It was year 2005.
I had just moved to the United States leaving behind my family, friends, and a decently comfortable life for a dream. A dream to be inducted in the “M” club if not the “B” club. You know what I’m talking about, don’t you? M is for Millionaire if you are one of those lucky ones not consumed by this lust.
I remember bugging my employer in the initial days talking incessantly about starting a business. Imagine talking to your EMPLOYER about starting your own business! Such was my overflowing confidence, or arrogance? I remember my employer looking at me with a puzzled face when I spoke of it.
I knew I wanted to start a business. I knew I wanted to be a millionaire. What I didn’t know was how?
A tech startup?
An import/export business may be?
How about a gas station or a dunkin’ donuts franchise?
Years passed by and I was still not able to make up my mind. And while I was still in the contemplation mode, I received a phone call from my cousin in India. It was a customary annual call to wish me a Happy New Year. It was January 2008. On this fateful call, he spoke these momentous words:
“By the way, do you invest in NASDAQ?”
I had heard the word NASDAQ has something to do with the stock market and I wondered how and why my cousin in India is keeping track of the US stock market.
“You see, market is doing very well. Every stock I bought an year ago is way up. I’m now thinking of ways to invest in US stock market. You are already there and earn in dollars. Why don’t you invest?” he added.
Though his words embarrassed me a bit but left me charged. I had saved up about 25000$ for my dream car, a BMW convertible. But I was still a few months away from purchasing the car so coming from a merchant family, my first instinct was “What can I do with this money sitting idle in my bank account? How can I put it to use until I buy the car?” I was now itchy to know more about all the money action I had been missing but I needed to do my homework before further discrediting myself on the subject.
Over the period of next few days, I intensely read on the basics of investing, enabled brokerage on my existing employee stock plan account and funded it with the money I had been saving to buy my first BMW convertible car! I even reactivated my Indian brokerage account that had been dormant for years. The only transaction I had ever done in that account was to apply for TCS IPO and made a few hundred bucks. That was my only claim to familiarity with the stock market. I remitted a good chunk of dollars to my Indian brokerage account as well. I had fully stocked my arsenal and was ready to play it on both bases. My sun would never set like it didn’t in British empire!
With spilling confidence, I called back my cousin in the middle of January. After my last conversation with my cousin, I had started noticing that everyone I was speaking to was euphoric about the market. When I look back, I wish someone had told me about the Tulip mania. Well, no one did. This was January of 2008. Sensex was at its peak and a total collapse of Bears Sterns was just a few months away.
So, here I was on a call with my cousin, literally throwing stocks in the cart as my cousin spoke over the phone at the other end. It was exactly opposite of a fire sale – A fire buy! Or should I call it a fiery buy?
When I was done with the call 20 minutes later, I had done shopping worth 8 lacs rupees (roughly 20,000$ in 2008) of shares in Indian companies. No fundamental analysis, no technical analysis, NADA, None!
Once the buying spree finished, I felt so relieved that I’m finally in the game and I’m not going to miss out on the action (That my friend is called Fear Of Missing Out or FOMO as they call it). I had now become a part of the Euphoria. For the next few days, I indeed saw some gains and I was happy I took the dive.
“He was right! I’m already 2% up. Once I’m up 10%, I’ll make a quick exit.” I thought.
Next step was to dive into the US stock market. I was going all out at a rapid pace. I was running to my own destruction.
Since I was a newbie, I needed an anchor or a starting point. For Indian stock market, it was my cousin who gave me the direction but I knew nobody here in the US who could advise or pave a way so I did a little bit of reading myself and came across a website called gorillatrades. I took advantage of the free trial offer and bought a couple of stocks with an investment of 3000$ upon their advice. To my surprise, I made 100$ in one week!
“This shit works! Where was I for so long!”
This was my thought when I saw 100$ profit. This boosted my confidence enough to pump more money into the market and I raised the stakes to 10,000$. This was April 2008 and the storm was still brewing that I was unaware of.
\In the next few weeks, it was visible that there was something wrong with the US financial system. This was making all investors nervous, and the stock market had gone bearish. The problem was, I was too naïve to understand the functioning of the stock market. I did not take the news very seriously. Why would I? I had never seen an economic collapse in my entire life. It seemed like a usual temporary correction and that didn’t bother me much. I was going to wait. In the meantime, I started investing the rest of my money in the US stock market. Talk about timing! No other time in the last few decades could match the terrible timing I chose for buying stocks!
When I started seeing losses on both fronts, it forced me to educate myself in investing. And when I discovered derivatives, I felt like I had found the holy grail of making money!
“What an easy way to make money! The downside is limited but the upside is unlimited!” I was fascinated with the concept of options. I saw an ocean of opportunities to make quick money.
By now Bears Sterns had failed and panic had started seeping into the stock markets around the world. My investment had halved in the Indian market, so I sold all my holdings in the Indian stock market in a panic to pull all my money out. I was deeply hurt financially in the process.
“What a terrible mistake I made. If only I could recover my lost money, I’d bid goodbye to investing forever!” I thought.
