If You Needed a Reason to Never Own a Stock Again, Here It Is
CRDO’s action overnight reiterated to me an important lesson…
Never, ever buy and hold stocks.
If you weren’t aware, I was bullish on CRDO.
Everyone was.
The stock couldn’t go down! I said.
I’ve never seen a stock break all-time highs at $20.00 and not go higher! I said.
And look what happened…
After the closing bell yesterday, the stock fell 50% in just over an hour on news that its one investor was pulling out.
You want to talk about blowing up an account? If you were holding stock overnight, that’s how you could have done it.
But Kenny I thought you said the stock was going to go to $40?
I did. But you wouldn’t catch me ever holding the stock overnight.
The only thing I was doing on this stock was an options trade out to March.
But with that, I defined my risk ahead of time.
I lost $800, and I knew ahead of time exactly how much I could lose.
If I held this stock overnight and traded like I normally do, buying 1000 shares or so…
That’s a $9,000 loss.
What if it went to zero? That would be a $19,000 loss.
You get in, you have your fun during the day, and you get out when it comes to stocks.
And you absolutely must define your risk on every trade you make.
Options allow you to define your risk because if you buy a call or put, your risk-reward ratio is capped at however much money you put into it.
What if you sold naked puts on CRDO at $20 where would you be this morning?
Ten contracts put you in the exact same spot as the guy who held 1000 shares overnight.
The only difference is you got a little bit of premium up front. You’d still have to buy CRDO at $20 when who knows if it’ll keep going down.
Don’t ever get fooled again.
If you’re going to be a bagholder, buy something that can’t go to zero like QQQ or SPY.
But that’s what you do as an investor. You buy it and you don’t touch it for 20 years.
We aren’t investors. We’re traders.
You get in, make your money, and get out before the closing bell.
Because if you don’t, this will happen to you one day. And it’ll blow up your account.
Comments
2 responses to “If You Needed a Reason to Never Own a Stock Again, Here It Is”
Leave a Reply
February 16 2023
Trust Kenny
Vwap works
You r right warlock trading times