Day Trading on Robin Hood - Peace Out (For Now)
This is the final post in my series on experimentation with options trading strategies on Robin Hood.
Last week, I reported that I was going to try a new strategy on Monday of this week. Well I was unable to get the Iron Condors opened for Coke and Sysco, so that didn't work out. Then I tried buying a put on SPY, since it was dropping from the market open on negative sentiment (I bought shortly after the market opened). By the time I finished getting ready for work, the stock reversed course and started climbing and the put started to drop in value (a put goes up in value if the stock price drops and goes down in value if the stock price increases). After I lost $300, I decided that I had had enough and I sold out. SPY continued to climb for a while in the early morning, peaked and then started to decline after that and actually ended the day down.
After all this, I realized that I just don't have the patience / temperament for trading. I hate losing money more than I like the prospect of large gains. I think this is my generally conservative approach to risk, which forms the foundation of my basic investing strategy, the Financial Fortress. I certainly don't have the time for trading with a day job. Time is probably the most important thing you need to perform basic research, track the market's activity from hour to hour throughout the day and take advantage of situations as they develop. You also need to have great instincts. For example, my son (he's 18 and his summer job is "day trader") woke up late that same day after SPY spiked and sensing that it was headed back down, bought his SPY puts and ended up making $2,000 that day. Now that's a trader!
So I pulled out the remaining funds I had in Robin Hood and parked in my savings account for another day. Maybe I'll buy some more 4 week Treasury Bills on Treasury Direct (see my post on best ideas to earn interest on your extra money) while I decide what to do next. I also still like Bitcoin a lot, as I have written about previously. I continue to own a small amount of Bitcoin myself and have been watching developments in the cryptocurrency space with great interest.
Lessons learned about options trading:
When investing in options, study them and make sure you understand how they work and what your risk level is in each situation
If you are selling a call or a put (i.e., in an Iron Condor), be very careful about the stock you pick and understand your downside risk; generally speaking buying puts and calls is much safer in terms of limiting downside risk, but you will lose all your money if they expire worthless or "out of the money"
Don't invest more than you are prepared to lose
When investing on margin, know that you can lose more than your investment (if your investment becomes worthless, you still have to pay back the margin loan)
Do your research / homework
Keep a watchful eye on your positions and be prepared to sell to lock in gains or cut losses
Timing is everything
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