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What was your worst mistrade?


backtothebeach
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Given the fact that I still compare prices in the supermarket, not to mention when booking flights, it is weird that I can piss away a substantial amount on a mistrade and only be mildly annoyed.

 

Sold some deep ITM ($90 strike) BRK-B Leaps today. I first looked at the middle price between bid and ask. It looked about right, considering time to expiration and interest rates, $0.50 above intrinsic value.

I submit and it fills immediately. Turns out my vision was off or something, it was actually 0.50 LESS than intrinsic value. Just handed away $1 per B share to the market maker. Damn!

 

Anyone wants to share a mistrade? Might be fun and maybe we can learn something from each others' mistakes.

 

Edited by backtothebeach
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Biggest mistakes were selling when I thought the stock was at intrinsic value. 

 

I bought a bunch of Overstock.com LEAPs in March of 2020 when the stock was around $7.50...both in my fund and my personal accounts.  I also bought quite a few shares at $2.99 in my personal accounts.  I thought intrinsic value was around $25-$35, so I sold half of the LEAPs in my fund when the stock was between $25-30...I made 8-10 times my money.  I also sold the shares in my personal accounts through the same range, but was smart enough to sell the remaining LEAPs when the stock was at $40-45.  Did very well really!

 

But if I had held the LEAPs and stock for a few months longer, I would have made 30-40 times my money!  A difference of several hundred thousand dollars in my personal accounts and about $3M in my fund!  

 

Cheers!

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Sounds like they are talking about fat-finger type trading execution mistakes rather than Sanjeev's type of mistake.  We all have plenty of stories like Sanjeev with the benefit of hindsight.  Value investors rarely sell near the top tick.

 

As far as the OP's question, the gist is this quote: "I submit and it fills immediately."

 

Almost any time an order fills immediately that you were not expecting to, it's been some kind of mistake.  For me, it has usually happened when I inadvertently entered a buy order when I was intending to sell or vice versa.  Usually I break orders up into much smaller lots so it isn't the end of the world - but it costs real money and you feel sloppy.  Depending on how the trade went it can also mess you up with a wash sale.

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Acting like a day-trader! We suck at short-term trading, and it just isn't our thing.

Most times we will emerge with a gain, but it will typically be a lot smaller than we would otherwise have made - had we simply never entered into the trade. Picking up dimes at the expense of dollars is just a dumb way of doing things! The only time it has really worked for us is when vega trading a covered call; the call will either expire worthless, or a negative press article will appear that allows us to buy back assigned shares at a lower price.

 

We will routinely round-trip, but we don't day-trade.

Entirely different risk dynamics!

 

SD

 

 

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Yeah I was thinking more about execution mistakes, sloppy trading, fat fingering an entry.


Another mistake I have made is selling the (same strike) call instead of the put. I realized the mistake when the underlying went up - then bought the underlying to create the initially desired position (covered call = short put). In a bull market sometimes mistrades still work out...

 

The worst however was about 20 years ago. I thought I had spotted a stock where bid > ask. proxy-image?piurl=https%3A%2F%2Fencrypted-tbn0.gstatic.com%2Fimages%3Fq%3Dtbn%3AANd9GcQ-EVqzSHGutCp5rBnkl3nUWSVLiorMh6YZFXFqDIiHC5YA_DGU%26s&sp=1638983386Te417b30850777c9d3ebca2011943f112cafe046ec223e90d5d48206688492169Traded it back and forth a couple of times like crazy before realizing it was already after hours and I had only looked at the decimals. In reality I lost more than 5% on every round trip. I called IB, being a total wreck, and was incredibly lucky that they busted the trades. Not a mistrade really, just being young and stupid.

 

 

 

Edited by backtothebeach
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I've had more instances than I care to count where I do something like enter the inverse of what I intended on option spreads. In the IBKR platform the exact same trade could either need to be entered as a buy or sell depending on which order you added the legs to the quote. Getting an instant fill is almost always like a punch in the gut, as you know you must have screwed it up and it's too late to do anything.

 

A more interesting type of mistake was something like ten years ago when I was new to options and thought I had found a risk-free profit box spread. It was for a new IPO that just had options open up that day. I double and triple checked to make sure I had everything right. I ran it through a model to make sure I was profitable at every share price, and I was. So I opened a few spreads and got an immediate fill, which should have been worrying but at the time it wasn't. I saw that my margin didn't go down and everything looked correct, so I opened a quite big position.

