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There are few things more boring and pointless than hearing someone tell you about “the one that got away.” By its very nature, trading generates countless missed opportunities, and anyone who has done this for a while has approximately zero interest in hearing about the big fish that got away. It’s got to be as boring as listening to someone tell you about a dream they had last night.
I’m not here to write a post about the countless profits I let slip away last quarter, but I would like to share a tale of “blowing it” that I think informs my decisions in the immediate future.
Back in mid-February, I did something which I had not done in years, which was buy puts on individual stock. I had reason to believe that Nike (NKE) was going to weaken, so I bought some puts. When I buy options, they tend to be quite conservative. Specifically, I bought some puts that were in the money and didn’t expire for months.
As I begin this post, it’s 4:30 in the morning. I’ve been awake since 1:30. I’m usually a brilliant sleeper. I close my eyes and 10 and fall asleep instantly, and then I wake up at 5:20 a.m. with no alarm and get my day started. Not this time. It’s been too crazy.
Think of what’s transpired. Last Wednesday, the market was at the highest levels in human history (which is a little peculiar, since the whole “virus” thing was well known and spreading fast). Yesterday, we had the biggest drop on the Dow in human history. Added to which, this has been the shortest 10%+ drop in equities in human history. Absolutely incredible.
At this point, we might as well just start pulling projections from thin air. Dow Industrials? How about a 50,000 target. Or 100,000, for that matter. NASDAQ? I dunno, 20,000? With new lifetime highs every day, and 99.999999% of the “investing” public utterly thrilled, anything is possible.
Both this Monday (that is, today) and last Monday had, for me, some singular and very nasty losses. I wanted to share the story of each of them, since the contrast between what led to those losses is worth noting. In short, one of them was a royal screw-up on my part, and the other was just plain bad luck. Let’s review, and in doing so, we’re going to look at the Friday preceding each of the aforementioned Mondays.
A couple of Fridays ago, the market was falling to pieces, thanks to the Corona virus scare. All my positions were doing great, and I was just about fully committed with respect to buying power. Egged on by this success, I decided to get cute and put the last of my buying power into some weekly SPY put options.
I’ve been in the markets since 1987. I thought the market was strange in 1999. I thought it was odd in 2007. But nothing – – nothing! – – comes even close to what we’re going through now. It’s like I’ve met people who were 2’3″ and 1’9″ and then met someone who was four micrometers high. There’s no comparison.
And thus, we’ve seen volatility pounded and pounded and pounded until it is at 11. And why not? Even the most empty-headed simpleton realizes that the Federal Reserve is directly pushing the market up every day, and Dow 30,000 is clearly in their sights. It makes great press. So here’s the sad state of the VIX:
Note from Tim: Earlier this week, I did a post called A Breathtaking Tale of Loss, which was simply a link to a story on the WSB sub-reddit that I found fascinating and horrifying. To my chagrin, after I did my post, I saw that the story to which I had hyperlinked had been wiped clean by the town fathers over at Reddit. Mercifully, a Sloper by the saucy name of qtbby69 had the mad skillz to unearth the article, which he provided. For the sake of its exposure, I am reprinting it here. Thank you!
The year is 2017, my parents had a successful real estate business with over a dozen rental properties and several fix and flip projects in production. Our assets totaled a million and a half after paying off all loans if we ever liquidated everything. Which we did, and that’s just the tip of the iceberg.
My oldest brother made the brilliant decision that because he lost his job, he should start day trading. He quickly made $30k on Apple by yoloing his saving in shares before an Apple products release event. Excited by this, he made an entire PowerPoint presentation convincing the family to get into day trading. We were reluctant at first, and I wish it stayed that way.
In the summer of 2006, I left my job at Dell Computers. I was planning to take a year off, which I
did, before moving forward. I spent my
year off diving into my passion of investing.
At one point I became particularly consumed with the idea of peak oil
(13 years later an idea debunked by the combination of US shale oil and
QE). At the time though, I needed to buy
a new car. I had been driving a truck
for a number of years, which I loved.
However, with my study of the energy market, I decided to buy something
I never would have before. I bought a