UNP May 2008 120 Put
Position: UNP May 2008 $120.00 Put
Size: 15 percent*
Opened: 11/20/2007
Closed: 01/04/2008
Profit (Loss): 17%
trade thesis
The United States appeared to be headed for a recession, if not already in one, and container volumes at the ports of Long Beach and Los Angeles were declining year over year. Also, Union Pacific (UNP) appeared to be a poorly run railroad when compared to its peers, based on fundamental analysis.
mistakes, flashes of brilliance, and lessons learned
This was a successful trade and my first profitable one at Optionsxpress. A key mistake was committing far too much of my account equity to the position. However, in this particular trade it worked out because I was nervous and took a profit when it was available, in contrast to a similar trade in CSX.
In this particular case, UNP proceeded to rise from when I took the profit through expiration. Had the opposite ocurred and UNP dropped substantially, I would have missed out on a potentially substantial profit by closing the position too early because I was worried about the large size.
notes
* of total account equity.