 

The problem of course was that the only reason the trade seemed to be open was that there was a high interest in shorting the stock and the puts were much more expensive than the calls of the same strike. To get the spread to work I had to short a deep ITM call as one of the legs, which I didn't realize at the time was still risky even when you have a higher strike long call. I woke up next morning to the bad news that all my short calls were assigned and I was short a huge amount of the stock. The stock had a very high borrow fee and I realized there was no way to keep the trade open profitability and took a hefty loss closing it back out.

 

 

 

 

Edited by aws
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I bought shares of Charter earlier this year and foolishly used my phone instead of walking up to my desk.  I put an extra 0 on the number of shares because I was also watching a low priced stock separately.  About 10 minutes later i realized I bought 10x the number of shares I intended to.  I panicked, ran up to my office and sold the extra shares. Through sheer luck it had ticked up and I made more in that 10 minutes than the whole week.  By accident. 

 

It confirmed I would never make a good day trader. 

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12 minutes ago, dwy000 said:

I bought shares of Charter earlier this year and foolishly used my phone instead of walking up to my desk.  I put an extra 0 on the number of shares because I was also watching a low priced stock separately.  About 10 minutes later i realized I bought 10x the number of shares I intended to.  I panicked, ran up to my office and sold the extra shares. Through sheer luck it had ticked up and I made more in that 10 minutes than the whole week.  By accident. 

 

It confirmed I would never make a good day trader. 

 

“A man’s gotta make at least one bet a day, else he could be walking around lucky and never know it,” Jimmy Jones, horse trainer.

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4 hours ago, DooDiligence said:

Selling AAPL in 2018 for a mere triple.

Selling half my BRK.B in mid 2020 at a tiny gain (I'm slowly buying it back).

and the #1 error was selling small portions of my Edwards Lifescience's (it's still my biggest position and growing)...

 

I sense a theme here.

Spekulatius' tombstone engraving:

 

People got rich buying the stocks he sold.

 

 

 

Edited by Spekulatius
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Wow, these are great posts. Surprisingly I have never made a “fat finger” entry while trading. In my day job I work at a computer, sitting in front of 11 computer screens that I am solely responsible for. A “fat finger” has the potential to make national news. There are safety’s in place…but it still gets the heart pumping occasionally and it has happened and I have been guilty. The interesting thing is that when I have made an entry error, I immediately know it, but it has already set off a chain of events that have to be immediately mitigated to avoid an unintended result, generally this can take several hours to return to “normal”. Reading this experiences from others regarding trading I can visualize that feeling applied to trading, and weirdly enough I had never thought about that, I do double and triple check my trades before entering. 

 

Anyone who choses individual equities has a “sold too early” story, with the benefit of hindsight etc. I, as I’m sure everyone else on this board, have“lost” more money by exiting early than on any individual name I have ever sold at a loss. 

 

I think the biggest mistakes I have made in trading have to do with low margin businesses. Businesses that are tough to begin with, and regardless of management your returns will never be much more than the industry standard. Two that come to mind are construction contractors and retail…..both can be hard and margins can be low…combine that with the fact that eventually there will be poor management running the thing and its a recipe for a horrible situation. Doesn’t mean there isn’t opportunity at some point, just in general. 

 

 

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2 hours ago, dwy000 said:

I bought shares of Charter earlier this year and foolishly used my phone instead of walking up to my desk.  I put an extra 0 on the number of shares because I was also watching a low priced stock separately.  About 10 minutes later i realized I bought 10x the number of shares I intended to.  I panicked, ran up to my office and sold the extra shares. Through sheer luck it had ticked up and I made more in that 10 minutes than the whole week.  By accident. 

 

It confirmed I would never make a good day trader. 


A day trader might have tried to put a trailing stop on it and let it run😉

 

If you’re not a day trader I think the best course of action is to close out a fat finger mistake immediately. Especially if it goes against you, just suck it up. If you try to wait a little until it gets back to even, the market can start playing tricks on you. It usually goes further against you until you panic and close at the bottom.

