Early on the morning of December 4, I emailed Jane Fox, a commentator on the live portion of the Option Investor site, the Market Monitor. I knew this early morning pop wasn't going to last, I typed. Adhering to my trading plan which called for me to adjust a RUT DEC/JAN double calendar when the RUT reached 606, I had just adjusted the trade. Immediately afterward, the RUT started tumbling lower.

My written-down trading plan called for me to adjust this trade halfway between the sold strike (600 on the upside) and the expiration breakeven, at the point indicated by the red dot on the expiration profit/loss graph of the position.

Profit/Loss Graph of a RUT DEC JAN Double Calendar:

The planned adjustment was to sell the 560 calendar, part of the double calendar position. The 560 calendar would be sold at a loss, meaning that I would probably have to stay in the trade longer so that time decay on my sold option on the remaining calendar would make up the loss. After following my plan, the new expiration profit-loss graph was the one shown below.

New Expiration Profit-Loss Plan for Adjusted Position:

My concern was that this adjustment resulted in a single calendar with a higher upside breakeven but also with a higher downside breakeven. In fact, immediately after the trade was adjusted, my graph and strategy summary told me that the downside expiration breakeven was now at 584.57. Just the day before, the RUT had hit a low of 588.28, and two days before that, had a low of 582.99.

I didn't want to adjust! I just knew the RUT was going to reverse and it did, plunging to a low of 592.99 within an hour after I'd adjusted the position. I was practically stomping around my office, suffering from a severe case of coulda-woulda-shoulda's.

As is obvious from the profit-loss chart, there was still plenty of potential profit in that single calendar, more than enough to make up for the loss in the adjustment process. Moreover, I've been trading long enough to know that what I "know" about market behavior and what I can "tell" is going to happen from my examination of trading charts is good for only one thing: to help me make what-if plans. I consider myself at least a decent technical analyst, but I don't let what I see as a possibility on the charts keep me from adjusting when a trade needs to be adjusted or taking a loss when it's time to take a loss.

I do try to wait out the first few minutes of trading, if it's possible to do so without breaking my trading plan, but other than that, I try to act when it's time to do so. I'm not perfect about doing so, but I do try. I set alerts in case I step away for a few minutes, so that there's no excuse for not acting on my plan. If I'm not going to have access to the markets, I set contingent orders or call my broker after an alert has sounded.

Occasionally, I adjust or exit for a loss, following my plan, when waiting a few minutes would have rendered the action unnecessary. In most cases, I just take that reality as part of the trading life.

Not always. I'm human. I'm not always immune to those coulda-woulda-shoulda's. They're also part of the trading reality. I'm not the first writer to warn that we're not in charge of the markets. We're only in charge of our own actions. But, I would argue that much of the fear that trading sometimes engenders is not fear of the markets but fear that we won't react appropriately.

With that in mind, I'd much prefer to suffer a few coulda-woulda-shoulda's than that gut-gripping fear that comes after you know you haven't reacted appropriately. You've let a loss grow too big while you stared at the screen. You took on too much risk and didn't know how to handle the trade. You just jumped into a trade without a plan. You don't trust yourself any longer. Coulda-woulda-shoulda's I can shake off. Not following a plan and getting caught in a loss that engenders the kind of fear that follows a trader around for months? That's harder to shake off.

By 3:40 pm ET that December 4, the RUT had pressed back up to the 600 level. It wasn't quite at my adjustment point but it wasn't that far away, either, and it was climbing. With a weekend of risk ahead of me and the possibility of a gap higher the following Monday morning, I would have had a hard decision that Friday afternoon. Go ahead and adjust a little ahead of the 606 level or wait it out over the weekend? Knowing that the decision was already made, I didn't have to watch the RUT creep ever higher that Friday afternoon, not sure what I should do. It wasn't too hard to recover from that particular bout of coulda-woulda-shoulda's.

Oh, and in case you're interested, that trade ended up profitable. My plan also called for me to exit the Friday before option expiration week, so the trade eked out only a 1.76 percent profit on the buying-power effect. That wasn't much profit. Holding it into option-expiration week might have presented a possibility of making a bit more money, but it also presented the possibility of falling implied volatilities as the holidays approached. Falling implied volatilities in my long option would have dampened or even eliminated those profits. This time, I didn't even feel those shoulda-woulda-coulda's. At least temporarily, I was immune. I'm busy with next month's trades, putting my money to better use.