1. I recommend buying insurance - puts.??Especially into earnings.?? 2. ?Never buy and hold into earnings
Puts are the only insurance against gaps.
On Fri, Oct 30, 2009 at 5:18 PM, Tom Southworth <[address removed]>
Baidu peaked at 438 on October 23. ?I had a manual 8% trailing stop loss that I would have executed at 403, except that BIDU gapped down 78 points (17.8%) to 355 on opening October 27...ugh. ?A sharp prompt recovery in the first few minutes of the 27th caused me to hold it through the 27th and 28th as it closed higher each day. ?Thursday the 29th it was going to close down somewhat on a strong up day for the market so I closed out the position at 392.19 near the end of the day for a loss of 7.81, almost breakeven from the 400 entry on October 6. ?Now that we are in a correction, back to a watch list. ?Sorry, Tim, I didn't make enough money to fund a wedding like you did!
Lesson learned: ?I have thought about using an automatic 8% trailing stop loss but that might have been ugly if it had executed immediately after the gap down before it had recovered much; so, instead of essentially breakeven, I would have probably lost 7 - 8%. ?Gotta think about this some more. ?Any thoughts?
I forgot about tracking Perfect World, ?my bad. ?As of the September meeting, PWRD was extended more than 5% beyond its last buy point around the 40 level in late August. ?It pulled back to below the 50-day in mid-October in increasingly high volume, increased somewhat then retreated to the 50-day at the end of October. ?Bouncing off the 50-day twice is a good thing, but we are in a correction; so, keep watch.
Question: ?How do you play the buy-in on pullback to the 50-day?
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