How I Blew Up My Account: Part I

Well this has been a long time coming for me. I avoided it purposely for a long time but I'm definitely ready now a time has lessened the pain of past events. This has the potential to be a long post and I don't want to bore anybody so I think I'll probably break it up and maybe expand or share more as time goes on. If anybody wants more info or details feel free to email me at jasonandrewhaas@aol.com.

The short story goes something like this, though I never set out to trade the markets for a living, it was only in retrospect that my account balance and trading activity suggested I had already been doing just that for about seven years. But to be clear when I say making a living my standard at the time lies somewhere far lower than most people. I was single with no debt and low overhead, about $2,000 per month. I also wasn't paying capital gains taxes as I had a large capital loss to make up for. I had about $250,000 in my account and though there was nothing you would call a typical month, over time there was a mathematical average and it was somewhere just below the $2,000 range. There is much more to the story but essentially I was attempting to make a career change and found myself kind of comfortably going sideways. With each month that passed and block of 6-8 months and the account balance is hovering in a safe balance, I had little desire to force myself to look hard for my next career. I always assumed it would just find me through the course of life.

I eventually found something and after a year I admitted that it wasn't something I could see myself doing long-term so might as well get out now and look for something else. I had enough money and long enough track record to feel comfortable giving up guaranteed income for a  prolonged period until I could get through grad school and find my next calling. I looked through my trade log and played with the numbers of what it would cost for school, rent, etc. Even if I could just make $1,000 per month for 18 months and thus dip in to savings by about that same amount, then so what, I burn through $18,000 out of my $250,000. There was also that cost of grad school that I just considered an investment and was willing to write a check up front for about $15,000. What kind of MBA can you get for 15K and where will it get you? more on that later but the answer is not much. But it was cheap enough that I figured it was a low cost insurance policy. The goal was to get out of grad school and find a new job with my trading account capital above $200,000. That was just a self set psychological boundary that I never wanted to go below.

I already realize that this post is too long for most people, even if you were interested when you started reading it. So maybe I'll do a video post and talk you through the charts I was playing with at the time and it might go faster. I just thought I would give some backdrop for how I was even in position to blow up my account.

I'll shorten the story here and say that I started school in June 2008 and we all know what happened in September 2008. It was during the market crash that I decided to liquidate my account from what was then a long only covered call writing account, that was my break and butter for seven years. In retrospect it was just lucky, I was simply long the market from 2002-2008 when it was on a multi-year upswing after 9/11. But I never saw that for what it was at the time. Like most amateurs I figured since I was making money I must be dong something right. That was the foundation of what eventually turned in to my demise. The second leg of this story was I got extremely lucky and placed a large defined risk/reward bet on the market the day it bottomed. I had no idea at the time it would bottom that day, far from it because in fact I used the longest dated options that existed at the time. This was March 2009 and I used the Jan 2011 expiration dates. I bought long call spreads on about eight separate tickers and then also sold put spreads against it. I played with the numbers and best case scenario was account balance would be $300,000 on the upside and $100,000 on the downside. I thought the market was pricing in the end of the world and I simply made a bet that that wouldn't happen.

Now again I got extremely lucky, I took some of the profits off after a month thinking the bounce was too much too fast and we would retrace. I took some more off in May, sometime in September when my balance was exactly at $250,000 I took it all off. Another psychological move that would harm me later....................I'll pick the rest of this story up later this week. Spoiler Alert: it ends badly.




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