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Well if we're all doing things we sold too early, I guess I can also add that I set up a bitcoin mining farm back in 2011 and sold over 1000 bitcoin at about $10 each. I never actually believed in bitcoin, I just saw I could make like 30% a week for a little setup work by mining the coins and selling immediately. I dismantled and sold off my equipment when they crashed down to about $2 a few months later. I guess I easily could have been a billionaire if I were a true believer based on how early I was in and the resources I had available, but I don't feel too bad about what they are worth now, as I know there is no chance I ever would have held them through all the runs and crashes over the years.

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13 hours ago, DooDiligence said:

Selling AAPL in 2018 for a mere triple.

DooDiligence, don't feel bad, I sold AAPL in 2017 for a mere double. I was pretty happy at the time, having doubled my money in AAPL in less than three years...

 

My worst act of commission was buying a bunch of Level 3 stock some twenty years ago. The investment case was always dubious, but I was impressed by the CEO, James Crowe. Turned out that the "silicon economics" he touted so much wasn't very different from regular economics.

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1 hour ago, aws said:

Well if we're all doing things we sold too early, I guess I can also add that I set up a bitcoin mining farm back in 2011 and sold over 1000 bitcoin at about $10 each. I never actually believed in bitcoin, I just saw I could make like 30% a week for a little setup work by mining the coins and selling immediately. I dismantled and sold off my equipment when they crashed down to about $2 a few months later. I guess I easily could have been a billionaire if I were a true believer based on how early I was in and the resources I had available, but I don't feel too bad about what they are worth now, as I know there is no chance I ever would have held them through all the runs and crashes over the years.

So much of life is how you view it (nicely done AWS). Here's a link to a guy who just couldn't let it go. 

 

https://www.newyorker.com/magazine/2021/12/13/half-a-billion-in-bitcoin-lost-in-the-dump

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@spartansaver thanks for sharing the article. It sure is hard to recover from a 'loss' like that psychologically. While no where close to losing anywhere close to that in my life, I did have one large financial loss where for a moment (several months) I was unsure how bad the damage would be (illiquid asset) to point like the man in the article my personality and energy changed, became quite a bit jaded until my loving wife in not so subtle terms told me to f'ing snap out of it and though she did not say it I understood that I had to move on and 'get back into the fight' or I would lose much more than money. 

 

Aside from that, no fat finger mistakes but several selling too early calls. My favorite ones to lament on is when I bought Marvel (Entertainment) for $2 and sold at $4 (got bought out by Disney at $30) and when I got into GOOGLE very very early and sold for a double. I bought back into GOOG eventually but that was years later when I started forcing myself to forget about any price anchors I have. 

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I had AIMIA stocks before the Air Canada fall off. In the morning of the news, the stock began trading with some crazy amount of spread. I panic sold my shares, accidentally putting in a market order in the process. I think I lost about 50% of what I could have actually sold for (big loss either way). That was extremely painful.

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11 hours ago, aws said:

Well if we're all doing things we sold too early, I guess I can also add that I set up a bitcoin mining farm back in 2011 and sold over 1000 bitcoin at about $10 each. I never actually believed in bitcoin, I just saw I could make like 30% a week for a little setup work by mining the coins and selling immediately. I dismantled and sold off my equipment when they crashed down to about $2 a few months later. I guess I easily could have been a billionaire if I were a true believer based on how early I was in and the resources I had available, but I don't feel too bad about what they are worth now, as I know there is no chance I ever would have held them through all the runs and crashes over the years.

Ouch! This ought to be the winner here.

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I am not even sure I really understand the whole thing here. Often times you go into a trade or investment with a playbook and the job then becomes about executing it. So if you see a $15 stock and see a setup that gets you to $25 and things play out, who cares where it goes after? There are longer term type investments, but even still, with those, you have to keep things in perspective. I typically have those types of things(BRK, MSG's, FRPH, ALCO) on margin and while I rarely sell those types of assets, if I do its to free up capital for better opportunities. If you are consistently missing big returns because you are selling good stuff so you can go to cash...well thats dumb and makes no sense. But strategically moving stuff around to fine tune your portfolio risk is not something that should be evaluated and a "what could have been basis". I mean I owned TSLA in 2012 at like $25. I at one point bought AMZN at $180. So to hang your head because "At one point in time" you owned something that went bonkers IMO isnt keeping yourself in the right mental place. You should only be hanging your head if your gameplan was to hold the stock forever and then because of poor execution/fear/lack of discipline/etc you deviated.

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