So it's actually embarrassing to admit this BUT - I came into the week with TWTR making up more than HALF of my trading portfolio!! Yes, I know - INSANE!
Risk management has been my top priority since the beginning of the year. My goal is to risk NO MORE than $100 per trade - that's about 1% of my total portfolio. I had no concept of this last year and I got SLAUGHTERED! I'm bound and determined to learn this lesson in 2015!
And that brings me to TWTR... to start the week I had 200 shares, cost average around $41 per share. In addition to those shares I also had one March $40 call. So in all, about $8,700 in TWTR. My plan this week was to greatly reduce this holding.
Tuesday I made two moves... I sold to open one $43 2/6 call, collecting $112 of premium. I figured if we get a beat then I'll pocket the $112 premium AND bank nearly $200 profit on my stock when those 100 shares get called. If TWTR missed and gapped down, then I'd still get to pocket the $112 premium and keep 100 shares - which was fine with me. I'm comfortable holding 100 shares, but that's it. My second move on Tuesday was to sell my March $40 call for a 27% loss, or $129 hit. I could not risk carrying that long call into the ER.
Now clearly I made these two moves 2 days too soon. But either way I made the best decision I could with the information I had at the time. TWTR was trading right at $40 when I made these moves - an area that had proved tough resistance.
That brings me to today... I still had 100 shares that I wanted to get rid off. I sold those @ $41.20, breaking even on that lot. Then right before the bell I sold to open a naked put, the $38.50 weekly expiring tomorrow for a $112 credit.
So here's how it's all gonna shake out - more than likely. My $43 call will get exercised, resulting in the loss of my shares, BUT I'll make $200 on the stock and get to keep the $112 premium I made selling the call. Then my $38.50 put will expire worthless, allowing me to pocket $112 credit on that play.
2/6 $43 call - $112
2/6 $38.50 put - $112
Shares called at $43 (cost average $41) - $200
$40 March call - ($129)
Total gain - $295
Yes obviously I bailed right before I could have hit a home run with today's report, BUT that's just not fundamentally sound trading! My plan this week was to reduce exposure and somehow slip out of this trade WITH a gain. Heck, at one point this past three months I was down more than $1,000 in this position. So to come out in the green is a good thing!
I've still got some outsized positions in my portfolio, but I'm working to get those scaled down. Believe it or not my main goal is NOT to make money, it's to better manage my risk.
If I can do that - then the money will come.