Tag Archives: Options

Stonks Suck: Trading Tips for Beginners

As for stocks and trading I didn’t think I had much to tell anyone starting out. Luckily my brain goes into hyperdrive at 3 a.m. and holy hell I do have a few protips for the novice stock trader. While I’m not a trading expert by any means I have learned a few things along the way. So here’s a list!

Know Your Goals

It’s good to know exactly what you’re investing for, just be honest with yourself. If you’re 40 or 50 and are trying to save up for retirement, act like that’s what you’re doing. Open up an IRA, don’t dump money into stupid-ass WallStreetBets meme stocks, and don’t go chucking major portions of your portfolio into options. Do, please do, buy ETFs, dividend stocks, and whatever other boring boomer shit you want to buy. Bonds are probably perfect for you. These are boring, but boring is good for long-term investing. On the other hand, if you’re “investing” to get filthy rich ASAP, do not buy boring ETFs and dividend stocks. Do risky shit and make that money while you can. Learn how to be aggressive and have fun not sleeping well while doing so.

I say to know your goals early because your goals will manifest themselves in how you’re investing whether you like it or not. When I first started investing I tried to be, well, an investor. I was someone making money for the long term and while I thought this was my goal, I was mistaken. Apparently at heart I want to get as rich as possible as quickly as possible. I’m not so desperate that I’m blowing my account up or going all in on a single stock, but I do get myself into some questionably risky situations. Starting off I had half my money in “proper stocks” while I was doing seriously stupid stuff with the other half. My investment portfolio was a Jekyll and Hyde conglomeration split between boomer ETFs and meme stocks, all while jacked-up on options. This led to a lot of juggling between mindsets that was mostly subconscious. Was I trying to be safe? Was I taking risks for max gains? I didn’t know. I wasn’t honest with myself. Be honest with yourself. If you’re a degenerate options trader act like it and you’ll be happier. You might be poor, but you’ll be happy.

And if you’re new? Fuck around and find out your style and learn in the process. It’s like anything else in life; you don’t know until you try. Buy and sell some stocks, see how orders work. Learn what the hell a limit order is, what a stop order is, and what “bid” and “ask” are. If you stumble your way into options, learn what “expiring worthless” is and what “deep out-of-the-money” means. Whether stocks or options, above all else have fun and learn, and try not to lose too much money in the process.

DiVeRsIfY!

Options are great. No, not those kind of options, but options like how normal people use the word. Basically when trading it’s hard to be right 100% of the time, so why risk your whole account by owning a single stock? It’s dangerous because you will be wrong and if you bet it all when you’re wrong, even if it is rare, you’re out of the game. All the money is gone. You might even owe money to the broker if you did something really dumb.

Diversification is sometimes laughed about, even by giants like Warren Buffet. He famously said something like, “Put all your eggs in one basket and watch the basket.” He’s not wrong, but most people don’t know what to look for regarding dangers to this basket. There could be a wolf about to eat all the eggs and we wouldn’t know it. We wouldn’t even know what a wolf looks like! My point is unless you’re an expert at knowing market conditions, economic conditions, and are great at reading 10-Ks and 10-Qs like a wizard, you probably can’t watch the basket very well.

Personally, I admit I don’t know shit about companies. I invest in meme stocks that have high options premium. That’s my investment strategy. My egg basket is, well, I don’t know what it is, but it sure isn’t something that has any business holding eggs. The eggs could be eaten, spoiled (there’s probably an option expiration joke here), or be stolen at any moment and that’s why I have multiple baskets. One or two of the baskets can get stolen/eaten, and I still have eight more. I can and will be wrong, and at most it’ll wipe out 10% of my holdings. I, and you, can happily easily take a 10% hit to the investment account and be able to function.

This play more into my next tip: be stoic. By diversifying you can remove extreme emotion from your investing/trading.

Be Calm. Be Chill. Be Stoic. It’s just money after all!

You are your main enemy to stock market success. It’s not market makers, shorts, or other traders; they only use you against yourself. Why? Because you’re a person. You have emotions. You’re stupid and irrational and emotional. Money is on the line; you know the thing we all trade for shelter, food, good, and everything? Money is fundamentally tied to emotion, so when your money starts to get messed with you get stupid. Think of all the silly shit you’ve done and said on an emotional high or low. You may have drunkenly told someone you loved them, kicked someone’s ass, bought something stupid, and apply this to your investment account. How are you going to treat hundreds or thousands of investment money if you’re emotional? When a stock you own (please be diversified!) drops 60% and your money disappears what do you do? You have a choice and emotion will only make the choice harder to make.

