The Burning Light
a loss with Lumen and lessons learned
Let's talk about Lumen (LUMN) which has had an insane week.
In recent days, it went up about 900%. I never really followed the stock until I noticed on Tuesday that it was the top gainer in the entire market, just about doubling in price. I stupidly assumed earnings had just come out (when I could have easily just glanced at our earnings page to learn it was, in fact, not going to report until after the close).
Here's the 5-minute bar chart:
I'm usually disinclined from trading options on stocks which are just a few dollars, but I was feeling very confident, so I gave it a shot. In the chart above, the leftmost arrow indicates where I bought puts on LUMN. It was a small position, but, again, I mistakenly assumed whatever good news had doubled the price was already out of the bag.
Imagine my horror when, soon after the close, I saw the price bar rocket even higher. Thus, it had doubled on Tuesday (regular session) and doubled again after hours! I figured my puts would be worth about $0.00 when the market opened the next day.
In my defense, please look at the daily chart below, as opposed to the minute chart above. There is a MASSIVE rounded top on this sucker, and even when the price was at $5, I figured that it exhausted itself. Spiking to $10 was jaw-dropping.
When Wednesday morning rolled around, I let the dust settle a bit in the market and wound up dumping the options for $1.15 each (they were January $5 puts), which was about a 40% loss. Not exactly a great return on an overnight investment, although I at least wasn't stupid enough to make it a huge position.
It's presently bid/ask at 1.43 x 1.47, and who knows, considering the size of that top, maybe NOW is a more sensible time to get in!
In any case, a nasty loss, but the takeaways for me:
My lifelong practice of avoiding options on single-digit stocks is sensible. I think I'll stick to it!
Check the freakin' earnings calendar to make sure when a stock is going to report, particularly whether it is before the open or after the close!
Thus ends my little tale of my dalliance with LUMN.