Tuesday, February 23, 2010

On the ball

I would like to say that I have a crystal ball, however, I do not. I simply analyze the balance of probabilities and act accordingly. Yesterday I said that I thought the markets were poised for some sort of pullback and so I closed my position in NEP and went short of AAPL. So far the outcome that I thought was the higher probability outcome has played out. Should the markets continue to sell off, I will continue to maintain a short position in AAPL. However, as soon as I see signs of easing in the selling I am out. Shorting and buying stocks are two different kettle of fish. Unless you have a set up that offers an extremely high success rate then it is very difficult to maintain an edge shorting stocks as easy short biased swing trades with risk/reward ratios exceeding 3:1 are: (a) hard to find and; (b) hard to hold on to! So with shorts it best to grab and go rather than play greedy especially when your playing with front month at the money puts!!!

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