I don’t really have a tip here because it’s something you learn to deal with. There is no magical key to not being emotional when money is involved (besides shutting your phone off and going for a walk), but just know that it is immensely important, more than any other thing, to keep emotion in check in regards to investing. I do have a few tips on things to be aware of though. Luckily they have names so by labeling them you can recognize what’s happening and combat it.

FOMO

Fear of Missing Out. You watch a stock you were kinda thinking about buying jump 300% in a few days. People at work are talking about their hot stock that’s printing them tendies. You start to think that maybe you missed the boat — you dragged your feet and are sitting out riding the rocket to the moon — or did you? Maybe it’ll go up another 300% if you get in ASAP! Yeah, that’s a great idea. You’re not even greedy, you just want it to go up a little bit so you can feel like you were part of the moon mission, and that’s not hard to do, right? Surely if it went up so quickly, it’ll keep going up at least until you sell.

Wrong. This is a terrible idea. Hype is dangerous. FOMO is why people I work with are chucking money into Bitcoin at $50,000 after it went up 1,000% in a year. This is why people are still bagholding GameStop at $450 per share. This is why a large portion of bagholders exist in the first place; their still holding onto their $18 AMCs they bought a few months ago no wanting to take the loss.

If you find yourself experiencing HARD FOMO and just can’t resist, buy yourself a small portion. Don’t go crazy. Don’t “invest” anything more than you’re willing to lose. Using Bitcoin again, if you invested $1,000 at $50,000 and Bitcoin went down to $5,000, would you be fine with it? You turned $1,000 into $100 and how would you feel? There is a low enough point where it’s stomachable, so invest that. I’m not buying Bitcoin but if I did I’d be okay with a $500 “investment.” If I lose it, it’s fine, and I won’t lose sleep over it. FOMO is dangerous so be aware of it.

(Related Post: The Great GameStop Short Squeeze of 2021)

FUD/Dooming

The opposite of FOMO: Fear, Uncertainty, Doubt. This can be caused by your family questioning what the hell you bought, news stories, internet shitposts, etc. and make you scared to hold your stock/option because you’re worried the price will crash. These pale in comparison to witnessing a beloved stock you owe totally collapse in price. You watch your thousands of dollars of gain disappear in a few days (or maybe hours) and what do you do? You panic sell. You’re $10,000 profit is down to $7,000, $6,000 and $5,000 and OMG how much worse can it get! I could lose all my profit! You panic sell and realize a $2,000 gain, but oh how you kick yourself in the ass for not getting out at the top. You were greedy, you feel like shit. You’re the worst trader ever.

Then the next day the stock goes up and you get a side of FOMO to go with your main-course FUD. If only you held…but maybe it’s not too late to jump back in?

As before, no real tips on this one. It’s also hard to give tips for when something emotional is happening. It’s easy to say “don’t panic sell!” but when you’re on the verge of panic selling its hard to detach yourself from the numbers on your screen and actually not panic sell. Only with hindsight do you realize how much of a paper-handed bitch you were.

Like with FOMO, a good recipe for mitigating FUD is to give into your emotions just a little bit so you feel like you’re doing something. If you want to sell as a stock is crashing, sell half. Sell a third. You don’t need to sell it all and regret it later. And if you have truly massive balls, you can always buy more shares on the way down!

No Regrets! No “what ifs”!

There’s few things worse than seeing an “investment” work out better than you expected but to not sell at the top. You’re always haunted by the “what if I just did this…” A stock triples, you don’t sell, and then it’s back to where you bought it at. You could’ve raked in so much money but you held too long and raked in absolutely nothing.

Then there’s the opposite problem: selling too early. You got greedy/scared and took a 10% gain when you could’ve had a 1000% gain. This was me with GameStop in January. I had 400 shares total and sold them around $30-40. Sure I made $5,000 but I could’ve had $150,000 if I held on for another week or so! Try not to kick yourself in the ass for missing like that and tell me how well it goes. It’s hard.

At least I didn’t FOMO back in. I realized my mistake — I sold too early — and am trying my best to not let it haunt me. Everything is clear with hindsight and what I did made sense at the time. Trading is stupidly hard and no one perfectly buys at the bottom or sells at the top and as long as you come out ahead, who cares? I’m not the guy holding bags at $450 a share, and at least I was in the play and made some significant cash. As always, easier said than done, but try not to be too hard on yourself for not being perfect.

