There was a saying in the pits, “Don’t try to catch a falling knife”. What does it mean? It means we have a tendency as contrarian traders at times to buy a stock when it’s been down and dropped a bit, looking for a pullback. This saying is suggesting to wait a bit till a stock actually settles and goes up a bit, not just one day, before we jump in. Twitter Implied Volatility has been low lately, except last 2-3 days, and it seemed an easy decision to buy cheap calls with the stock  down looking for an pullback. Nothing wrong with that thinking other than trying to wait till the stock, in this case TWTR, actually goes up for a few days and shows some life. At this point I may scale in.  What Does That Mean? It means I might buy 1/3 or 1/2 of my position now and if the stock drops more, I would add to the position till I get to my comfortable size. If I have totally written TWTR off over the next year as having no upside potential, then I would avoid any long position. Trade Idea With Stock at $33.65, I might wait […]