I Lost 23 Cents And It Was A Great Trade

I bought the Microsoft 390 puts at a $1.22 and a $1.23. 

Closed them for a dollar.

I lost twenty-three cents, and I'm counting it as a win.

Here's the thinking going in. We picked a product where, look, if the marketplace really tanks, Microsoft was going to get sucked down with it. 

Did that happen? Absolutely not.

Everything worked against me on that trade. Everything. And we still got out basically unscathed.

That's when a small loss is actually a humongous win. 

When you're in a product and you do everything wrong and you come out and still almost break even, it's spectacular.

This is a little bit of intestinal fortitude. This is also just good trading.

The other half of it is what you refuse to pay in the first place.

I watched a spread the same week where somebody wanted a $1.75 for something that can only ever be worth $5, with six hours left to play. 

Can't do that….it’s a stupid trade.

That's not conservatism, that's arithmetic. You're paying more than a third of the maximum value for a position that has to be right in one session. The math on that doesn't work no matter how good your read is.

Most people spend their energy on whether they were right about direction. Almost nobody spends it on what they paid to find out.

What you paid matters. What you sized matters more.

The simple sizing check decides whether a loss is a scratch you shrug off or the one you don't come back from, and it's one of five I go through before anything goes on. The whole list takes sixty seconds. It sells for $29.97 the rest of the year and it's free today.

Get your hands on your copy here. 

To your success,
Don Kaufman