Exercise Restraint to Prevent Premature Speculation

I’m getting better at exercising restraint.

In some areas, anyway.

Fried ChickenWhen I learned about a year ago that my cholesterol levels were high enough to supply my family and successive generations with lifetime supplies of Crisco, I radically changed my diet.

Much less red meat, very little fried food and almost no fast food.

Although I must admit that watching the making of fried chicken in the recent period piece movie “The Help”, did make me want to rethink my re-thought ways.

I do miss the delicious ooze coming from my pores, as it was also eminently spreadable, but I tell myself that it is all worth it.

In some other areas, I’ve not been as disciplined.

For example, on Sunday, CNBC, instead of offering their infomercial programming had live coverage of Hurricane Irene.

I just couldn’t resist watching. I wish I had the restraint necessary to just turn the TV off, even though gluing myself to the screen was potentially jeapordous to my marriage.

I found myself hoping for the power outage that never came. That would have also given me another excuse for not using the treadmill for a 1,276th successive day.

Fortunately, at some point CNBC decided that Irene was for the most part, much ado about nothing, and regained its business senses and went back to its regular weekend schedule pimping itself to the highest bidder.

While it was doing live broadcasting, I thought that CNBC management missed a great opportunity to take advantage of obvious synergies. They really should have considered having on-air personality Brian Sullivan presenting while on a BowFlex or perhaps while whipping up a rotisserie chicken in no time at all.

Or both.

Over the weekend I had done my homework. Knowing that there would be cash in the accounts due to assignment of shares, I had made a list of stocks that I was ready to buy as soon as the market opened Monday morning.

Now, I like up markets as much as the next guy who isn’t short, but on days that I have cash, I’d rather see moderating prices. I really don’t like chasing stocks, even though that brings the best options premiums.

So I was disappointed to see that the overseas markets were posting 1% and higher gains on Sunday evening and that our futures markets were opening with an upward pop.

The real problem is that despite the fact that I know that what goes up must come down, I’m like a little kid as soon as I get some cash.

I just have to spend it. Now. I have to spend it now.

The funny thing is that only applies to stocks. Otherwise, I’m not much of a consumer, neither of goods or services. If the economy is waiting on me to change my spending habits it had better stop holding its breath.

But when it comes to stocks it’s a totally different story.

Take last month, for instance, when I received my first royalty payment for the Option to Profit book.

Normally, if I buy shares, I like to buy in large enough volume that selling call options on the shares will be worthwhile. Additionally, I typically like each position to represent somewhere between 5-10% of my total portfolio value. I’m also not a fan of perenially low priced shares.

But what did I do with my suddenly found cash position?

Sure, I invested it, but how?

Since it wasn’t enough to pick up my usual sized lot, instead I bought shares in Sprint.


Granted, that allowed me to get enough shares to sell enough call contracts, but Sprint?

That went counter to everything I stood for other than the need to clean my pockets of cash.

Even when prices are going up I’ve always had a really hard time resisting the urge to buy. Despite the fact that I have a long list of rules to follow when buying and selling, the need to resist the urge is something that I’ve never been able to do. Buying high and selling low is not on my list of trading guidelines.

Unfortunately, that also means that when opportunities do present themselves, such as after a nice downward move, I’m usually fully invested and am not in a position to take advantage of bargains.

Well, I did have my list of stocks all set and ready to go this morning.

Halliburton, Chesapeake Energy, Goldman Sachs, Transocean, British Petroleum and ProShares Ultrashort Silver ETF.

But everyone of them just followed the cue set by the pre-open futures.

Being the short term pessimist that I am, I fully expected the 100 point advance to retreat. Then I expected the same of the 150 and 200 point advances.

But somehow I resisted parting with the cash.

Well, not entirely.

I did pick up shares of Halliburton after it had fallen from having been up about $1 to just $0.40. I was able to do the same for shares of Freeport McMoRan and ProShares QQQ, which wasn’t on my original list.

Those opportunities didn’t last too long and my second series of urges hit, in that I just had to sell options right away.

That’s also the pessimist in me coming out. Since my expectation is that prices are going to drop, I want to make certain that I get the insurance premium before the opportunity is lost.

And so I did sell weekly options on those three newly purchased positions just in time to see another 100 points added to the Dow and lost additional capital gains opportunities in the underlying stocks.

As always, should have waited.

Just a case of “Premature Speculation”.

I’m not really embarrassed by it happening. I just get so excited. But I still wish it wouldn’t happen.

Especially as I’m getting older, I can’t click the submit button on cue as I used to be able to do in my prime, which probably occured in a different lifetime.

By the time the trading day ended, incredibly the market not only kept its gains, but closed at its highs. Always necessary to attribute the unattributanble to something, today the “Raison d’etre” was some nebulous news on the Greek banking scene and perhaps some relief over the relatively mild impact of Hurricane Irene.

Of course, had the market gone down, the reasons given would have been disappointment over the Greek banking merger and the hurricane related costs being discounted on Friday by the meteorologically enhanced trading algorithms of the High Frequency Traders.

Still, when it was all said and done, I felt great.

Despite battling with the ever-present “FOMO”, fear of missing out, I watched the market’s unabated move toward its 250 point gain and was still left with half of my cash still in hand. I was able to exercise some modicum of restraint, yet still felt like a trader.

I could hold my head up high, with an angle to the horizon of a young man.

Perhaps keeping things in hand is the solution to all things premature.



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