Dykstra: Stick to Your Guns

Time was running out with my January 2009 $25 calls, and many of my readers let me know it. Instead of panicking, I kept a level head and referred back to my system. When the opportunity came, I averaged down, adding to the position when the price fell far enough. But ADM kept dipping, and when time started to become a factor, I adjusted my game plan slightly.

In the end, I held a large number of contracts. Instead of waiting for the option to rise $1 above my average entry price, I set my good-till-cancelled sell order to just 50 cents above the average entry. Later, I would lower it to just 30 cents above my average cost. This let me shoot for a lesser win while still making a big profit. On Tuesday, ADM came through, and many of my subscribers let out a collective sigh of relief.

However, the thought of cutting and running never crossed my mind. I tell my readers that I do not employ a stop-loss strategy, even for a pick like ADM. For those who are unfamiliar, a stop-loss is an automatic trigger to sell out of a position once it falls to a preset level. It is mean to prevent big losses on a pick.

I have faith in my picks, and I expect them to get their nose across the goal line for the win. With ADM, it was important to stay level-headed and stick with my plan. Those who stayed by my side were rewarded. Had I employed a stop loss, I would have walked away a loser. Instead, I put some more money in my pocket.