Update - PALM

PALM - what can I say. I took a trade that I normally would not have taken, and the market taught me a valuable lesson.

Lesson: ONLY trade your original plan - otherwise, the market could get the advantage.

Here's the chart on PALM:

Okay - so you know what happened from the last update on this one (November 9th update). To quickly recap, PALM was forming a pennant pattern (which is bullish), HUGE insider buying took place, and I THOUGHT this was going to be a quick and easy play - wrong.

I rolled this thing out once where the 2nd blue box is located. I had an out of town emergency which took me away from my trading and as Murphy's Law would have it, the stock went drastically against me.

I held onto this spread because I thought there was a possibility of a nice pop back up. I needed it to go back up at least to the mid $15 range. There was some news out about a possible takeover of PALM, which would have helped this happen. But, nothing did happen and if I didn't buy this spread back before the November option's expiration on November 20th, then I would have been "put" 100 shares of PALM at $16, when it's value was $11.74. Not good.

So, I bought it back for $0.96.

Let's go over the whole enchilada to determine my profit/loss:

My October trade was a loss of $0.44

I rolled out and sold the November trade for $0.40

I bought back the November trade on 11/17 for $0.96

So, my NET loss is $1.00

I know in my last post on this I said I was going to work on turning this into a winner by working on it. I could still do this, however as the famous Kenny Rogers once sang, "...you gotta know when to hold 'em, know when to fold 'em, know when to walk away, and know when to run..." In my case, I'm walking away.

I'm walking away because, YES I could turn this around for a profit BUT it would take a few months and I believe that due to the lost opportunity cost I would theoretically lose more by tying that margin up rather than finding better trades.

Remember: when you sell spreads, your broker will keep part of your account in margin and you cannot use that margin for any other trades. I don't want to tie my margin up with this trade. I'd rather take my loss, learn my lessons, and move on.

Lessons:

1. Do NOT deviate from your trading plan. Hunches, guesses, and gut feelings are best left for Las Vegas. We are doing this as a livelihood and it's a business. We put as much advantage in our corner as possible, anything less is being foolish.

2. Once a pattern is broken (this example it broke it's bottom support - blue line) then GET OUT. You can always re-enter once you figure out what's going on to correct the trade.

3. If you are going out of town - planned or not - then close your trades out.