10th March was a strange day for me. I basically totally threw everything that I had learnt through my mistakes out of the window. The stock market turned bearish after Fed Chairman, Jerome Powell’s hawkish comments, on further rate hikes due to rising inflation data.
Elsewhere, reports have emerged on the collapse of Silicon Valley Bank and Silvergate Bank, both due to a bank run (a large number of bank customers withdraw their deposits because they believe the bank might fail).
I was bearish on Tesla and Coinbase as I believe their share prices would fall. As a result, I bought very high risk 0 day PUT options (expiring on the same day 10 March 23), hoping to profit from a collapse in the share price of both companies. A PUT option, when predicted correctly, has unlimited upside for the option buyer. I tried to adopt the strategy that I learnt from the day trading group of using short expiration date and allowing the sudden share price movement to create an exponential increase in premium price.
I initially bought one contract of Tesla PUT option contract at USD160 and it quickly ran up to USD220. I then took on more risk and added 9 more contracts at US220, making my average price of my 10 contracts very close to USD220 per Tesla PUT option contract. The total invested capital was USD2.2k.
It was still going well as Tesla fell below USD170 and my PUT contracts turned profitable. However, the market then recovered and Tesla surged to more than USD178. I did not put any stop-loss for this position, not even 50%. As the day dragged on, Tesla’s share price did not fall below USD170 and the premium fell fast as it neared the market closing time, even though Tesla eventually dropped back to close flat.
During the trading session, I had a chance to roll the contracts to following week, to a strike price of USD150 (from the original USD170) but did not do so as I was still hoping that Tesla would drop during the later part of the session. It did not happened as the 10 option contracts eventually expired worthless. I tried to repair my trade by buying in the opposite direction, with 10 CALL contracts of strike price of USD185 at a total of USD60. As Tesla’s share price was trading sideways, that 10 CALL contracts expired worthless as well.
Meanwhile, my 5 PUT contracts on Coinbase at strike price of USD50 also expire worthless as the share price of Coinbase recovered after I opened up these positions. That was a smaller loss as compared to my Tesla positions as each contract cost USD55 and I had only 5 contracts.
In total, I lose a total of SGD3,422 (USD2,535) in a single trading day, which was the biggest amount I have lost in a single day trade. The details of my trades are as shown below:
Concluding Thoughts
It was so ironic that this happened after my last 2 blog posts shared about the minimizing the risks of options trading by being an options seller instead of an options buyer, as time can work against me being an option buyer.
I also shared about the risks involved in doing day trading and that each trade has the risk of losing all the capital when due to the volatility and sudden price movement, as well as little reaction time as the contracts expire very fast.
Then, here I am, choosing to be an options buyer instead of a seller, placing high risk 0 day trades without any stop-loss and not doing anything to either roll the contract or cut loss when things do not go according to plan.
I will remember this expensive $3,422 lesson to preach what I pray and to follow the rules of safe trading or else suffer the consequences of the worst case scenarios. Also, to keep my trades small and celebrate the small wins instead of YOLO my money, hoping to win big with one lucky trade and end up with losing all my capital.
I hope this article brings some value to you and highlights the high risks of zero day contracts or day trading and that you do not follow my footsteps in making these mistakes.
<< Subscribe to my blog to have all these articles delivered directly to your email address >>
*** FREE MONEY ***
Sign up for WeBull Securities Brokerage and fund any amount to receive up to USD500 in share value (Apple, Tesla, Microsoft, Google)
Receive Free Money (USD30~USD500) When You Sign Up With WeBull Securities Platform (Fund ANY Amount)
*** 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
After accumulating more than 600k of unrealized losses on my portfolio, I wrote this article to encourage friends and investors who are also losing a lot of money to the market.
If You Are Feeling Depressed From Losing Lots Of Money In The Stock Market, Here’s An Article For You
In the 10 years of my investing journey, I have made many mistakes but also learned many lessons from these mistakes. I compiled the 10 most valuable lessons that I have learned and may they help you succeed in your investing journey.
Happy 10 Years Of Investing | 348k (Realised) Profit, 635k (Unrealized) Loss & 10 Lessons Learnt
The precious 6 lessons I learnt after cutting more than half a million of losses in the stock market through bad investments and risky trades.
6 Lessons Learnt After Losing 551k In 10 Years Of Investing & Options Trading | What Newbies Should Know They Start Investing/ Trading
How I managed to build a 1M investment/ trading portfolio despite coming from humble beginnings.
How A Poor Kid Got To A 1M Investment Portfolio | Tips & Principles Of Building Wealth
I did these 10 side hustles while holding a full-time job, so I share them here so you can be inspired to grow your wealth through a side hustle that you enjoy.
I Did These 10 Side Hustles While Working Full Time | 10 Side Hustle Ideas To Help You Earn An Extra Income
Struggling with inflation and high cost of living? Try these 10 methods to help you save money and accumulate more savings for investments or rainy days.
10 Ways To Save Money To Help You Fight Inflation & Rising Costs Of Living
Why I am building $120,000 of cash reserves in Singapore Savings Bonds (SSB) & 5 reasons why I think SSB is a worthy low or zero risk investment that you can consider.
Why I Am Building $120,000 Of Cash Reserves In Singapore Savings Bonds (SSB)? | 5 Reasons Why SSB Is A Worthy Low Risk Investment
Sharing why I am doing Dollar Cost Average (DCA) into SPY and QQQ ETF for long term investments and a step-by-step guide to doing it automatically with Interactive Brokers.
Why I Am Doing DCA (Automatically) For SPY & QQQ For My Long Term Investment? (20% ~ 30% Upside Potential) | Step By Step Guide To Activating Automatic Recurring Investment On IBKR
*** FREE MOTIVATIONAL BOOK ***
If earning more money from your investment does not excite you anymore, you may be seeking a purpose that brings fulfillment and meaning in life. I have written a motivational book that may be useful to you in some ways. You can also download a free copy here:
https://learninginvestmentwithjasoncai.com/finding-the-magical-realm-of-happiness-motivational-book
Learning Investment With Jason Cai 