Anyway, because of the holiday Good Friday, the stock markets are closed, and stock options expire on Thursday. What are Stock Options?
DISCLAIMER: Stock Options are very dangerous. I downplay the risk quite significantly on this blog but I must warn anyone who is considering trading stock options that is isn't for everyone. See with the average stock, it generally goes up in value as time goes on. Everyone makes money. With Stock Options, they generally go down over time. And the price drops REALLY QUICK! So that was my warning. I do not encourage it.
What are stock options though? Stock options are contracts that you can buy or trade that give you the 'right' to buy 100 stocks. You aren't buying stocks. You are just buying the 'right' to buy them if you feel like at a given price. For example
Lets say Errorik Stock is at $35/share.
Maybe a stock option that has a $40 strike price and expires next month is worth $50/contract.
(a contract = 100 shares)
($40 strike price means that you have the right to buy this stock at $40/share)
So you buy a contract for $50 because you know that Errorik has a good reputation of making profit, and you calculate that it's worth the gamble.
Now, if Errorik stock increases in value to $45/share, then the contract you just bought becomes super valuable. It's worth at least $500 now. Because you have a 100 shares that you could buy at '$40' and sell at $45 right away.
So there, you just turned $50 into $500. Easy money!!!
What usually happens however, is that The Stock doesn't go up, or stays the same, or maybe it goes up, but doesn't go up enough or fast enough. And you lose all your money.
Okay now, here is my Good Thursday story.
5:30am. I wake up and go to work just like any other day in my life knowing that today is the day. Everything that has mattered in the past few years of my life is determined by the events occurring later this afternoon.
The only thing I do different this morning is that I don’t drink any water. I won’t have any time to get up and pee. I will be on my computer and my eyes can’t leave the screen not even for a second. Today, my boss is on vacation. My door will be closed all day. All meetings have been canceled for no reason. When you cancel meeting for no reason at the last minute, people assume you are busy doing very high priority work.
8:30am. Trading begins for me. I have a 1 hour disadvantage because New York time is one hour ahead. This means I have 1 hour less to research the current futures and market stance.
8:35am I have invested everything I have, about $40,000 into Bidu Call options. Bidu is like the Chinese google. I guess Bidu has better search compatibility with the Chinese characters that google hasn’t developed yet.
8:45am I have now lost about $17,000. This is a lot of money, and I think about all the ramen bowls and cups of oatmeal I have saved to get this much money. It makes me sick seeing how far backwards I have come. I decide to stay in because it seems like it momentum is changing rapidly.
9:00am I have rebounded off my low, and have gained $21k. So now I am $4k in profits for the day. I sell everything and rejoice. I now have about $44k total in my account.
9:02am The sell transaction has completed, and I drink water to cool me down. By now I am sweating profusely. I am so relieved, and yet my heart is still beating so fast. I can’t really think of any other times in my life that compare to how nervous I feel right now, maybe checking my college acceptances, or asking out this girl. The investments that are happening today will have an even greater impact on my life.
10:00am I am bored because I have cancelled all my meetings. I am so bored, so I keep looking at stocks. I see Google being a good buy. I buy $44k of Google options. It goes up
10:05am I am up $8000 already in Google options, so I sell immediately. I just get too scared. I want to keep my profits. It's too much of a risk to hold in case I lose it all.
10:07am Sell transaction is complete. I lock in $8000 in profit and my account now has $52000!!!
I am so relieved. I drink some more water and go to the kitchen to get some paper towels to wipe the sweat off my face. People ask me if I look okay as I go to the kitchen. I say yes as I speed walk back to my office.
11:15am I decide not to go to lunch. Luckily I have some oatmeal and chips saved up, so I just bring those out. I am now addicted to gambling with stock options. I buy Google contracts again.
11:59am I need to pee really bad. All the water I have been drinking to calm me down has added up and now my bladder is ready to blow. But I can’t take my eyes off the screen. I am up $35000 and my portfolio is going up and down by tens of thousands of dollars every minute! There is no way that I can afford running down the hall to take a piss. I look around my office for a cup to pee in. I am unsuccessful. BUT I discover a chip bag. It seems possible to pee in this and I can dump it down the sink at a less strenuous time of the day.
I begin to fantasize about toilets and it is really distracting. Concentration is key when thousands of dollars are moving around every second. The last time I fantasized about toilets was when I needed to puke from being so drunk.
12:15am Really needing to pee makes you about 10 times more nervous!! My heart is racing so fast right now. There is a kind of unhealthy you feel right after you eat a lot of McDonalds. This is a completely different kind of unhealthy. I feel like every minute I spend watching this stock, a week is taken off my life.
I don't know why this picture above is so blurry. Try clicking on it to enlarge the image.
1:30am I finally sell my stock. I gain almost 100%. This is the best day of my life. I want to yell and scream and jump up and down, but there are people around. But it is so hard to conceal my excitement and happiness. I finally get out of my chair for the first time in a while. I close the office door.
And I do some air punches. Like Tai Chi. But really fast! I spend about 20 seconds air punching. Tiger Woods does this too kind of, but I could beat him up easily.
Now, I have to start looking for my Ferrari.
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