You Have to Know Why

November 27, 2012

I exited my Northern Technology (NTI) short put (bullish) position today as the stock ran up toward $23 a share.  Of course, I didn’t get the last dollar of potential profit, but that’s not my goal.

What happened next amazed me.  About a half hour before the close, the stock started dropping like a stone, falling as low as $20.24.  Since I entered the trade by selling those $22.50 puts for about $2 each, if I had still held the position, it would have been a net loss at that point.  Boy, did I feel lucky.

Then, almost as quickly, the stock started going back up, closing the day right around $22 a share.

I even started playing “what if” in my mind, thinking how I could have re-entered the position for even more potential profit.

But I didn’t, and I’m glad. Read the rest of this entry »