THAT STUPID FAT-FINGER TRADE!
We’ve all been there. You are distracted, tired, thought you were on a beach somewhere, etc. and it happens. Push the wrong button, cover the wrong option, buy instead of sell, etc.
This type of thing is especially frustrating because often times your timing and adjustments were dead-on, but the executionwent to the dumps – which stings our ego even more!
I have personally suffered from a fat-finger yesterday – I covered the wrong short option and sold part of an iron-condor “wing” at the same time. Of course I was filled on both sides at the absolute WORST price you could ever imagine. After getting over the initial reaction of disgust though – I immediately tallied up the damage and decided to “sell” out my losses in another position (selling premium). This technique of selling premium to cover losses is not a new idea, however I noticed that once I completed the new sale, my mind was put at ease and I was able to finish the day.
Actually, this is a stellar example of why you should always keep enough margin in your account to compensate for a disaster day. It’s very uncommon occurrence for most people to constantly have errors in their trading due to fat-finger mistakes, so selling out your losses in these cases isn’t necessarily taking on too much excessive risk in my opinion – you are simply trying to get back to the stabilization of your portfolio; where it was before the mistake.
Like many things in trading, it’s simply a matter of quickly assessing the situation, making a decision and moving on. I really hope this article helps you. Please feel free to reach out to me if you have your own story of how you rebounded from a mistake.