I Don't Deserve These Profits

Sean McLaughlin
February 28, 2023

I F*d up.

And when I do, I usually suffer the consequences – almost without exception.

But today is one of those exceptions. Thankfully.

Recently, in an effort to fade the rising volatility in the options market arising from the 3-4 week pullback from recent stock market highs, I sold naked puts in a large cap stock – Occidental Petroleum $OXY.

I like the name for a number of reasons, the most prominent being that Warren Buffett (Berkshire Hathaway) has been acquiring large blocks of stock just below current levels. This is support.

So when the broader markets were continuing their slide a couple of weeks ago, I felt $OXY was a high probability bet to hold these levels until the mini-market panic cooled off, and selling premium via $OXY puts seemed like an intelligent way to play it.

So far so good.

But I didn’t pay attention to the earnings calendar. That’s where I screwed up. Occidental reported earnings this morning. Had I taken the time, following my Best Practices, to look into whether or not $OXY was reporting soon, I would have discovered today’s imminent release and I would’ve shied away from putting the trade on.

Holding naked options risk is not something I like to do ahead of binary events such as Earnings Releases. The Risk vs. Reward has too fat a tail in the wrong direction for me to be comfortable with it.

I know there are many traders out there who make a living doing this kind of thing. But it’s not for me. I know my limitations.

Lesson learned: I need to create a “Pre-Flight Checklist” that I review each time I consider putting a new trade on. If for no other reason than to prevent more sleepless nights in the future like I had last night.

Thankfully, the Occidental earnings release turned out to be a non-event with the stock trading up slightly (in our favor) and leaving me with open profits in my naked short position. Profits I don’t deserve, but will accept with gratitude.

What’s one small tweak you can do to your daily routine that might prevent disaster to a trade? I’d love to hear about ways you keep yourself out of trouble.

Trade 'em Well,

Sean McLaughlin
Chief Options Strategist
All Star Charts, Technical Analysis Research

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