Missing Out On Potentially Profitable Trades

Sooner or later, you'll find yourself missing out on potentially profitable trades as every trader and/or investor does at one point or another.

These missed opportunities are the What if's..... that happen to all of us. "What if I didn't exit my position when I did?". "What if I used I used a larger position size on that 10% profit trade, say 10X for example?". "What if I didn't use such a tight stop loss?". I could probably come up with tens if not, a hundred or more example's here, just based on my experience alone.

Stock trading is very psychological and therefore stressful and emotional at times. Missing out on potentially profitable trades is just one situation that you'll find yourself in where you'll be able to see why first hand.

I recently found myself in one of these situations which got me thinking about "when I've felt like this and what have I learned from this feeling before?".

Here's my recent example: I recently executed a Buy/Write (Covered Call) with Bank of America (symbol: BAC). I purchased 1700 shares of BAC at $6.30 and simultaneously sold 17 October 07, 2011 $6.00 Calls for $0.45.

On expiration day, October 7, 2011, BAC was trading just below $6.00 in the afternoon. I decided that I wanted to try and keep my shares at my cost and not let my shares get called away should BAC close at or above $6.00 by the end of the day. I purchased the Calls I originally sold back for $0.02. A short while later, BAC started moving higher, above $6.00 in late afternoon.

I felt good that I bought the Calls back for $0.02 because now I still owned my shares regardless of where BAC closed and it was above $6.00 at this time. Since I was trying to lower my cost of BAC to reach a short term profit target minimum, as BAC moved higher I saw an opportunity to sell additional Calls against my position that was "acceptable" to me.

I entered my order, only to watch as the price of BAC had peaked in late afternoon, just as I entered my order. Since I entered my order using a limit price, just as the price reached my target, I found myself "missing out on potentially profitable trades" once again.

What happened was that as I submitted my order at my limit price, so did other traders around the world and there obviously weren't enough Calls available when my order got it's turn to be executed.

Because I held out for that last penny ($17.00 in this case), I would up missing out. By the time I cancelled my order and got confirmation it was cancelled, BAC had dropped considerably and it no longer looked s promising, or profitable to me. I immediately felt a bit stressed as I realized a made a mistake (...at this moment in time because I was trying to get that extra penny out of the trade. As we all know, sometimes things work out for the better.), but, I also realized tomorrow is another day...

I have one more example I'd like to briefly share: I used to trade very actively during the pre-market trading session. I remember opening a large short position in Lehman Brothers one early morning. I closed my position in pre-market as I had appointments that day and had to leave. I'm not sure if the trade wound up being profitable or not, but either way, it was not very significant.

Right after the market opened for the regular trading session, Lehman Brothers announced bad news, something about their bankruptcy if I remember correctly. The stock dropped tremendously. I can't remember the dollar or percentage drop exactly, but I'm thinking it was quite possibly 40% or more! I noticed this as I checked the price on my Smart Phone and immediately felt emotional/stressed/overwhelmed. Again, I can't remember the exact amount, but remember the short position I had in pre-market?...

Had I stayed home a little while longer and kept my short position open, I would have had approx. $80,000 in profits in about 2 hours time that day. I felt so bad I had to sit down... I once again found myself missing out on potentially profitable trades. Big time in this case. I guess it could have been worse though, I could have opened and held on to a large long position that morning.

Enough of the examples for now (I'm feeling flushed again...). I think the lesson here is that we all will find ourself missing out on a potentially profitable trade. There's no way around it. We have to realize this before we even get started so that when the time comes, we can move on to the next opportunity that comes along while being sharp and clear minded.

I think it's also important to realize that missing out on any opportunities doesn't necessarily mean anyone made a mistake. It's easy to get confused and think that a missed opportunity is due to a mistake but that's not always the case at all. If you followed your trading rules/plan, then you did nothing wrong. If you didn't follow what you had outlined ahead of time, then you should take a step back and try and learn from your mistake to turn the scenario into something positive.

Lastly for today, when thinking about missing out on potentially profitable trades and how they effect you emotionally, think about how many people could have bought real estate prior to 2003 and sold it for large profits..... Missed opportunities are part of life. Learn how to get something positive out of any opportunity that arises and you'll be better prepared to try and take advantage when the next one comes along. There will always be another stock trade to try and profit from.




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