Im writing this for two reasons:
1.) To help people avoid the same mistakes I made
2.) To get the story off my chest
Last summer I decided to learn about the stock market. I opened a Scottrade account, deposited $500.00, and started making trades every few days. After three months of experimenting, my account was right back where I started, give or take a few bucks. Content with my summer trading, I decided to take a break from the stock market until I graduated college in December.
Fast forward to January 2014. Not only was I graduated and working a full-time job, but I also had recently learned about:
I was intrigued by the possibility of making 100%+ gains in a matter of days, or even minutes. Calls, puts, strike prices.. I learned what seemed like everything I needed to know, and I felt I was ready to start trading options.
I started by playing the earnings game. Everyone uses NFLX, right? Their earnings are tomorrow..Lets put that $500.00 in your Scottrade account into some $370.00 NFLX calls.
I made 7X my money off that first trade. Wow, that was easy!! $500.00 to $3,500.00 in 2 days. FB was next. Everyone uses Facebook... My $3500.00 grew to $6,000.00. Then Chipotle. $6,000.00 turned into $11,000.00.
I had turned my $500.00 into $11,000.00.. in TWO WEEKS. I was three for three, and I was hooked.
You know how careful you usually are with that first $500.00 you start trading with? Well for some reason, the more money you have, the more careless you become (in my case, at least). I thought I was invincible, and decided to put a huge bet on CSCO earnings. Why double $1,000.00 when I can double $10,000.00? Well, CSCO stock didnt go down the 10% I had predicted after earnings. My $10,000.00, however, went down 100%.
I had lost everything.
3 weeks later, I put $2000.00 into my Scottrade account and started back up into my options trading madness. I was very careful in the beginning: I swore to myself that I would NOT make the same mistake I made last time. When I made money, I would be smart with it!
After a few failed trades, I managed to turn the $1,500.00 that remained of my $2,000.00 into $12,500.00. (NFLX went down quite a bit one day.. I had bought weekly puts at market open.) I WAS BACK!
...that money lasted about 2 days. I made two huge bets (thats what I was doing at that point: betting/gambling), and managed to lose my money all over again.
3 weeks later, $3,000.00 this time. Third times the charm...I WILL be smart this time! By this time, I had learned about SPY options and decided that SPY options would be where I would make my money back.
Monday, April 14th, 2014: lost $100.00.
Tuesday, April 15th: Turned $2,900.00 into $12,500 -- in one day. I was somehow able to time the spikes and dips of SPY that day just perfectly. Whew...I did it!! Im back! I swore I was done.
Until today. I had my confidence built back up from my amazing Tuesday, and was extremely cocky and over-confident. SPY looks like its heading down. Lets pay off those school loans, baby. Well, SPY didnt go down. It went up. And I didnt exit when I should have. Oh, I lost $2,000.00. Ill get it back. I didnt.
So heres the moral of the story: be smart and make sure emotions dont cloud your judgement. Treat every trade as you did your first trade, and dont get sloppy and cocky.
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