i've lost 400k the last 2 months i'm quitting
- Thread starter hedgeking
- Start date
This is very good advice. And following this is a post I made 3 years ago about Mark Cook who also blew out his account, but eventually came back. Sorry to hear about your losses and thanks for having the integrity to post what happened. That shows a lot. Let us know how things go. Best wishes for good things ahead.
Stock Market Wizard, Mark Cook was using the trading strategy early in his career of selling options and making good money doing it. He was doing so well with his trading that he started trading for some family members. He had a system worked out that he thought he'd "perfected" that was consistently making him money. Then in June of 1982 he decided to step up his trading even more. He ran his program one week that month and it came up with a list of trades for a company called Cities Service. The stock was trading at $27 and the 35, 40, and 45 call options were selling for premiums far above the model-implied prices with only about a week left before expiration. He couldn't believe the prices and felt as though they were giving him the money. He sold hundreds of these options. He says, "I still remember that on June 16, 1982 - one day before the day that will live in infamy for me - I tried to sell an additional hundred options at a specific price right before the close, but I didn't get filled."
"The next day, they announced that Cities Service was going to be bought out for $20 more than the highest strike price option. They shut down trading in the stock and options for the rest of the week and didn't resume trading until after the option expiration. Of course, the options got exercised [leaving Cook about one hundred shares for each option he had sold] and by the time the stock started trading again, he was down $500,000.
Jack Schwager asks, "Did that include your family's accounts?"
Cook: "No, that was just my account. I had gone from $165,000 at the start of June to a deficit of over $350,000. In addition, I had lost over $100,000 apiece in accounts I had for my mother, father, and aunt. I still have the trade slips right here in my desk drawer. It wasn't until last year - seventeen years after this happened - that I was able to pull them out and look at them. I had a margin call in excess of one million dollars on my account, which is what I would have had to put up if I wanted to hold the short stock position instead of buying it back. Technically, you are supposed to have five days to meet the margin call, but the firm was on me to cover the position right away."
Part Two Follows -
From "Stock Market Wizards" by Jack Schwager
"The next day, they announced that Cities Service was going to be bought out for $20 more than the highest strike price option. They shut down trading in the stock and options for the rest of the week and didn't resume trading until after the option expiration. Of course, the options got exercised [leaving Cook about one hundred shares for each option he had sold] and by the time the stock started trading again, he was down $500,000.
Jack Schwager asks, "Did that include your family's accounts?"
Cook: "No, that was just my account. I had gone from $165,000 at the start of June to a deficit of over $350,000. In addition, I had lost over $100,000 apiece in accounts I had for my mother, father, and aunt. I still have the trade slips right here in my desk drawer. It wasn't until last year - seventeen years after this happened - that I was able to pull them out and look at them. I had a margin call in excess of one million dollars on my account, which is what I would have had to put up if I wanted to hold the short stock position instead of buying it back. Technically, you are supposed to have five days to meet the margin call, but the firm was on me to cover the position right away."
Part Two Follows -
From "Stock Market Wizards" by Jack Schwager
Continuing:
That night he called his mother, which was the hardest phone call he ever had to make. He felt like a complete failure. He felt like he should be put in shackles and hauled away. "Mom," I said, "I need to talk to you."
"What is it?" she asked
"I think you need to come over to the house tomorrow morning to discuss it."
The next morning around 6:30 A.M., he looked out the window and saw his mom dragging up the walk at a snails pace, which was very unlike her.
She came in and asked, "Mark, what is the problem?"
"Sit down on the couch, Mom," he said solemnly.
She sat down and asked, "What's wrong Mark? Is it something serious?"
"Yes, I'm afraid it is," he answered "Mom, I lost $100,000 of your money."
She didn't flinch at all. She looked him straight in the eye and asked sympathetically, "How much did you lose, Mark?"
"I lost half a million dollars."
"But you don't have half a million dollars."
"I know, Mom."
"What else?"
"What do you mean, 'What else?'" he asked
"Besides losing all this money what else is wrong?"
"That's it Mom." he answered
"Oh, is that all! I thought you had cancer."
"Did that ever put things in a different light. Her next sentence was unbelievable." "How long will it be until you make it back?" she asked
"If she would have said anything else, I would have quit. But she had said just the right thing, at the right time. I straightened myself up a bit and said, "Five years," picking a number out of the air because I had no clue how I would make the money back."
"If you make the money back in ten years, that's okay,' she said. "Now go ahead and do it."
"From that point forward, I never again sold any naked options."
As it turned out, ironically, the deal for Cities Service fell through and if he had been able to meet the margin call, within a month, he would have made back all his money and even had a profit. Of course if he had been filled on the last hundred options he was trying to sell that last day, he would have been forced into bankruptcy.
And he did end up making the money back.
To read the rest of this story check out Jack's book, "Stock Market Wizards". A very enjoyable book. I really enjoy reading about the experiences of other traders.
That night he called his mother, which was the hardest phone call he ever had to make. He felt like a complete failure. He felt like he should be put in shackles and hauled away. "Mom," I said, "I need to talk to you."
