Managing FOMO and Sticking to the Plan
I saw a post that someone was feeling frustrated that they feel they continue to miss market opportunities. We've all been there at one point or another. Some of my worse trades were a function of rushing to try and not miss an opportunity. The solution to this problem is simpler than expected, it just requires some leg work.
I have a trade on in NFLX right now that yesterday I turned into a risk free vertical spread. The process includes buying an option, waiting for a move, then selling a further OTM call or put. If our credit received on the short is greater than the debit paid for the long, we have locked in a profit and are in a risk free trade. The caveat, we cap our upside. If NFLX ran to 600 my trade would make around $12k, if I didn't cap my upside the trade would yield around $77K.
What's the point of this? I'm okay giving up a $77K potential for a guaranteed profit (a little over $2K) with a $12K upside potential. Why? The probability of NFLX hitting 600 by my trades expiration (20May) is around 9%.
I am trading a well defined and tested plan. If we take the time to truly create a well developed approach, test and validate it - we worry less about what others are doing, because we know what we are doing works. It's when what we're doing isn't working that we're more concerned with what others have going on.
That's not to say to keep an eye open to see what others are doing, I believe in being receptive to new information and potential opportunities. However, if someone else has uncapped NFLX long calls that return $77K - I at no point feel FOMO or frustrated that I didn't also. I'm happy for them and that their trade worked out. I am also happy with my $12K and will continue to deploy my plan.
Create a plan that you TRUST and missing other opportunities becomes less prevalent.