Well, options expired on Saturday. ( Options always expire on Saturday, even though the last trading day is Friday. )

OPTIONS SCREEN

So I was looking at my options screen, and nothing was coming up for short volatilities. Especially the first trading day after expiration. The IV are slightly lower than normal.

We all know about Bernie Madoff, and this is a tragedy. But it is something we can all learn from it.

DON’T PUT ALL YOUR EGGS IN ONE BASKET.

Haven’t said that since I was a kid. But it is true, no matter how good a trade or deal looks, do not put your whole net worth in to it.

When I first started trading options, I took and AAPL earnings play. I was soooo sure the numbers were going to come in high, I loaded up on ‘cheap’ options with only a couple of weeks of expiration left. Right before earnings, I bought a bunch of calls and started dreaming of a classic 1986 Porsche 911. I really did not know that much about implied volatility, which is an understatement.

AAPL reported and beat the street. They guided lower for the next quarter and the stock went no place. I thought, sure, I won’t be buying that Porsche now, but I will just sell out and lose the commissions. Since the stock had not moved and it was only a one day, I thought I should get close to the same price.

I didn’t get close to the same price. I took it in the shorts.

The implied volatility dropped and I lost a big chunk of my account. It was a valuable lesson and I did make all the money back, but it hurt.