Two S3s and a Jump - 8/20/2008

The set-up going into today was two S3s and then a jump. I was using 8/4 as a grounie set-up. There should have been an EARLY V-SPIKE in the morning. This should have set-up a low.

I was short overnight from 1273. Covered my shorts at 1265. This was a high probability S3 & S2 overnight squeeze set-up. I covered my put hedge yesterday at 1268.75, and put out the hedge again overnight knowing that we would get that dumb squeeze.

Then into the morning dump to 1261, I shorted 10 more 1200 AUG PUTS at 10.75. This looked great when futures squeezed up to 1276.50 afterwards.

However, looking at the 8/4 grounie, I noticed that the market gets weaker at the close. I lost my nerve when I saw the headline about Russia and Condi signing the Warsaw Missile Treaty. I covered my 10 puts at 9.25. Still a profit, but I missed the rally at the close.

BOTTOM-LINE: I did not fully think out the scenario that we could close weaker. I should've put out a line of futures shorts if we broke 1260, or maybe I was simply oversized. Anyway, talking to Jim panicked me. Have a GAME PLAN, stick to the GAME PLAN.