My Brokerage Called To Ask About My 576k (Unrealised) Loss :(

A couple of days ago, I received a call from my brokerage, Interactive Brokers. It was a +852 XXX XXX number which looked like a scam call but I picked it up anywhere. The person on the line identified herself as someone calling from Interactive Brokers. She explained the purpose of the call was to follow up on the huge loss I had in my trading account.

She asked if I was aware of the loss before proceeding to verify my identity and asked me some questions with regard to this loss, such as did anyone know my account password or if I was influenced by anyone to execute the trades. I told her I was aware and made those trades myself and that the huge loss was due to the stock market going down for the past 6 months. However, these are losses that have yet to be realized and IBKR tracked them as losses too.

I also confirmed with her if my positions would not be liquidated and she said yes. This is because 100% of my capital invested comes from my own cash and I did not use any margins before. Otherwise, at more than 50% down, my positions will be liquidated to meet the maintenace margins requirements.

Read more about the risk of using margins and how you can get margin call here:
Understanding The Risk Of Margins, Selling Naked CALL & PUTS

I later went to check my account and realized I was down by more than half a million in paper losses for both my stocks and options holdings.

It wasn’t that bad at the start of April (after the March rally) as my net liquidity was still around 700k, which means my unrealised loss was probably slightly more than 200k as my invested capital was around 916k (according to my spreadsheet that I used to track all my trades and investments).

Does this huge loss make me feel worried or depressed?

The truthful answer is that it hurts to see the portfolio down by so much, especially after I cut $135k of loss last December, due to bad investments accumulated over the first 8 years of my investing journey. To matter matters worse, I have keyboard warriors coming over to gloat over my misfortune and asking me to reveal all my losses. Well, here you have it!

I am personally not too concerned about the losses from the drop in value of the stocks that I own because I know I have holding power over the stocks.

In fact, they are my collateral to help me earn more income monthly through selling Covered CALL options contracts. The market going down actually helps me generate higher returns as compared to a bullish market. I think it is a better strategy than shorting the market or buying PUT contracts. I have explained my rationale further in this article.

With this strategy, I was still able to generate good monthly returns (see column highlighted in yellow in the above table) over the past 6 months when the market was going down.

You can take reference from my trades in this section: MY TRADES

I do update as regularly and share as much as I can whenever I have time to update (but please do your due diligence and don’t blindly follow me. I am not responsible for any of your gains or loss).

Clock Ticking On My (Bought) Options Contract

The same reason for being able to hold long-term couldn’t be said for my options contract, specifically those that I have bought, which are the LEAPS CALL contracts. When we become options contract buyers, time is now our enemy. The risk gets higher when the trend goes against you and the clock ticks down every single day.

In 2021, the LEAPS strategy was great for generating phenomenal returns due to bullish market trends but it does not work that well anymore in 2022. I am trying to clear away my LEAPS contracts as fast as I can but that is provided the market gives me an opportunity to exit before it is too late. The below table is a summary of the LEAPS CALL options contract that I own and the % allocated for each company.

Concluding Thoughts

The main purpose of this sharing is to encourage folks who have suffered heavy loss in their investment journey that they are not alone. If you are buying into fundamentally strong companies, please don’t panic sell because you have the holding power and things will recover once the current storm clears. You may still be thankful that you are given the opportunity to buy your favourite stocks at a bargain price now.

For friends who have bought options contract and seeing a huge chunk of value slashed off your premium, you are not alone too. Many of my LEAPS CALL are at 10% of their value now. I have average down occassionally for the past couple of months and hopefully, the stock market will rebound in the 2nd half of the year so we can all suffer a lower loss.

For friends who have yet to start investing, I hope the lesson learnt in my journey help you avoid the potential pitfall in your investing journey. On hindsight, I probably would not spent USD100k buying the dip in Dec 2021, though most of those LEAPS contract only expire between the 2nd half of 2023 and early 2024.

I am also glad that towards the end of 2021, I switched strategy to focus more on doing the Wheel Strategy for that regular monthly income coming in every month. That has helped me generate more income and thus, increase my total invested capital.

I started this blog since Oct 2021 to share what I have learned in this investing/ options trading journey, the things that work and the mistakes that I have made that could have been avoided for others so that their journey will be less painful. I still consider myself to be newbie investor/ trader and learning every day.

The content and sharing provided here are free and only cost your time in reading through. It will give me a great sense of satisfaction if the sharings here have benefited you in some ways. If not, I thank you for dropping and wish you all the best in your investing journey. May you gain wealth to enjoy a better quality of life with the people you love.

*** FREE RESOURCES ***
Keen to learn about options trading but do not wish to pay for expensive courses, this newbie guide will help gain the knowledge and fundamentals to understand options better. And it’s totally free!
The Newbie’s Guide To Options Trading

The LEAPS Strategy has helped me make more than USD120,000 in 2021. Here’s all you need to know about this strategy that can help you increase your wealth exponentially:
The Ultimate LEAPS Options Thread

Looking for ideas on what stocks to invest in or which stocks to trade? You can take reference from what I have been buying or selling. I try to update them as soon as I can in this section, as well as share my thoughts on executing these trades:
MY TRADES

If the bear market in 2022 is making feel depressed as your stocks come tumbling down, read this article to find out how you can use options trading to help you claw back some of your losses as you await market recovery:
How I Do Earn Even When The Stock Market Is Bearish?

Also, check out my trading strategies in different market conditions, whether it is bullish, bearish or volatile:
How Not To Lose Money In Trading? | My Trading Strategies For Bullish, Bearish And Volatile Market

I watched tons of videos on YouTube since 2020 and if you are wondering if there are any useful channels that you can subscribe to for learning market trends, TA, FA, check out this compilation here:
My Secret Weapons For Options Trading: I Watch These YouTube Financial Channels Every Day

I concluded my first year of options trading with more than USD160k of gain, see how I do it and the capital I use for every month to give you a sensing of the percentage yield I get out of my gains:
1st Year Options Trading Recap: The Journey Towards SGD$217,509 Profits In 2021

This blog is as authentic and as transparent as I can share, I do not just show the wins and hide the loss. I have made some very bad decisions in the first 8 years of investing and paid a huge price for them. Here is the loss I have accumulated during these years. I hope you learn some lessons from my mistakes.
I Cut $135,715 Worth Of Losses In The Last 1.5 Months

Want to learn more about Technical Analysis (TA) but find it difficult to grasp the concepts? This article brings you TA at a glance, and helps you understand key terminologies, indicators, and techniques used in TA to equip you with the knowledge that can empower you in your investing/ trading journey.
The Newbie Guide To Technical Analysis (TA)

Excited to start your trading journey or perhaps try out with a paper trading account to build your confidence in trading? Check out this step-by-step to help you get started:
How To Buy Options on Interactive Brokers (Step-By-Step)

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