The only way I could see to recover my lost money quickly was through derivatives. I decided to use the money I pulled from the Indian market to buy Apple and Google options in a market where turbulence had already started brewing up. Like many other people, I was still not sure of the severity of the situation. And then it happened!
Lehman Brothers collapse
It was the second week of September 2008 and news of the Lehman Brothers collapse hit the news. All my options became worthless and my account which was 25 grand just a few months ago crashed to a perfect zero! It was an unbelievable shock, enough to numb me. I had just lost my entire savings. The loss had the opposite effect on me. It threw me into the classic gambler mentality. Instead of bidding goodbye to the stock market for good, I started thinking about ways to recover my lost savings. So, I took a personal loan, saved paychecks, and accumulated 25 grand again! I was now ready to do trading more than ever but this time more carefully! Since my brokerage company gave me an active trader status, I was able to do several trades in a day! However, I was still lacking the complete picture. It was a clear bear market, but I was an ever bull player. I kept betting on the upside solely on intuition. I bought Google and Apple options once again, betting on the upside but I failed to notice that the market had turned into a bearish mode with little to no upside, rather a big downside. The entire market was melting, and I kept betting on the upside and kept losing money in the process! In a matter of a couple of months, I was down to zero again but this time with a difference. I had a big debt on my head to pay back to the bank. To settle the loan, I sold my company’s employee stock options grant at the lowest possible price! Only if I knew that the very same company grant would be worth half a million dollars just five years later!
Turning from Bull to Bear
Having burnt my hands twice in the market, I took a break for a few months. In fact, I had to as I had no money left. I had been not only burning my paychecks, but I had also sold off my employee grants! In the next few months, I kept educating myself on the stock market and saved 25 grand one more time, and this time I thought I was a wiser man who understood the market much better. With that understanding, I had turned from a Bull to a Bear and I was ready to bet on the downside this time. This was March 2009 and the market had bottomed out. But how would I know? Seeing the market sliding for so long had already turned me from a Bull to a Bear. I bought several Put options of blue-chip companies which had big price fluctuations during high volatility hoping that they will go down. But to my surprise, the market started recovering and my Put options became worthless in a matter of a couple of months.
“Wait, what? I thought I understood the market now.” I could not believe that this happened to me a third time! I started having sleepless nights.
Building it all over again – the fourth time!
I was trapped in a typical gambler mindset. I wasn’t even thinking of making money anymore. All I wanted was to recover my lost money. So, I went on. I took another dive into the market. It seemed there was a timing disconnect between me and the markets. The market was going on a sine wave while my thought process was going on cos wave, lagging by one cycle. I was able to predict market moves right but my timing was always wrong! I was so consumed in the stock market that it had started defining my schedule. I was waking up at sharp 9:20 am, exactly 10 mins before the markets opened to digest all the market-related news, company’s quarterly earnings and revenues,
before-hours price movements, Bloomberg futures, foreign markets, commodities etc. The market would start at 9:30 am and I’d watch it for 10-20 mins before placing my first bet. This time I was able to make money on and off in day trading. It felt like I had grown into the market. I felt like I was into a relationship with the markets. This time I was very cautious in my bets. I had set a goal of 500$ gain or loss per day. If I made 500 or lost 500, I was out for the rest of the day. Setting this rule really helped, only for a while. It helped as long as the market was volatile and severe price fluctuations caused large price movements in options to reach my target of 500 quickly but as the market stabilized and volatility subsided, the fluctuations were not enough to meet the target and I started losing money again because day trading is highly effective mostly during high volatility. When it was all said and done, I was down to zero once again, for the last time because by now I had lost all hopes to recover my lost money. I had understood that I had come too far to recover what I had lost. I was finally done. The golden question that dented my psyche and destroyed my confidence was “How could I lose money four times in a row? Am I that dumb and stupid? Even a broken clock is right twice a day!”
The only consoling answer to this question was that I got better each time I lost money. The first time I had lost the entire 25 grand within a couple of months but on my last try, it took me almost a year to lose that amount of money. There were days when I made more than 5000$ on a single day and then there were days when I lost more than 10000$ on a single day. But the bottom line was that I was never going to play derivatives ever again. The day I made this resolution, I went into the bathroom and shaved my head!
But little did I know that there was one last event waiting to happen to cement my belief into reality!
The Flash Crash
May 6 th, 2010 is the day which is etched in my memory forever. This was the day that cemented my belief that I’m just not supposed to make money in the market, and I must get out of this vicious circle of trying to recover my lost money! It was time for me to accept that I had failed, that the money was gone, forever! On this day, as usual, I woke up at 9:20 am, digested all the relevant news, and placed my first bet at 9:40 am just 10 minutes after market opening. It was a put option bet of 2500$ on Apple. I kept watching it until 11 am when I got a call from my manager.
“Where are you?” He asked.
“I’m home getting ready for work.” I lied. I was glued to my laptop screen watching my Put options on Apple.
“We have a meeting at 12. Remember?” He asked.
“Yes, I remember. I will be there.” I replied and hung up the phone.
