Time for something seasonal.
Possibly the dumbest trade I made was buying some ‘underpriced’ puts in Boots the chemist ( Now Walgreens Boots Alliance inc.). I had been alerted to the super low volatility in the July put and this was December(2005?). So, while Xmas shopping I took a look around the local Boots store I decided that selling very ‘down market’ beer gift packs and assorted ‘tat’ was probably not the absolute pinnacle of successful retail. I concluded that Boots was on the slide, and that Xmas sales would be poor.
When cheap is Expensive
Having bought a fair chunk of puts which were quite far dated I thought time was on my side. By March the Boots share price had risen about 25%- who knows why? The first lesson here was that I have no idea about business. Secondly making predictions based on a 10 minute visit to one shop is no way to assess the operation. To my mind, so many businesses look like they are falling to bits, but like Italy, they keep surprising- in a good way.
Having a Belief is not the same as making a prediction
I now understand I have my beliefs about the market, but do not make predictions. My poor example of ‘trade what you see’ was a half baked attempt, not to be repeated. Probably.
Rash Trading and Bias
http://io9.gizmodo.com/5974468/the-most-common-cognitive-biases-that-prevent-you-from-being-rational
I may be repeating the above link. I had traded for many years with my own particular bias, and now understand this. I still see the stockmarket as a disaster waiting to happen, but history shows that this is just not so. I avoid equity options as I tend to have a personal view eg -Shell good, Vodaphone bad etc. I believe I trade the index with complete neutrality. That,is vital.