"What is it?" she asked
"I think you need to come over to the house tomorrow morning to discuss it."
The next morning around 6:30 A.M., he looked out the window and saw his mom dragging up the walk at a snails pace, which was very unlike her.
She came in and asked, "Mark, what is the problem?"
"Sit down on the couch, Mom," he said solemnly.
She sat down and asked, "What's wrong Mark? Is it something serious?"
"Yes, I'm afraid it is," he answered "Mom, I lost $100,000 of your money."
She didn't flinch at all. She looked him straight in the eye and asked sympathetically, "How much did you lose, Mark?"
"I lost half a million dollars."
"But you don't have half a million dollars."
"I know, Mom."
"What else?"
"What do you mean, 'What else?'" he asked
"Besides losing all this money what else is wrong?"
"That's it Mom." he answered
"Oh, is that all! I thought you had cancer."
"Did that ever put things in a different light. Her next sentence was unbelievable." "How long will it be until you make it back?" she asked
"If she would have said anything else, I would have quit. But she had said just the right thing, at the right time. I straightened myself up a bit and said, "Five years," picking a number out of the air because I had no clue how I would make the money back."
"If you make the money back in ten years, that's okay,' she said. "Now go ahead and do it."
"From that point forward, I never again sold any naked options."
As it turned out, ironically, the deal for Cities Service fell through and if he had been able to meet the margin call, within a month, he would have made back all his money and even had a profit. Of course if he had been filled on the last hundred options he was trying to sell that last day, he would have been forced into bankruptcy.
And he did end up making the money back.
To read the rest of this story check out Jack's book, "Stock Market Wizards". A very enjoyable book. I really enjoy reading about the experiences of other traders.
Can I ask a few questions:
How long have you been trading?
How long has the period been since you lost the 400k, when did you enter those positions, and did you lose the 400k on only those 2 stocks after they dropped?
How much were you expecting to possibly gain when you put on those trades?
Why didn't you set a stop loss and why didn't you get out when you lost 50k, 100k, 200k?
If you really thought of this as gambling, you did realize that with gambling there is always the possibility of losing everything, so why is it a shock to you that you lost everything?
Do you know why gambling is stupid and why they make others rich, and make the players (in majority of cases) poorer?
Trading is not gambling, because you control your risk and your reward. Trading is controlled risk management basically. You had the opprotunity to pull out at any time, yet you waited, and waited, and waited until you had nothing. That is a 1 to 1 risk vs reward ratio essentially, and that essentially is what most common gambling (a lot of card games for example).
---
At least I have found another great post to put in my folder of "THINGS NOT TO DO" while trading. I have a ton of those, so you shouldn't feel bad, I've read several posts of people dropping millions in prop firms and all that. So you shouldn't feel so bad, you lost in your gambling, if it made you a better person to realize to stop gambling, then good, if not and you continue to gamble, you deserve what your future holds, and that is a life of pain and suffering for you and your family. So be wise and straighten up.
Good luck, make the right choice next time.
How long have you been trading?
How long has the period been since you lost the 400k, when did you enter those positions, and did you lose the 400k on only those 2 stocks after they dropped?
How much were you expecting to possibly gain when you put on those trades?
Why didn't you set a stop loss and why didn't you get out when you lost 50k, 100k, 200k?
If you really thought of this as gambling, you did realize that with gambling there is always the possibility of losing everything, so why is it a shock to you that you lost everything?
Do you know why gambling is stupid and why they make others rich, and make the players (in majority of cases) poorer?
Trading is not gambling, because you control your risk and your reward. Trading is controlled risk management basically. You had the opprotunity to pull out at any time, yet you waited, and waited, and waited until you had nothing. That is a 1 to 1 risk vs reward ratio essentially, and that essentially is what most common gambling (a lot of card games for example).
---
At least I have found another great post to put in my folder of "THINGS NOT TO DO" while trading. I have a ton of those, so you shouldn't feel bad, I've read several posts of people dropping millions in prop firms and all that. So you shouldn't feel so bad, you lost in your gambling, if it made you a better person to realize to stop gambling, then good, if not and you continue to gamble, you deserve what your future holds, and that is a life of pain and suffering for you and your family. So be wise and straighten up.
Good luck, make the right choice next time.
Here's the last part. Buy Jack's books they're really great.
hhttp://www.invest-store.com/cgi-bin/elitetrader-bin/home.cgi?
Jack Schwager asks, âHow long did it take you to recover the $350,000 trading deficit that was left over from the Cities Service trade?â
Cook: "Five years, measured from the Cities Service trade, which was three years after I resumed trading. The big year was 1987. When I say that, people automatically assume that I must have been short during the October crash, but I actually made most of the money during the bull market earlier that year.
