03/05/2021 — A Rude Awakening

Just when it looked as if the market had lunar aspirations, the reality of financial gravity set in and the futures tumbled right back down to a more reasonable level. As justified as the mini-correction is, it doesn’t mean that it didn’t inflict a little bit of pain on those of us haughty enough to take aim at the 3700 line in the SPX. Somewhere down in the 3720 area, this author had to call uncle and eat a couple thousand dollar loss.

I’d be lying if I didn’t admit to fits of frustration and anger as the market tanked and option prices rose. Due to the sudden nature of the move, put prices shot up on account of the double whammy of volatility and delta. In a way, it was a gentile reminder of what can take place seemingly instantaneously. Only a year ago in March, the market took a southward turn for the ages. This week’s brief but swift rebuttal to the subsequent historic rally really didn’t move the needle all that much. The VIX almost claimed 32 which isn’t anything to sneeze at, but it still pales in comparison to the market’s run up to 80 last year.

Sometimes small losses, although painful in the moment, are blessings in disguise. It is one thing to look at charts and graphs of dramatic market moves from days past. It is quite another thing to trade through them. Besides the necessary reminder as to what is possible at any time, having to weather the storm, holding the position, or covering part or all of it is a quality exercise. It’s a reality check that not every trade can be a winner, and that knowing how and when to take losses is every bit as important as knowing how and when to take winnings.

In a few days the NCAA basketball tournament kicks off and it looks likely that the number one overall seed will be the Bulldogs of Gonzaga. They finish the regular season undefeated, the first time any team has accomplished this since 2015. Wonderful as that may be, this is where it pays to note that it has been a while since the last undefeated national champion. 1976 to be specific. In that year the Indiana Hoosiers ran the table while the parents of this years hoopers were still milling about in their diapers. Suffice to say, the odds are against Gonzaga.

Coaches rarely come out and claim that they wish their team had lost a game or two over the course of the season, but some surely think it. The reason is quite simple. Losing builds a bit of character, and more importantly, it can be beneficial to do away with the sting and shock of a loss, provided it isn’t too damaging. Losses are inevitable. It’s a stroke of good luck to get a little practice in dealing with them in situations that allow for a recovery. No one wants to win ’em all only to lose the championship game, and no one wants to make a small fortune trading only to give it all back in one drastic market event.

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A running soliloquy covering the life and times of a financial trader. Opinions, insights, commentary, and stories from past and present…served with a healthy dose of irreverence.

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Willie Witten

Willie Witten

Writer, thinker, trader, musician, builder and beer aficionado

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