Today I had the correct thesis, but a poor entry. Look at the chart below. The first chart is the 187.5 PUT option. The second chart, is the underlying stock TSLA.
Today was a lesson in the cost of impatience. I decided to short Tesla. It had been running up for the last few days given the FSD was becoming available in China. Additionally the market was informed that the model two is will be built on existing production lines. There were also some other positive catalysts.
I decided to buy a put option at 185.5. This was the right trade, but my timing on the entry was wrong, I only bought one contract, but the volatility made wild price swings and the PNL worried me.
In hindsight, I should’ve exited the trade with a tight stop loss and re-entered later. I need to have the patience to wait for my re-entry, for if I had waited just a few more minutes. About seven minutes. It would’ve been the perfect time to short, for the stock fell for the rest of the day.
The lesson here is that when I have a thesis of a trade that’s one part, but the second part is getting a good entry so I mustn’t be so quick to pull the trigger. I’ve told myself many times to wait at least 10 minutes until the market has opened. Not only should I be waiting but I’m looking for levels to form, and I need to start looking for candlestick patterns to show me reversals. I should also be looking at the five minute more for these reversals, for these five minute candlestick patterns matter. I should also be looking at the daily for really solid support and resistance lines.
In summary, I need to have the patience to allow levels to form after open, to watch for daily levels as they hit daily resistance and support lines, and be willing to re-enter a trade having patiently waited for a better entry.
Great thesis today. Poor execution. Ultimately a red day. It should also be noted it was Fed meeting day. I was trying to trade light. Furthermore, instead of sticking with my thesis, I revenge pivoted to GOOGL and made further losses. Have the grit and patience to stick to my original thesis!
Onward and upward.
– The Trader Medic