A Little too Close for Comfort

Wow! This was a crazy day for DMND.  As a reminder, I chose a $40 strike price for the Put I sold.  In one of my previous posts I think I mentioned the stock price could go down to $38.85 and I would at least break even on my investment if the option was exercised by someone. (This is not including fees.)

Well.....take a look at the chart below.  The stock gapped down from its high yesterday of $42.45, and it continued to drop to $37.91.  This was below my stated $38.85.  Was I nervous today?  Absolutely.   Did I freak out?  Nope.  The drop was related to bad news about future expectations of the company.  Yesterday Diamond Foods, inc. came out with an earnings report that showed they did better than expected, and the stock market rewarded them with a day high of $42.45.  The earnings report is a fact, as far as I know.  And then today the stock took a beating because of some speculative information?  It did not seem rational.  Still there was a potential for me to lose some money.  I decided to hold on for the ride.  In looking at the charts, I think tomorrow will be a better day.  I still see upward movement for at least a week.

Chart 1: DMND stock with candlestick information
(charts thanks to MachTrader)

Side Note: For those of you who are interested, I have been reading a lot about Rare Earth Metals in the news lately.  China controls 95% of the production of these metals, and countries and companies seem to be concerned about it.  I think it might be a good investment opportunity for those of you who are interested.  As always, do your research before you start investing in them.