In spite of all evidence to the contrary, I think a lot. There are a lot of things I don’t do in life, such as going to the movies, watching television, going to clubs, and most other activities which require a lot of time socializing. Not to say that I’m a hermit; far from it. But, with the kids out of the house, I’ve got a lot of time to ruminate, for better or worse.
Given the events of recent days, I’ve been thinking more than usual as I do yardwork and walk the dogs, and I’ve settled upon a decision I think will be constructive in my life and whose foundation will perhaps be worth sharing.
Within the span of twelve hours, from Thursday evening to Friday morning, I experienced three events. To be more specific, there were three instances in which I had a choice to make a decision, and I chose to make those decisions quickly. Those were:
- On Thursday evening, how to react to the breaking news of the hush money case;
- On Friday morning, what to do at the prospect of my SMH puts getting killed;
- Also on Friday morning, what to do with the during-market-hours news that Carl Icahn had taken on a big stake in CZR
So, we have one communications decision and two trading decisions, but what they all had in common was that they were totally unexpected decisions to make, and I was at liberty to take action on any of them. So how did those play out?
On the first one, I decided to react emotionally and with verbal violence (not directed toward anyone here, but violent nonetheless) to the news. I was histrionic, childish, vindictive, angry, and altogether off-putting. I clearly remember my hands were shaking so much that I was having trouble even typing the words. One would think this would be a cue to, ya know, just close the laptop and take it easy, but no, I plunged forward.
I’d like to pause here and state I am not usually a reactive personality. For instance, there have been times when I have faced physical emergencies, such as a car suddenly spinning out on the ice or fishtailing on the freeway from heavy rain. These were very risky situations, but if you had a camera on my face, it would have looked like a Sphinx. I was like Mr. Spock at the wheel. Calm. Placid. In firm control.
Not so, with incident number (1). I absolutely flew off the handle, and only after a sleepless night did, I finally decide to put hat in hand and explain myself. Avoidable, unnecessary, and destructive. Not Good.
Instance number two was the SMH trade I’ve yammered on so much about. This was also an emotional decision, and the action I took is one we as traders all know: I stopped the pain and the worry with one click of the mouse button. Bang! Problem solved! Life is good again! Only to watch the position I closed do PRECISELY what I had dreamed the prior day and approach a 400% profit in a matter of three hours. I say to you again: Not Good.
The third example is one where my hands were tied. See, I’m not normally away from my desk during market hours but on Friday morning, I decided with the PCE risk behind me I could treat myself to my morning chai, so I drove out to Philz to get it. As I was walking away from the coffee shop, drink in hand, I glanced at my iPhone and saw CZR’s price chart had become a vertical line. I tapped on the news to see the Carl Icahn report, and I thought to myself, well, shit, I’ve got to get the hell out of this position ASAP.
For reasons I won’t bore you with, I can’t execute trades on my phone, so I knew it would be a good ten minutes before I was even in front of a keyboard to get out of the trade. It was even more agonizing since I saw the CZR price was going from +12% to +14% to +16%, and I could almost feel my put options withering away in value.
I came home with every attention to click the Sell All button, but I took a moment to look at the daily chart, and I realized that, Carl Icahn be damned, it was a hell of a good-looking chart. So not only did I not sell a single contract, but I actually bought a bunch more. In a way, I did the opposite of what my impulse told me to do.
Perhaps you see where this is all going. For two choices, I had the luxury of instant action, and I regretted them both. For the third choice, I was forced to wait, and I knew it was the right move when I was done.
I have therefore decided to set up a new rule for myself. I’m going to be deliberately modest with my goal and demand of myself that I live like this for the month of June. That is a bite-sized enough chunk of time to make a true commitment and see how it goes. The pledge is both to you as well as myself.
I would state it in the following fashion:
Whenever I am faced with an unexpected decision, I am going to find the nearest available timepiece (typically my phone) and use it to record three minutes of time. I will do NOTHING with that choice, no matter how clear the "right" answer seems to be (with the obvious exception of a person having some kind of medical emergency). Once that three minutes have passed, I will then give myself leave to make whatever choice I think is best.
What if, on the plane, I forced myself to wait three full minutes before commenting on the Guilty verdicts? I almost certainly would have been calmer, or maybe I would have had the good sense to say nothing at all.
And what if I forced myself to wait three minutes before closing the SMH position? I would have observed that SMH was starting to weaken, and maybe I should just hold on tight. I wouldn’t have sold them.
As for Carl Icahn, fate forced the 3-minute rule (really the 10-minute real, in that instance) on me, and I made the right decision.
So that’s the experiment. Let’s see if I can be a better person, and a better trader, based on this change.
