Bulls Make Money, Bears Make Money, Pigs Get Slaughtered

When holding losing positions, you can either be one of three things. Confident in the position where your confidence outweighs the unrealized loss, stubborn about taking the loss, or just plain stupid. On my IMAX play I was just plain stupid. I would like to use this post to go over my IMAX play and explain some things I learned.

I listened to IMAX 2009 Q4 earnings call on 3/11. This was a very positive earnings call with IMAX experiencing substantial growth in Q4 and expecting this trend to continue exponentially with the building of many new theaters and a number of blockbuster hits to come out in 2010. With 3D becoming an increasingly excepted movie format and with the announcement of 3D TV production from several big name companies at CES 2010 on January 7th, it was looking like 3D wasn't going away anytime soon. I confirmed these feelings when I noticed $IMAX was trending on twitter with a lot of other investors sharing my same ideas. On 3/23 I bought one $15 April Call for 1.80 and sold two days later at 2.40 for a quick profit of $58 or 23.26%.

With the completion of that profitable trade, I grew more confident in IMAX. On Friday 3/26 I bought one April $17.50 April Call for .72 and one $15 April Call for 2.22. I have absolutely no problem with these entry points as I believe they are probably the best entry points I have taken on a stock to date. I did my research on the company, didn't rush into the trade, confirmed the uptrend in the stock and bought on a pullback. Over the next couple days IMAX became my biggest winning position. I closed some of my losing trades and decided to let IMAX run. My over confidence in IMAX and my inexperience with stocks trading at their all-time highs led me to remove my trailing stops and let my options rip. For five trading days from my entry point IMAX continued to make new highs, at points stalling, but always breaking higher.

Throughout this trade I had been in contact with my father telling him of my ideas and current trade positions. The day before IMAX pulled back I called my father to tell him that I was up over 73% on the two trades combined. Two words he said to me over the phone that day have been ringing in my head while I've been watching IMAX retrace, and my positions turn from green to red. "Be careful".

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I wasn't careful. I had no trailing stops, no stop limits, no stop markets. Over the weekend I plan to take a serious look at my trading plan and goals. If I can't take a profit how will I be able to deal with my losses.

In conclusion, I believe that the best way we can learn from our mistakes is to go over them in painstakingly fine detail. If you can't discuss your losses openly you should #1 never talk about your gains, and #2 not be investing.

Take care.