I went short the market last Wednesday. I did it by my normal method; I bought the Exchange Traded Fund SDS. I bought this ETF when the market turned negative in the morning. After three days of Rallying, I figured we would get at least one day of a correction. My plan was to get in and out of the ETF as quickly as possible.
Unfortunately for me, it was also a travel day for me. I was returning from my trip in San Diego so I was in the car for the middle part of the trading day. In the car, I was listening to the news, and the market continued to go higher. It ended the day several percentage points higher, meaning I was down almost 5% just that day. Thursday, the markets were closed, so I was forced to hold on to the position. I resolved to get out on Friday.
I woke up early on Friday to find the market trading relatively flat. I was still certain that there was no way we would get five up days in a row in a market like this, so I waited until the market dropped a little bit, and I was going to sell. The drop never came, the market inched higher and higher throughout most of the day. Since it was a short trading day the market close before I could do anything meaning I had to hold on to my position throughout the weekend. I was now down 10%, right at my stop price, and I was for certain going to get out on Monday. I was hoping the market would not open up sharply higher, as this would increase my losses.
Well the market gave me a gift today. The market tanked, dropping 8% in one day. Since I was double short in my position, I made up my losses and more in one day. While I was going to sell in the morning, it was clear the market was weak so I held on to it till the end of the day. I sold half the position at the close and made a small profit after taking some very big losses. I will get rid of the rest of the position as soon as it is reasonable.
The point of the post should be pretty clear. I got REALLY lucky in this trade. I should have gotten out way before I did. I almost had to take some big losses and the market bailed me out today by falling apart. If you were me, you would also understand this. Trying to play this market can really drive you nuts. There was really no good reason the market was rallying last week. There was no bottom reached. Even if the bottom was reached, there was no reason stocks should have been up 15-20% in a week. That's insane. That is not a sign of a healthy market. But the fact remains, just when you think you have it figured out, the market does crazy things.