Closed Lundin Mining put option – analyzing trade

Entered a Lundin Mining put option in mid-December 2015 and exited in beginning of February 2016, as shown below. Quantity and value have been erased in the picture.

LUMI option result

Price-wise, a small profit of 7% but as this was a very small trade, the commissions turned this trade into a loss of 15%. My current option trading is for educational purposes. Below, you can see when I entered and exited the position when looking at the company’s share price and copper price. The copper price played a crucial part in this trade as it constitutes almost 2/3 of the company’s production distribution in tonnes, as shown in this earlier post.

LUMI openexit
Image courtesy: Yahoo Finance
Copper yearshift 15-16
Image courtesy: www.tradingview.com

Analyzing the trade

Good:

(a) At times, I was 50% up on my trade.
(b) Spotted a trend in the copper price fall. Haha, well, I acted, but all too late. But ”Showing up is 80% of life.” as Woody Allen allegedly has said. At least I dared to act on this case and not just paper trade and then say ”what if I had acted?”.
(c) Closed the trade close to no loss, right before it turned way-out-of-the-money. I credit my gut-feeling for this as I felt the outlook for my case had started to turn on me.

Bad:

(a) I entered a ”short position” in the stock when the RSI was oversold in the short term, i.e. bad timing. Should have looked more into technical analysis to time the trade right.
(b) This long term picture of the copper price with this simple trend line added, shows a technically strong support at where we are right now. This price could instead have worked as a downward target price and a point where to instead flip the position and buy call options in Lundin Mining, which I have not done as of yet.

Copper longterm

This trade further showed myself how important it is to pay attention to more aspects that just a few, both long-term and short-term indicators of various kinds. I will have to keep this in mind in my next trade.