MEE - closed trade

Well, we got hammered here. I made a mistake, which I'll show you in a following entry, but for now, let's look at the chart and I'll walk you through what happened from the last entry.

As you know, we got in when we had the close above the high of the most recent low day. The most recent low day is the far most green circle. We got in where the blue square is located. We did get in at a resistance area, but we were following our "rules" and got in anyway.

Then, the next day after we got in, the trade immediately went against us in a big and nasty way. We got slapped. So, in order to get some protection, I sold a Call Option. I sold the October 36 Call Option for $0.40. This was sold in the red boxed day.

Now, onto the next day after that:

The stock dropped even further - going even more against us and hit the stop loss, which as at $29.75.

So, we have a loss. A stupid loss that shouldn't have happened, but I'll go over that in a following entry. The good thing is that there was something valuable that you will learn from this that will make you a better trader in the future.

Here's the breakdown of what happened and the numbers:

We bought the MEE Jan. 29 Call for $7.00 on 9/22

We sold the MEE Oct. 36 Call for $0.40 on 9/23

We got stopped out and sold the MEE Jan. 29 Call for $4.40 on 9/24

We bought back the MEE Oct. 36 Call for $0.20 on 9/24

So, the breakdown net is:

-7.00

+0.40

+4.40

-0.20

-$2.40 LOSS. We lost $240 per contract - ouch! At least you can see here even when the trade is going fast and furious against you, you can still help to minimize (no matter how small) the loss by selling an option. By selling the option, we netted $20.00 to help offset our loss. No, it's not a lifesaver, but every bit helps.