For a while I was trying to fight the trend. This is a mistake. Although sometimes swimming against the flow can be profitable most of the time it is just difficult.

That’s why when the market direction is up, there is no point to go short. But… it is not a secret that since March bottom the market was going in one direction with very few corrections. Many people will say that a big correction is due to come and September is a bad month anyway!

They may be right and we may see a change of direction but until that happen, I would not recommend to open a short position. But you can do what I’ve done: Bought some shares that I believe their trend is up but back-up it with a put option for October. You can still find them cheap so for 40-50 points you can have a back-up if something will change.

I myself bought FTSE 4500 put for October a bit expensive at 86 points, but still I am happy with this insurance.

All of these put my Dax 4000 Put for May call value on the lowest you can imagine (6 points when I bought it for 36). This wasn’t good. I was speaking with my friend that holds the same positions and both of us agreed that the market is almost on its peak and the only way is down.

So we checked to buy the Dax 4400 Put for May. The price was 66 around 17:00. I though that if the Dow will finish on high note then the option will be worth 60 or less and I will buy it. But I forgot to check. You know Friday evening is not the best time to deal.

Anyway it touched 62 and the weekend has started. A new week and the markets again see red. The Dax lost 190 points in one day. This means two things:

1) My 4000 Put worth 34 now (300% in one day)

2) 4400 put that I didn’t buy worth around 125 (100% in one day)

All I can do is blame myself. I knew that the market will go down but combination of tiredness and fear of losing more prevented me to take a huge profit. Another painful lesson has been learned.

I have bought today a put option on the Dax. Why the Dax? The FTSE 100 didn’t jump as high as the German one or the Dow. While the Dow jumped from 6500 to 8000, and the Dax from 3600 to 4500, the FTSE was much more solid and jumped from 3500 to 4000.

So if I am right and the market will change direction, my logic says that the FTSE will slide slower than the other two. So I left with 2 options. The Dow options seem to me expensive so I’ve decided to choose the German index.

Bought it for 36.3. The lowest price today was 30 but I missed the bottom. I guess you can’t catch the bottom. So I have 4.5 weeks and my target is to double the money. I will keep you updated.

I am not that impressed with the last rally. It is nice to see the market changing direction, but I don’t think that this is the end of the bad period. But I do think that the rally will continue for one or two days depends on the Goldman Sachs results tomorrow. If I am right then I will buy a put option on the FTSE 100 and maybe on the Dow Jones as well.

So I am looking to buy the PUT 3750 for May. I think by Tuesday it should be cheap enough. The nice thing about options is that you know how much you can loss. In fact every time that I buy one I consider it as ‘lost money’ and I am always looking to double my investment. Sometimes it works, sometimes not, but I have more than 50% success which is enough

Did I take it? no. No? no. Why? because… it was late I was tired and god knows why.

Instead this morning I bought a 7740 CALL option on the DOW at 42. I though the DOW was way too down in the pre-hour market and I hoped it will bounced back. So I bought it when it was 7680. Now (19:30) hour an half before closing time my option worth nothing.

That’s ok sometime you lose sometimes you win. But my mistake was not to hedge my position. On that time I could buy the 7640 PUT at 55. Now it worth much more and it would cover my losses from the CALL. It is true that when you hedge your position you limit your profits but it is better to have little profits than big losses.

In the bottom line it is all depends what you are looking for. For me if I can make 10%-15% on each trade I am happy. For some they are looking for much more. But then when they lose they lose more.