Since I couldn’t leave the options trade unattended due to high market volatility, I decided to just sell it, unwillingly.
“I’m even on the price anyway. Let’s sell it and buy it back again after the meeting is over.” I thought.
I got ready and reached work and attended the meeting in time. When I came back to my desk and checked the same options price at 1 pm, it had gone up to 5000$.
“Fck! I lost the opportunity to make a 2500$ profit today! All because of that stupid manager! Why did he have to do that meeting today?!?” I was cursing my manager in frustration. “Never mind. I will catch this trade on a dip.” I consoled myself and waited for another opportunity to buy the same options. But instead of a dip, thirty minutes later the options went up to 10 grand. “What the fck! A lost opportunity of making 7500$ today!” I was furious now.
By 2 pm the options went up to 15 grand.
“Are you friggin’ kidding me?” I was in utter disbelief now. I started getting sensations of anxiety now to have lost a rare opportunity.
And then came the moment I can never forget. The markets went in a deep dive from 2:20 pm onwards. That option price crossed 100 grand. The DOW was down by more than 1000 points. I was numb by now. I could not believe what had just happened. It was a once-in-a-lifetime opportunity that could have recovered all my money in one shot! It was almost my one year of salary! Although the market recovered before closing, the shock left me panting. I was shivering. I had no other choice but to go out for a walk to breathe. I was cursing my luck and no consolation was working. It took me a long time to recover from that shock. This was the day I realized that I must get out of the market completely and lose all my hopes of recovering my money ever! Although I came across similar lost opportunities later in Netflix and Google when the options became worth more than 25 grand overnight because of earnings results but the shock wasn’t so bad because by now I was convinced that I can never make money in the stock market. This pretty much ended my tryst with the stock market.
Currency Markets
At my peak, I was so consumed in the stock market that at one point in time I started wondering why they don’t keep the markets open for longer times. 9:30 am to 4 pm was not enough! And they don’t even open the markets on weekends! What a tyranny! Looking at the numbers rolling on the screen was like a dope that gave an adrenaline rush that you get addicted to and yearn for all the time. And then
I discovered the currency market. It filled the void of the stock market because it was open 24/7. Moreover, my luck wasn’t working well with the stock market, so I thought of trying my luck in the currency market. I was reading in news every day about the severe fluctuation happening in major currencies especially Dollar, Euro, and Yen. I thought of taking advantage of the volatility. I had understood by now that large money movements happen during times of high volatility, in any market. So, I applied for an account with a currency trading platform. I was functional within a day and I started trading with a small amount of 2500$. I started doing hypothetical test runs to validate the money-making potential of the currency market. When it seemed to be working in my favor, I started betting real money. My target was 250$ per transaction this time, gain or loss. The strategy didn’t pay off too well. The currency market saga went on for a month with me losing the entire 2500$ in the account and that was also the end of my date with the currency market, never to look back into it again.
Did I miss a zero?
At my peak, I was doing more than ten trades every day. The trading platform was installed on every device I owned or worked on, be it my mobile phone or laptops, or even workstations. I was glued to the screen pretty much all the time. Since I had an active trader status with my broker, the transaction settlements were instant, and I was able to rotate the same money for different transactions that gave me leverage over non-active traders and allowed me to do several transactions every day. At the end of the financial year, I went to my tax consultant to file taxes for the previous year and he asked me to get a printout of all my stocks transactions for the year. When I reached his office with the required documents, he looked at the bundle of papers and asked.
“Is this a book you are carrying?”
“No, it’s the printout of my stocks transactions for the year!” I replied.
“Are you serious? It looks like a full-fledged novel!” He said in surprise. He took the bundle and my W2 and started inputting numbers into his tax software. After a few minutes when he was done with his calculations, he looked at the screen, shook his head in negation and erased everything, and started doing it all over again.
“What happened?” I asked him.
“Nothing. I think I missed a zero somewhere and messed up the calculation so I’m recalculating.” He replied and continued inputting numbers. A few minutes later when he was done with his recalculation, he kept staring at the screen in disbelief.
“What happened now?” I asked.
“I don’t know man. Is this for real what I’m looking at?” He asked and moved the monitor to my side.
The calculation showed that I had done two million dollars worth of transactions in that year! I was stunned! We looked at each other’s faces not knowing what to say. It was unexpected for both of us. For him, because he did not think my salary was enough to transact in millions and for me because I couldn’t believe I had done so much trading.
“When was I doing my office work then?” I wondered.
It wouldn’t have been a surprise if this figure came from the trading calculation of a rich man but it coming from the trading of an average joe was unexpected.
“You must get married!” He said breaking the silence.
“You come here every year with tens of thousands of dollar loss and now you’re coming with a couple of million dollars worth of the transaction. And you are still not making any money. What is the point of doing this then? I don’t know what to make out of it. You need a wife to keep a check on your money-wasting tactics!” He continued.
Obviously, I had no answer to that. We finished my tax filing for that year and I headed back home with a promise to him that I will put an end to the whole stock market adventure now.
To be continued…
