Alrighty then… nothing to sugarcoat here. Today was a bloodbath in the CORN option, pure and simple. I’m sorry guys, I got stopped out of CORN for a 23% loss today. After making 70% in June, I knew I was overdue for a loser but I hoped when we finally got hit with one, it would be just a little 5% to 10% loser instead of a 23% loser.

Trust me, I’m not trying to pretend there is some sort of “silver lining” to this awful loss I took today on CORN calls. But we might as well go over some valuable trading ideas that should be discussed here.

First, you have to set a stop loss. For option trades, my stop loss is 20%. My normal stop loss is 5% but because options are more volatile, you have to widen that stop.

I should have known better than to enter a call option on a gap up. This is what usually happens to gap up open stocks:

1. They gap up severely, where often the open is the high of the day or very close to the high of the day. That means your order, if you enter it pre-market or right at the open, is likely to be executed at the worst (highest) price of the day.

2. Then, since the stock opened up too high…there is nowhere to go but down because pre-existing shareholders want to sell at that high price, shorters want to short at that high price, etc.

3. Then downward momentum starts, and the traders who bought into the high gap price see how bad it’s doing, and they start selling, driving the price even lower.

That’s exactly what happened in CORN since Monday.

It’s my fault for buying on a gap up open. I think I fell in love with “the story” of CORN and attempting to make money from the weather. I mean how cool that would have been. Instead, the high pressure areas over the midwest are starting to move now and it is forecasted that some rain storms will move in over the next 2 weeks. In fact, there’s now a 30% chance of rain in parts of Iowa this weekend. Also, a huge low pressure system has moved in off the West coast that stretches from Washington all the way down to Baha California today.

However, with the worsening drought and the strong uptrend in corn, I thought we still may have a strong winner from my entry on Monday’s gap up open. It seemed like a solid candidate for a profitable play. Especially given that the mainstream news services are only beginning to talk about the midwest drought now.

But like I always say, forget the hype, forget the news, forget the PRs, all that matters is how the stock trades… and Monday’s alert couldn’t have traded any worse. If it traded this poorly today even when the USDA report, released early today, detailed a 12% reduction in acreage yield for corn, in my personal opinion it’s time to move on and look for better opportunities.

Jedi Luke alerts can be winners, and can trade very well. I’ve seen countless winners from Luke and many like his SONC or Apple call options deliver monster profits. But the bottom line is this is stock trading folks and all alerts simply do NOT have the same profit potential across the board.

Now some shady market analysts that you’ll find over the Internet fudge their numbers and say “I got out at break-even” when in truth they lost along with everybody else.

You’ll find the majority of analysts who will talk about a stock chart, say of SPY, but will never actually show you how they can really make money with their chart reading ability. You know what I’m talking about. Those guys like John Murphy who say, “Well, we just talk about the market we don’t actually give stock picks”. What a cop out. If they were such good chart readers why wouldn’t they help people make money with stock picks? And then their answer to that is, “Well, we can’t legally give stock advice per the SEC.” That’s true, but they can talk about what they themselves are buying and then it’s up to their listeners whether they want to buy the same thing. But they don’t want to do that because they know that they aren’t very successful as traders and if enough people knew that, they’d lose their business.

At least I’m not one of those guys, and I don’t pretend like my losers are winners. In fact, I don’t pretend to be anything. My goal is to be as honest and transparent with you as I can because I think you demand nothing less when it comes to making money at stock trading.