April 28th

As boring as a boring day will come; but this is how we like our Theta positive days - smooth sailing.

As some of you know - for several years I have done some ocean sailing crossing the Atlantic in all possible directions. Sometimes I had guests on board and they were without exception surprised how boring ocean crossing is (or should be). Think of it if you somewhere between NY and the Azores - 5 days South of Novia Scotia - how much excitement do you really want. Same with theta positive income trading no excitement is good - and that can be a problem at times. If we are trading for a trill or if we enter a trade because we are bored (guilty) then we are trying to find some kind of satisfaction in trading which should not be there. At least not in our income trading portfolio.

I have been mid Atlantic a couple of times - in what you would call severe weather - never life treating though, but that came from preparation not due to the conditions. I presume that for most of the readers of this blog those circumstance would have been life treating. Here is another parallel with trading - learning this style of trading with small size trades - make sure that a mistake is not life treating. Make sure that a error is just what it is an error, but you should never give it the power that it is able to get you out of this game.

Within the Sheridan community we have a phenomena called max loss. On every trade we enter, this is a number we calculate (at forehand). That if reached, we pull the trade off and accept the lose with grace. Yesterday during the help-desk I was ask if I ever ignore the max loss rule. I have to admit that I do - but - never without setting a new definite max loss, never without consideration for the  market, never when the only reason to stay with the trade is a 'deep religious hope' that if the market turns the trade will work out. I don't think traders in there first year have the insights to make this determination skillfully, so if you hit your 'max loss' get out and come back next month to play ball.

I finish up with a last sailing story. In Dec 2003 I had to sail a racing yacht from the UK to the Caribbean. Crossing the Bay of Biscay in the winter is kind of an adventure. The owner of the yacht had two choices a. to pay us for the delivery or b. to pay the English IRS 20% import duty. He choose to pay us a very generous fee. I arrived in Plymouth on Tuesday evening inspected the boat - thought her to be good enough for the trip. By Thursday the rest of the crew had arrived and a very rare winter storm from the East force 10. Normally winter storms in the Biscay are from the West. The East was perfect for us - setting us away from France. So with wisdom we decided to leave Thursday evening. 2 days later we had Finister across and we were out of the Biscay. That had been a very adventurous trip not a trip you would make with paying guest. Nothing was dry on board and I mean nothing. Sleeping bag, underwear, socks everything was wet, cold and salt. But we made it. The wind died and it took us another 4 days to get to Lisbon for a very much deserved espresso.
This story has no parallel with trading - other then you take risks based on your experience - and early on in your education you don't know, what you don't know. Finding out mid ocean in a storm that you miss a essential skill is not very advisable.

Comments

[Eric K]

I love your post, particularly sailing stories! So the RUT is winding up for its potentially devastating storm on the 4th when the bank test results are let, and yet the real bounty for many of the butterfly positions will be found in this week before expiration week. Hold or fold? Experience says it could be a non event, (as most market events with a month of forewarning are), however practicality says take the nut and run.