekly options trades, meaning I would put the options trade on Tuesday morning and the options would expire, hopefully worthless, on Thursday. I put on 3 trades, all of them Bull Put Spreads. A bull put spread is where you sell an out of the money put and then buy a put that's got a lower strike than the put you sold...the idea is that the stock trades up and you keep the spread between the contracts as your profit. Worst case, the stock tanks and you're out the spread..generally $500 or $1,000 per contract on a 5 or 10 point spread.
Well, I put on trades in AAPL, BIDU and GOOG..all good candidates at that time. The only problem, I accidentally put an extra zero behind my AAPL contracts and that meant the position was ten times larger than it should have been. Even worse, I didn't realize the error until Wednesday morning when I checked my account and noticed a large loss. As it would happen, the only stock to trade down to its strike was AAPL and after fretting about it for a couple of hours, I decided to take the position off and eat the loss. For these types of trades, I risk between 1-3% of my account value. The AAPL f-up instantly took my account down 10%..however, the account could have gone down to 25% if I'd of left the position on and it kept going against me.
As much as this sucks, it could have been worse. I can make up a 10% hit, it will just take time. The take away for me is to double check my orders when entering the order and then check it again after the trade is put on. I have had a busy week and was likely multi-tasking when this trade order was entered...that should never be the case. Furthermore, I hesitated on getting out of the trade when I realized the mistake..not a good idea. The loss would have been a little less had I just bailed immediately. I haven't made a good tuition deposit to the school of hard knocks trading university in a while, but that was a good one.
Mistakes happen and we have to deal with them. We also have to deal with the psychological effects of the mistakes. One can easily begin to over trade in order to make up a loss and that generally turns things from bad to worse. For me, the game plan is still the same. Next week, I'll be scanning for weekly options trades that fit my trade criteria and slowly but surely, I'll dig out of this little draw down. Just thought I'd share this with everyone...you might relate to it or will some day.
TLT
Well, I put on trades in AAPL, BIDU and GOOG..all good candidates at that time. The only problem, I accidentally put an extra zero behind my AAPL contracts and that meant the position was ten times larger than it should have been. Even worse, I didn't realize the error until Wednesday morning when I checked my account and noticed a large loss. As it would happen, the only stock to trade down to its strike was AAPL and after fretting about it for a couple of hours, I decided to take the position off and eat the loss. For these types of trades, I risk between 1-3% of my account value. The AAPL f-up instantly took my account down 10%..however, the account could have gone down to 25% if I'd of left the position on and it kept going against me.
As much as this sucks, it could have been worse. I can make up a 10% hit, it will just take time. The take away for me is to double check my orders when entering the order and then check it again after the trade is put on. I have had a busy week and was likely multi-tasking when this trade order was entered...that should never be the case. Furthermore, I hesitated on getting out of the trade when I realized the mistake..not a good idea. The loss would have been a little less had I just bailed immediately. I haven't made a good tuition deposit to the school of hard knocks trading university in a while, but that was a good one.
Mistakes happen and we have to deal with them. We also have to deal with the psychological effects of the mistakes. One can easily begin to over trade in order to make up a loss and that generally turns things from bad to worse. For me, the game plan is still the same. Next week, I'll be scanning for weekly options trades that fit my trade criteria and slowly but surely, I'll dig out of this little draw down. Just thought I'd share this with everyone...you might relate to it or will some day.
TLT
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