At that time I wasnât day trading yet. In May 1987 I saw what I believed was a phenomenal buying opportunity in stock index call options. Two factors had converged: my cumulative tick indicator was giving extremely bullish readings, and the decline in volatility had made the option premiums very cheap. My grandfather used to tell me, âBuy things when people donât want them, and sell things when people want them.â I put $55,000 into long-term, out-of-the-money stock index calls that were trading at ½ to 5/8. [Schwager points out: In this type of option position, the trader can make multiples of the initial outlay if there is a huge price advance, but lose the entire investment in any other price scenario.] I bought well over a thousand options. During the next few months, stock prices exploded and the volatility shot up â a combination that caused the value of my options to soar.
Ever since the Cities Service disaster in 1982, I had wanted to demonstrate to my parents that I wasnât a failure. On August 7 1987, I went over to see them, âIâm trading options again.â
âOh no!â exclaimed my dad. âWhat is the bad news this time?â
âWell, Dad, that is why Iâm here.â I answered.
âWhy do you trade those things, Mark? Didnât you learn your lesson? Do you have a problem again?â
âYes I have an income tax problem,â I answered. âThe calls I bought are worth $750,000.â
âHow much did you invest?â
âFifty-five thousand dollars,â I answered
âGosh take it!â he said
âNo,â I said, âthey are going up more tomorrow.â The next day I cashed out the position for a $1.4 million-dollar profit.
hhttp://www.invest-store.com/cgi-bin/elitetrader-bin/home.cgi?
Jack Schwager asks, âHow long did it take you to recover the $350,000 trading deficit that was left over from the Cities Service trade?â
Cook: "Five years, measured from the Cities Service trade, which was three years after I resumed trading. The big year was 1987. When I say that, people automatically assume that I must have been short during the October crash, but I actually made most of the money during the bull market earlier that year.
At that time I wasnât day trading yet. In May 1987 I saw what I believed was a phenomenal buying opportunity in stock index call options. Two factors had converged: my cumulative tick indicator was giving extremely bullish readings, and the decline in volatility had made the option premiums very cheap. My grandfather used to tell me, âBuy things when people donât want them, and sell things when people want them.â I put $55,000 into long-term, out-of-the-money stock index calls that were trading at ½ to 5/8. [Schwager points out: In this type of option position, the trader can make multiples of the initial outlay if there is a huge price advance, but lose the entire investment in any other price scenario.] I bought well over a thousand options. During the next few months, stock prices exploded and the volatility shot up â a combination that caused the value of my options to soar.
Ever since the Cities Service disaster in 1982, I had wanted to demonstrate to my parents that I wasnât a failure. On August 7 1987, I went over to see them, âIâm trading options again.â
âOh no!â exclaimed my dad. âWhat is the bad news this time?â
âWell, Dad, that is why Iâm here.â I answered.
âWhy do you trade those things, Mark? Didnât you learn your lesson? Do you have a problem again?â
âYes I have an income tax problem,â I answered. âThe calls I bought are worth $750,000.â
âHow much did you invest?â
âFifty-five thousand dollars,â I answered
âGosh take it!â he said
âNo,â I said, âthey are going up more tomorrow.â The next day I cashed out the position for a $1.4 million-dollar profit.
For what its worth (and I have said this before) I lost over $100,000 my first year (actually $116,560.00). It was devastating. I remember not being able to sleep. Not eating. Not knowing what to do, and laying their in bed sweating, knowing that in the morning the markets would open and I had no clue as to what to do, with (family) people counting on me to perform.
Its a bad way to live
I stopped. Put my finances on paper and made my apologies to my family. I presented a plan to fix it. I presented a timetable. I went out and got the help I needed, and I worked at it.
Eventually I got even (lol) and then learned to make a profit. I remember my first year after break even I made 29K. Big deal right?
This world is what you make it. The bad experience you have had is not going away, but you can make it a turning point in your life if you want to. What I learned is that every minute of the day, any one of us can make a decision to change and then put it into action.
You know the time is going to go by anyway. I am suggesting that doing something to try and turn this around might change the way you think, about the world, and about yourself.
Steve
Its a bad way to live
I stopped. Put my finances on paper and made my apologies to my family. I presented a plan to fix it. I presented a timetable. I went out and got the help I needed, and I worked at it.
Eventually I got even (lol) and then learned to make a profit. I remember my first year after break even I made 29K. Big deal right?
This world is what you make it. The bad experience you have had is not going away, but you can make it a turning point in your life if you want to. What I learned is that every minute of the day, any one of us can make a decision to change and then put it into action.
You know the time is going to go by anyway. I am suggesting that doing something to try and turn this around might change the way you think, about the world, and about yourself.
Steve
If the story is true, which I doubt very much. i've been told about practical jokers on this board. If so, I'm very sorry for you. But, you have to be kidding. What in the world are you doing sitting and holding all your money in a couple of stocks, even the wildest daytrader i've ever met would not do such a thing.
i suggest that you consider gambling counseling, you may have more going on than just a couple of stock trades. how did you get the money to begin with. not being critical, just skeptical.
kevin
i suggest that you consider gambling counseling, you may have more going on than just a couple of stock trades. how did you get the money to begin with. not being critical, just skeptical.
kevin