My tip here is to take profits as you wish. You can probably tell that I’m a big fan of taking half-measures — selling half, buying half — because you’re doing something and doing something feels good. If a stock goes up 20% and you want to sell, sell half. Realize some profits and let the rest ride. If it goes up even more, sell half of those, and so on. This isn’t a rule, just an idea. You feel good taking profits but leaving some on the table does wonders for the “what if” thoughts that might haunt you.

The same is true for buying. Buy half of what you want and see how it plays out. If the stock goes down, buy more. This keeps you safe from tossing in a ton of money at a high price, but makes you feel good for getting some cash in the game.

In Closing

I don’t really have much to say here. Stocks are like anything else; you suck at first and then you get better. The only downside to sucking is you’ll probably lose money in the process. Consider it tuition for learning or something. Be glad that you’re taking the first steps to financial literacy and independence because investing is just that: investing in your future. Have fun and I wish your stocks fly to the moon and beyond and that you get the Lambo/Tesla of your dreams.

(Shill Note: I did actually write a book about trading options. I think it’s only $5 so if you’re interested please check it out. And if you do, LEAVE A DAMN REVIEW! I’m really curious on how the book actually is received by those who read it. It might suck but I’d like to know if it sucks at least. /Shill.)

The Great GameStop Short Squeeze of 2021

I haven’t slept well in three days. My typical day consists of reading from midnight until 4 a.m., taking either a benadryl or melatonin (both?), and finally falling asleep at 5 a.m. I then wake a few hours later around 9 a.m. stressed and anxious and fall back asleep around 10. That lasts until noon or 1 and then it’s time to pound coffee and head to work.

What’s with the waking up at 9 a.m.? Stocks, that’s why. I’m sure you’ve heard about this little company called GameStop that has dominated the news and social media the past week. I’m sure you have a vague idea what “short selling” is, know how evil hedge funds are, know that small investors are using Rohinhood to finish the crusade that Occupy Wall Street failed so miserably at before, how millions are finally righting the wrongs of the Great Recession, and so on. There’s so much to cover that everyone has already covered that I’m not sure what to say about it. Any kinda “factual” reporting here seems boring and pointless. How about an insiders perspective? Someone who’s been on the WallStreetBets sub-Reddit for quite some time, someone who’s blown their account up a few times (long $ROPE), someone who finally figured out how options work, and from someone who saw the GameStop hype brewing about a month ago.

(Shameless plug here: I wrote a book about trading options. Check it out if you’re interested.)

Looking at my past orders I purchased 100 shares of GameStop on December 28th 2020. r/wallstreetbets, the now infamous subreddit, was my go-to source for hot stocks to consider. My strategy that has been working pretty well: find hot stocks that that my fellow idiots on WSB were buying options on and sell options to them. So I loaded up on 100 GameStop shares and sold a thing called a covered call. This gives you a few hundred dollars and is kinda like a “guaranteed sell” if the stock goes above the options strike price which inevitably caps any gains you can make. I’m a proud member of theta gang — people who sell options for modest profit over risky YOLO trades — so I did what any theta gang member naturally does: rake in that sweet options premium.

I want to point out that GameStop wasn’t very special at the beginning of year. It was turning into WSB’s darling, but that was all. Everyone knew it was heavily-shorted but no one at the time was trying to force a short squeeze or knew how culturally massive GameStop would be in a few weeks. I had 400 shares at one point and was gladly selling covered calls against them. Buy 100 shares at $18, sell a call for $20, and collect my free money. Repeat as often as you can. Once it popped past $30 I basically ignored it. That was the then-fabled short squeeze and I made a few thousand off it. Time to move onto the next hot meme stock. Hmm…maybe AMC? Blackberry was also talked about a lot too…

But GameStop kept going up! It went from $30 to $80, then up to $150, and then near $500. “Holy shit,” I thought, “I really messed up here.” Had I held the 400 shares I had I’d have $100,000 in my name, all in the course of a few days. One thing you learn to deal with in the market is to quickly banish those “what if?” thoughts that can kick your ass. Yes, I could’ve made $50,000 off Tesla last year. Yes, I missed a once in a lifetime $100,000 on GameStop. Oh well, at least I earned a few thousand and didn’t lose anything.

