Losses = Leasons Learned

"Whenever I have lost money in the stock market I have always considered that I have learned something; that if I have lost money I have gained experience, so that the money really went for a tuition fee." Edwin Lefevre - Reminiscences of a Stock Operator.

And my lesson learned: Never go against your instinct, or the market.

I was sure we were in a Bear market. Yet I got bullish on several stocks. And the market collected tuition.

My Nokia options expired worthless. My call on the Cemex vertical bear credit spread got exercised. I went against the market, and my instinct, resulting in losses.

All handset makers have seen a large decline in recent weeks. The state of the economy, plus the release of Apple's Iphone at half its previous price, have created large concerns for companies, such as Nokia, as there has been an increase in international competition. The share price has declined dramatically in the past few weeks.

So, going with my instinct, and market behavior, I bought a January ATM put option on Motorola on Thursday, strike 7.5. I'm already up 35% and have a target of $7.00 for the stock. With the current Delta at -.45, I am looking to close the position with a 50% gain. However, if Motorola breaks through the $7.00 barrier, I will hold my position and reevaluate.

I also had my first experience with being assigned. Cemex had declined rapidly in the past week, with no major news from the company explaining the decline. Then there was an unexpected hike in interest rates by the Mexican Government hurting shares further. I immediately liquidated my 100 shares at a decent price this morning, with a small gain. However, I will now close all my options positions in the future before expiration to eliminate assignment risk. AL