Quote from Robert Weinstein:
I agree I am focused on the stopping of the leak. I believe that news will pop the stock up higher and in a hurry. I do not agree that it could easily cost 100s of billions despite what some may say in the media. Oil prices are holding up and BP is not just one company. It is multiple companies and litigation takes years (see exxon for example). So far we have not actually seen much in terms of lose in terms of "destruction of millions of lives and the crushing of incomes and real estate" in my opinion. We have seen the news talk about some of this but it is my experience that what the news talks about and what is really the result is not always the same.
Clearly though I have been wrong yesterday and perhaps today (I moved from stock to options so this has yet to fully play out and could end up better or worse in the coming days).
My best guess is that those who are talking about a BK are also trading the stock and have an incentive to drive the price down.
Best
Robert
What you are doing is trying to argue with yourself to convince yourself that you were right and the market was wrong. You are trying to justify your actions to yourself so you do not feel any responsibility for the trade despite the large loss. This is a common mistake we all make when we have a big trade go against us. However the market is always right and stocks do exactly what they are supposed to do.
You are trying to convince yourself really hard with the following but think it through:
- "once they cap the leak the stock will pop" why? is that written into the law somewhere? The oil has been running into the ocean for almost 60 days and we are close to 60-70 million barrels of oil leaked and you think that capping it now will shoot the stock back to $40? Maybe, but you are saying it with so much certainty clearly your trade is no longer objective and that is the first step to huge losses.
- "the stock cannot go bankrupt" - who cares about bankruptcy. You will go bankrupt if the stock dropped to $20 so you should care less about the fortunes of BP and more about yourself. It does not matter what will actually happen with BP, it only matters what PEOPLE THINK will happen as the sentiment is enough to push down a stock. People are boycotting the gas stations and BP is seen as the devil by most people. Fair or not that is going to affect perception and whether or not someone will buy the stock. You don't think large funds were dumping the stock all the way down to get out of it and separate themselves? Why would they rush back in now, just because a leak was capped or it is at new lows? If you think BP should be fine and not go bankrupt, that is fine, but if you are alone in your thinking or the sentiment is strongly against you, why fight it?
- "litigation takes years, oil prices holding up BP, BP is larger than BP America, etc.." these are all excuses on your part to justify why the market is WRONG for dropping so much. BP could snap back to $40 if the market has a strong rally and oil hits $80, it could also just be a lot of short covering today since the momentum slowed down. It could be that the World Cup is starting or it could be that the Gores are divorcing. It could be 100 different things so the worst mistake is trying to justify staying in when it is raging against you and then adding more risk. You were down $5k, good time to get out.
Not trying to put salt in the wounds but it would have been fine if you just kind of turned a scalp into a major position and realized the mistake but this is a lesson for all of us. When a trade turns SUBJECTIVE and we think we know more than the market or try to tell the market what it should do, that is when we lose the most money. Also never martingale a subjective trade hoping for a bailout.