Everyone around me has taken notice and has been asking me about it. Last week my sister asked me about investing which she had no interest in before. Work is even crazier with everyone asking me about GameStop, AMC, Blackberry, and whatever other hot stock is in the news. I’ve went from the guy who sometimes trades, a person who happily mentions the hundreds of dollars I lose occasionally, to everyone’s stock market guru somehow. Even coworkers who aren’t interested in the market are asking me about it. A newer employee I haven’t talked to really was showing me Tik Toks about GameStop. People are constantly showing me memes on Reddit and Twitter. Two other coworkers opened up Robinhood accounts and are snagging up AMC and BB shares with the small amount of cash they chucked into it. One friend on vacation texted me a few days ago saying, “Please tell me you’re fucking rich off GameStop.” (Hint: I wasn’t. Thanks covered calls.) Best of all was Thursday when I found myself and a coworker on break trading Dogecoin of all things together. I made out with a cool $100 and he made $25. Hours later one of the new investor guys came up and asked us about Dogecoin. Three people trading dogecoin while on break at UPS? Come to find out later, he held and took some losses over the next few days. Better to learn the lesson sooner than later.

I left work Thursday totally destroyed. I’m not big on socializing and having people constantly asking me about GameStop, AMC, and how to buy and sell stocks was surprisingly exhausting. What are the tax implications? How much have you made in a single day? How much have you lost in a single day? What are limit orders and market orders? And so on. It was exhausting to talk about stocks as much as I did, being used to minor comments here and there about my trades. It’s cool though — I’ve always wanted people to be more financially literate and to invest — but this is insane and I’m not prepared for the hype and popularity of it all! 

I’m also worried for all the newbs who jumped into the market the past month or so thinking they can simply buy stocks and make a ton of money. GameStop can move higher I think — the shorts still haven’t covered — but these people buying in at $300 and $400 have a long way down if the stock decides to move that way. It’s great so many are interested in investing, but riding GameStop down to double digits and losing 60% of their cash isn’t going to be a good introductory investing experience for them.

What’s really blowing my mind with The GameStop Short Squeeze is how it’s taken on a life of its own. As stated, even two or three weeks ago the “investors” at WallStreetBets weren’t trying to fuck over hedge funds or make some grand statement about societal change; they just want to make some money. Once GameStop exploded the zeitgeist of the sub grew and morphed into something much greater than making money. It wasn’t about that anymore, it was about fixing the flawed financial system. Letting the little guy have his share, taking the power back from the 1%ers, giving back to your family and community. A bunch of recent posts detail Redditors buying Nintendo Switches for children’s hospitals. One person donated $5,000 to a charity. Another literally brought bags of peanuts into a local GameStop store with $100 bills attached to them. I plan on chucking $500 at the local food bank in the name and glory of GameStop. WallStreetBets is actually pretty generous with their earnings because they’re the little guys. They don’t care about their second yacht or a fifth vacation beach home. No, when you’re living off $30 or $40,000 per year, making $500,000 in a week means you can piss it all away by helping people. You’re well aware you don’t need it so large chunks can be given away. You damn well the hedge funds aren’t as generous with their gains.

The consensus on the sub now is one of millions of people on a mission: fuck over Wall Street. Everyone is snagging up GameStop shares wherever they can find them and they’re stubbornly holding. No one is giving into the temptation of cashing out for thousands or millions of dollars because it’s suddenly bigger than any one person. We’re all on a mission and that mission is HOLD, DO NOT SELL UNTIL GME IS $5,000 $10,000 PER SHARE! Nearly every comment consists of diamond and hand emojis and (having “diamond hands” mean you won’t sell when things seem iffy. Compare that to “paper hands” someone who sells at the first sign of risk or danger.) WSBers have taken out a few billboard and even airplane banner ads directing people to NEVER SELL!

Our hero u/DeepFuckingValue. Source.

I’m not sure how all of this is going to end, but damn is the journey a hell of a one. I bought back in with five shares at a price of $330 just to go along for the ride a bit more. I’m not trying to get rich or anything, I just want to say I was holding with diamond hands like everyone else. No one knows what the next few weeks will hold and it really feels like we’re living through a notable time, something that is literally making history as we witness it. I never expected this to happen with stocks or investing or fucking GameStop of all companies but here we are. HOLD HOLD HOLD and DO NOT SELL!!!!!!!!!!!!!

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