A bunch of trader’s on our desk made nice chops shorting RIMM yesterday at the 65 level. The trade worked four times. Today the trade was highlighted in our AM Meeting and tweeted as our Best Morning Idea. I checked my risk monitor at 11:00AM to see how we did in RIMM on the Open. To my surprise we were barely up money in it. I was somewhat surprised as it traded up to the 65 level on the Open before trending down for the day.
Before leaving for the day I spoke with the trader who made the most money in RIMM yesterday. He told me he wasn’t sure the trade would work again today. This is the same trader who told me yesterday he was convinced RIMM would soon trade back down to 62. I looked at him in a quizzical manner.
I said, “Yesterday it was the greatest trade ever but today you were afraid to risk $100?” His response, “Yeah, it makes ZERO sense.” I agreed. So much of trading is about simple execution. We had collectively found a trade with a risk to reward of better than 1:5 that had already worked four times. Today it actually turned out to be a 1:10 risk/reward as the market sold off.
If it ain’t broke don’t fix it. Go to the well until its dry….