During the past week, Apple(股票代號: AAPL) announced its blockbuster earning, $8.8 billion($9.32/share) vs. $7.31 billion($7.79/share) same period a year ago, a whooping 20% jump. However, it was below the consensus street expectation of $10.38/share on $37.23 billion in revenue.
As a fundamental analyst, I had an extremely bullish view on Apple’s business, and I wanted to participate in this earning. I bought September calls a few weeks ago in anticipation of the intensifying IV, and apple’s tradition of earning beat. My basis were that, the volatility increases should balance out the time decay of an option expiring in about 70 or so days. News from the media such as the lukewarm launch of the new iPad for China’s apple store caused me to hypothesis that a lot of the Q3 sales of iPad had already been pushed up to Q2, and the quarter’s iPad sales result could be beyond expectation. Moreover, the expectation of a mini iPad, Apple smart TV, and the new iPhone drove me to be extremely bullish on the stock.
Man, was I wrong, big time.
Mistake #1, I ventured into an unfamiliar territory without the help of technical analysis, I entered the trade when the stock price was peaking at around 620-ish.
Mistake #2, when the stock retracted, and when my loss reached 30%, I did not cut my losses as required by the rule, hoping that it was only temporary.
Mistake #3, I “gambled” and waited for the earning announcement, hoping that my bet would turn out to be right. IV completely deflated after earning, the stock went down 5%. My Calls went down from $32 down to about $6. A loss representing of at least 80%.
Mistake #4, I stuck to my gun of believing in the value of apple I derived through fundamental analysis, but I used the wrong tools, I mixed investing with trading, a deadly combination, a mistake I have made before.
Mistake #5, don’t get emotional, if you are upset, don’t trade, because it can very well turn into a dead end gambling bet. Don’t gamble money you cannot afford to gamble.
There are probably many more mistakes, but it hurts to write this article and be reminded of all the poor judgement I made. It is however, necessary and imperative, to face my own demon, my failure, be truthful to myself, and not to believe that I am better than I actually am. Don’t hide from it, must face it head on.
My dear fellow traders, stick to your trading plan, it takes courage to stop loss, it takes discipline to follow through with your stop loss protocol, it takes guts to admit you are wrong before it is too late. I hope my painful sharing can serve as a constant reminder to all of you.