Bulletproof no more.

Those of you who drink or have drunk alcohol a bit too much sometimes you understand the idea behind this posting.  No we do not drink to excess, if fact we indulge in almost no alcohol.  But the reference here is when many people drink too much they get the idea that they have become bulletproof.  The thinking that they can say anything or do anything and nothing bad can happen to them.  In drinking and in trading that is not good thinking and can lead to some very bad outcomes.  

So for about 5 months our trading has been well bulletproof, no mistakes, no losses, no bad decisions, and lots of profits.  Sure enough about a month ago we bought some JC Penney puts at $10 and figured it was a quick buck in a stock that had been hit hard. Our personal opinion was and still is that JCP will survive.  We rode what was a half position for us for about one month and decided our bulletproof status meant we could dive in for another half position for a full $100k buy in JCP.  

Sure enough we have discovered once again we are not bulletproof.   In the last week or so lots of bad PR has pushed JCP below $10 and now below $8.   Ouch we are sitting a fat loss and because of the way options work are stuck in the position since the cost of getting out is likely to be more than just having the buy the stock as an assignment later this month.  The second half of the position expires in November so we got to wait until then to unwind this bad trade.  Lots of time to let this stupidity sink in we suppose. 

There is frankly no telling what the final verdict will be and if the worst happens could lose the whole position.  But since both these options expire before the end of the year and the lucrative holiday shopping season for JCP is upon us we will assume for the moment we will get out with our pants on, but full of holes. 

Here is the lesson and after three decades of trading we have once again been taught the lesson with a loss.  This market is not a good market for trading and the best approach is to trade with super solid securities such as VZ, T, NNN, O, and other such stocks that have great balance sheets and investors run to when full of fear. Not much downside if we make a bad trade and easy to get out of if we do.  Yes, the profits are not as great, but solid profits are good profits and big losses such as JCP here take time to be made back. 

There will be times again to do run and gun trading, but not now and certainly not with stocks such as JCP.