So I was going through Reddit and came along a page named Wallstreet Bets, a page in which people share their tragic trading stories. I don’t know about you guys, but I have sometimes felt that life is going so bad, that I think it can’t get worse; to my surprise, it does get worse. If you think you had a bad day, take a look at these guys that almost literally burned their cash. Today… I’m here to talk about how economic failure can sometimes put you in a really tough spot.
If you read my previous post, we talked about options trading. Now, if there is something that is proven is that traders will blow up 3-5 trading accounts before becoming profitable, and only the option sellers are consistently profitable. Failure always happens and to be honest, that’s a step required in order to become successful and really learn. But when it comes to vast amounts of money, gambling more than 10 grand is not a brilliant idea.
I don’t want the idea of trading options (without knowing the risks and not limiting them) to cross your mind; you might end up blowing up your account in just one trade, commonly referred to as YOLOing your money. If you nail it you will be sleeping in cash like some people, but if you don’t then your “investment” will be worthless. These are some of the users that went lucky and some of them who did not. So I want to educate you and be better save than sorry.
If you see your account like this, congratulations, you just outperformed 99% of the people in the market; to be this lucky is not easy. I’m talking about the percentage of profit. Sure, you might use 1 billion and make another billion and it is just 100% profit. He probably played earnings and nailed the move. If you don’t know, earnings day is when a public company announces its revenue and earnings per share. If the company beats revenue expectations, provides good guidance, and surprises, the stock will skyrocket 5-10-or even 20%. A 20% stock move can mean a 1000% percent move in your option contract. Chances of nailing a move are minimal and many other factors like implied volatility can crush your contract even though you nail a move. Seeing this chart in your account might be appealing but don’t get too excited, seeing the opposite can really give you a heart attack.
See how many people ended up red and how many greens; -$32,000; $-52,000; and $-75,000. You have this guy that went from being able to own a brand new Tesla to just being able to buy 28.75 Chipotle meals. That’s insane and although some people might laugh at it, it concerns me as this is serious: some of these massive losses could eventually lead up to depression when we talk about vasts amounts of money.
Key takeaways:
- Options trading can be lucrative if you choose the right approach
- Options trading can also be destructive and detrimental
Honestly, this is exactly what scares me so much about the stock market because even if you know what you’re doing, there’s no guarantee that you will make a profit on the money that you invest. A lot of people are just lucky to break even. One quote that my parents always tell me from Warren Buffet is “If you don’t feel comfortable owning a stock for 10 years, you shouldn’t but it for 10 minutes.” I think when investing in the stock market, really the most reliable way to make profits is to consider the longevity and rewards of the stock .
I agree with you in that case. Nothing beats long-term investments unless being consistently profitable which is hard to achieve.
It’s wild that people are so willing to risk so much money on an investment they aren’t certain will bring them profit. I would never be as risky as that. This blog reminded me of a quote from Warren Buffet: “You never test the depth of a river with both feet first”. I’m paraphrasing here but it gets across the idea that you should never put all of your money into a single investment because it could end up going horribly. Thank you again for emphasizing the risks associated with this type of trading, it is always good to be cautious of investments you make, especially if you are not intimately aware of how the system works.
This is crazy. It just goes to show how everyone could make such a bad mistake if you gamble too much. It’s definitely important to learn and practice before you begin investing large amount of money.