Realized P&L of about -$21,908.Unrealized P&L of about -$11,577.
Net Asset = $80,605.
Cash On-hand = $98,595.
BIG MISTAKE : failure to protect Unrealized profit as of last Fri +10,151 leading this week major Realized losses. Right strategy but Trader's mistake.
DETAILS :-
Final week of Feb-09 option month.
BAC and C dropped drastically over fear of "nationalization" of some major US banks. Market was trying to read into Bernanke's speech "we will keep the banks or return the banks to private sector.......". The phrase "return the banks" have been interpreted by market as possible nationalization of US major banks.
Option Expiry Friday today.
Expected short sellers have to cover their position in the afternoon after the past 4 days of heavy short sellings. Waited for the US traders to be back from lunch to cover their short positions but have to cut loss at around 1:00am as our losses have hit threshold level. After 1:30pm, all those fat traders came back from lunch, BAC and C moved up sharply as expected to happen on typical Friday option expiry day as they have to cover their short positions. Sigh.
Fund D unrealized profit was +$10K as of last Friday. Goal was for it to hit at least 80% ($12K) of target maximum profit ($15K). Should not have left the +$10K unrealized profit on the table for a potential profit of only incremental $2K only..... the risk/reward ratio have shifted so much already. BIG mistake and we closed out this week with an overall realized negative profit of -$22K.
Made several very bad mistakes of typical newbie option trader (sigh, a $10K+$22K lesson). Maybe should fire the Trader... guessed he will definitely remember this well going forward).
Major Mistakes
1. Too much focus on 80% profit target of maximum potential profit.
2. Failure to protect already in-the-money "unrealized profit". This is as good as CASH !
3. Removed auto stop-loss and get into manual mode. Stop-loss could have been at -$15K but turned into -$22K instead.
Very expensive but valuable lessons learnt today. Need to revisit "Protect the in-money unrealized profit" and "Stop-Loss" strategy.
Notes : Gold price cross $1,000 today. Dow crossed below the lowest low since 1997.
Washington spokesman said more details will be provided next week regarding the possibility of nationalization of bank.
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