So, you've blown up your portfolio. What now?
Honestly, I hope this isn't the case, but many of us have been there before.
It's perfectly fine to curse (not in front of children), cry, scream and yell (not at other people), and break stuff. Maybe don't break stuff considering you did just lose a lot of money.
One thing you absolutely cannot do is blame other people for your choices.
Unless someone has a gun to your held, is blackmailing you, is holding a family member hostage, or threatened to make you drink Major Mellon Mountain Dew for the rest of your life, the the buy or sell decision is yours. There can be times when you are forced to exit a position, but you still made the decision to establish the position.
Don't parade around with your "It's Robinhood's fault." Most experienced traders have been stuck in a halt or a position where they couldn't exit a trade. I've seen those warnings shared many times by Real Money contributors and other experienced traders.
While the original idea started out with a fundamental thesis, it has morphed into pure emotion. We've blown past taking down a hedge fund to enforcing your will upon the market. Very few, if any, traders can enforce their will upon the market.
I had a former client call Monday saying their family wanted to buy a single share of GameStop (GME) at $250 just to be part of the madness. I said, personally, I'd rather own five shares of FuboTV (FUBO) if I wanted to really roll the dice on another short squeeze. This came after my son told me he wanted to own a share. And my teenage twins were asking me to explain GameStop. They wanted to know if we owned any.
These weren't positives. They were huge flags. They talked excitedly. Not one asked what was GameStop worth or what was the downside. They all wanted to know how high it could go and they wanted in.
The biggest takeaway here is that emotion will cloud your judgment. The reason so many experienced traders are cynical about these types of moves has to do with experiencing the same emotion newer traders are feeling around GameStop and the likes. And many of those same traders were crushed because of that emotion and the belief "this time is different."
And every time is a little different down to the finite details, but the broader results are often the same.
If you did lose on the long or the short side recently, I empathize. The run up was illogical and the hype was enticing. Both are easy draws, especially for new traders, but I had plenty of experienced folks messaging me so we could compare notes on how to play the mania.
I've opted for the more conservative, time-consuming path, identifying inefficiencies in the options market. Over the past week, I've been able to bang out dozens and dozens of risk-free trades, receiving small net credits for each trade. In the end, I may only make a few hundred or a few thousand dollars but it's 100% free from emotion.
Unfortunately, all I see from the high-profile cheerleaders encouraging others to buy is emotion. There's no rationality in their comments. It's 100% self-serving and 100% emotion.
Remember when the next mania comes around -- and one will before you know it -- if you feel like you are getting caught up in the excitement, talk with someone who has no skin in the game or someone with an opposing view, so you can help balance emotion.
