trader’s journal

Position: XOM April 2008 $100.00 Call
Size: 4 percent*
Opened: 10/31/2007
Closed: 04/20/2008
Profit (Loss): (100%)

trade thesis

Federal Reserve Chairman Ben Bernanke was dropping interest rates like they were hot. Every time he opened his burrito hole, the dollar tanked and the price of oil jumped. Expecting more rate cuts from Easy Ben, while his counterpart in Europe kept interest rates steady, I speculated the bull market in oil would continue and took a bullish position in Exxonmobil (XOM).

mistakes, flashes of brilliance, and lessons learned

While my thesis turned out to be correct both in direction and time frame, the price of XOM did not follow the price of oil and the call expired worthless. In retorospect, the correct trade would have been to take a position in oil, either through futures, an ETF, or options on either of the former. Better money management would have mitigated the loss - I should have closed out while the call still had some value, instead of stubbornly believing I was correct and XOM would cross the strike price.

request for input from the peanut gallery

I still don’t understand why XOM did not follow the price of oil - can anyone enlighten me as to why this went horribly wrong? Taking a 100 percent loss on the trade stung, does anyone have money management tips to share?

notes

* of total account equity.

This entry was posted on Wednesday, October 29th, 2008 at 8:13 pm and is filed under Journal Entries. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.