GE Put Options Expire- Strategy Review
Posted on | October 20, 2009 | No Comments
I have often said, it doesn’t necessarily help to be right. That could not be truer for put options. My position in October put options for GE expired on this past Friday. This will conclude the position I opened with the post Not for beginning Investors. What I should have also said is, that it was not for me either. I sold my 4 contracts before they expired worthless, for a little better than $40.00 after fees which is $80.00 less than I purchased them for. Since this was as much a learning experience as a hedging position. Let me review the successes (if any) and obvious failures.
Success:
1. My analysis was correct. GE’s share price had risen too fast and did correct, and with in the time frame I expected.
2. It could have been a complete loss, since the options expired out of the money, and I still managed to get out with a small amount of my initial investment returned.
Failures-
1. I did not capitalize on my analysis. Who cares if you are right if you don’t profit from it.
2. I violated my first rule, which is don’t get greedy. At One point early in the position, I could have sold my option for well over $340, a nearly 300% gain in few weeks. Rightly or wrongly, I held out. I expected the market to continue to go down, when in fact only GE had gone down. So I expected it retreat further. Almost immediately, General Electric stock zoomed back up to the high 16′s.
3. I lost money. On an absolute basis it was not so much, but on a percentage basis it was huge.
4. I departed from my usual investment strategy.
Badly handled trades are sobering and in this case can be an inexpensive lesson. Remember the fundamentals of your investment strategy and don’t veer from them unless you have a really good reason.
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