My first month trading the entire market just never went smoothly (they would eventually decide that it was too big a task for anyone), but for the first time since I’d been at ACME9, I was working my ass off. I had never really traded a portfolio this big before and I was going to be trading at least 800 names that I’d never even looked at before. For this reason, I tried to lean on Orange and ask his opinions of my trades. I’m not trying to shift the blame for what follows, but he was my manager and he was pushing me to trade a lot more than I had in waters that I hadn’t waded in previously. My timing turned out to be horrendous as usual.
I specifically pointed out my exposure in the Metal industry to Orange. Everything was really expensive, and I was short just about every name. I asked him if he was comfortable with the amount and type of risk I was putting on, and he assured me that he thought the prices merited such a bet.
Right after this, of course, the metals just went completely ape shit. One of the stocks I was trading was TIE. TIE started surging up three or four dollars a day for no reason at all. The most dangerous thing for an option trader selling contracts is for a stock to skyrocket and then tank even lower than where it started, and I was really afraid that this was going to happen in TIE. To make things worse the stock split and doubled my downside exposure. The problem was that prices in TIE had gone through the roof. They were so high that it didn’t make any sense to buy my contracts back, even though my position scared me to death. As the month came to a close, TIE, much to my chagrin, eventually started falling faster than a boulder thrown off of a cliff onto Wile E Coyote’s head.
I talked later with Brown about the stock, and he acknowledge that he was glad that he wasn’t trading it at the time, because he would have likely lost a million dollars, himself. That didn’t mean that he’d ever stick up for me when I was being excoriated for my losses, but he understood.
On the last Thursday in May, it wasn’t only the Metals that were going berserk, the whole market started to fall apart. The Dow fell over 200 points. Orange lost a decent chuck of money that day, but I managed to break even. I actually wasn’t set up horribly for big moves, but unfortunately the stocks that I needed to move didn’t proceed to act as insanely as the ones I wanted to have sit still.
After the close on Thursday, I pointed out to Orange that both of our accounts were coming into Friday with huge biases toward the upside, big bets that the market would go up the next day. Usually, we try to remain relatively neutral to market moves. The firm ran baskets toward the end of the day, whose purpose was to keep us neutral to such moves. What happened on this day, and what would continue to happen was that the market sold off significantly after our baskets had been run. Orange didn’t really want to hear about the failure of the baskets, he couldn’t do anything about tomorrow’s risk and he wasn’t pleased about today’s losses.
The next day was just a slaughterhouse. The market was again down well over 200 points, again the market sold off significantly after our baskets were run, only this time coming in with such a long bias I wasn’t as lucky as I had been the day before. My account dropped over $200,000. Orange’s account had dropped probably close to a million. To my credit, I had noticed that things were going haywire and bought back my risk in a number of marginal situations. I got killed that day, but I traded extremely well.
I mentioned to Orange at the end of the day, probably searching for sympathy, that I had never lost that much money in a day before (I was lying). To his credit, Orange gave me the perfect answer for someone taking the kind of risk he was taking. He said, “Don’t worry you will again.” At this point, he was totally acting like someone who knew he’d take big hits every once in a while, but knew that in the long run things would work out.
Bolstered by his confidence, I decided to that I was sick of letting the market push me around. I came in during the day on Sunday and spent 8 hours preparing for my next chance at the market.
It never really came.
I Fought ACME9 and ACME9 Won: Part 15 Keep Quiet when There Is Panic in the Streets
Related Posts
