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  • Help! My short position got crushed, and now I owe E-Trade $106,445.56

    From marketwatch.com

    His name is Joe Campbell, and he claims he went to bed Wednesday evening with some $37,000 in his trading account at E-Trade. One notable development on the pharma front later, and Campbell woke up to a debt of $106,445.56. Now, he may end up liquidating his 401(k). And his wife’s. That’s where you come in. At least where Campbell desperately hopes you come in. Of course, sympathy in the trading community over such gaffs is typically in short supply. His is a cautionary tale of getting caught on the wrong side of one of the riskier bets on Wall Street. When you’re long, the worst you can do is lose is ... (full story)

Terrible situation. This is why proper risk management is so important. Using 3% risk and placing a stop loss behind important consolidation levels would have yielded, potentially, only a 14-15% loss here instead of the insanity of what happened.
The game taught me the game.
According to the statement, the seller had 8,361 shares (approximately) short. For a $2 fade, as stated, that would have almost brought him a 50% increase in account size. It is easy to put the cart before the horse. I have done it many times, as well. Wrestling with our thoughts and emotions (greed/fear) is the hardest part of this business, IMO. FWIW.
The game taught me the game.
Quoting Gregory_
Wrestling with our thoughts and emotions (greed/fear) is the hardest part of this business, IMO. FWIW.
So true
I was long Enron and Glencore , lost £32m ... contributions gratefully received (Bit Coin only )
Quoting Gregory_
Terrible situation. This is why proper risk management is so important. Using 3% risk and placing a stop loss behind important consolidation levels would have yielded, potentially, only a 14-15% loss here instead of the insanity of what happened.
You're kidding, right? He was short a stock which gapped 800%. It had closed yesterday at $2.07 and opened this morning at $14.00 The only way he could have protected himself is with Call options, except KBIO doesn't have options.
Quoting Rob Mondave
You're kidding, right? He was short a stock which gapped 800%. It had closed yesterday at $2.07 and opened this morning at $14.00 The only way he could have protected himself is with Call options, except KBIO doesn't have options.
That is why I never trade non major currencies/stocks - 10 years of profit can be eliminated in a second (CHF fix, KBIO, ect.... )...
why didn't he just do a long straddle or long strangle using options?...delta neutral strategies..he would be sitting on serious mullah profits at least north of 200 percent
Carpe Diem
No options available on KBIO....I thought about fading it
"If The Fool persists in his Folly he will become wise." - William Blake
Buy side is always easier - when a "catastrophe" can be defined as "zero".
Sell side is tougher. No one know where the ceiling is.
why he didnt put a stop?

by the way what is 401(k)?
why he didnt put a stop?

by the way what is 401(k)? retirement money ?
Quoting loureed10
why he didnt put a stop?

by the way what is 401(k)? retirement money ?
Yes, 401(k) is one of the US retirement plans. The price gapped on open, a stoploss wouldn't help.
Quoting Rob Mondave
Yes, 401(k) is one of the US retirement plans. The price gapped on open, a stoploss wouldn't help.
Bad luck so.

Thanks.
lol pay for your loss! Fuck no, this is the price some of us have to pay to learn how to trade.
All posts are my personal opinion
Quoting Rtm
lol pay for your loss! Fuck no, this is the price some of us have to pay to learn how to trade.
So true, when I first started trading a real account I lost nearly $20K over several years due to stupid mistakes with trades I did not completely think through. Trying to grow your trading account and then getting caught in scenarios like this made me sick. It sucks learning the hard way but the lesson learned stick. If he gets his loss back from a Go Fund Me account I doubt he’ll learn.
Stock traders are usually prone to price gaps...They must consider liquidity risk when trading small-mid cap stocks...I don't think liquidity risk would be much of a concern if you're trading Microsoft or Sony for example...Best of luck to this trader, but it's his mistake...Moral of the story: If the stock you're looking to short doesn't offer Put Options, don't short it...Never use the short selling way ( it's very risky, unless you have billions of dollars and you can move the market) Cheers!
Simplicity is the key to brilliance.
damn 106K i was pissed losing 20k
Quoting Rob Mondave
You're kidding, right? He was short a stock which gapped 800%. It had closed yesterday at $2.07 and opened this morning at $14.00 The only way he could have protected himself is with Call options, except KBIO doesn't have options.
3% risk spread across a $5 stop (meaning a stop loss at around $7.17) would have put his stop loss behind the recent strong consolidation to the left on the chart. The stock hit $18. 18/5 = 3.6. Price would have gapped up less than 3.6 times his stop loss (because it started at around $2.17). 3% * 3.6 = 10.8% loss.

Risk management works in the long run, even in gapping scenarios. What doesn't work in the long run? Risking your entire account to try for a 50% gain.
The game taught me the game.
I suppose the guy could have put his stop above yesterday's high. Let's say $0.50 higher. That would be $2.68. Spread 3% risk across that and you end up with (($18-$2.68)/$0.50)*3%=91.92% loss

So, I can see where Rob Mondave is coming from. Still though, losing $35,000 instead of owing $106,000+ and losing $37,000+ is obviously better.
The game taught me the game.
1 final point. If you look at the M5 chart on this stock, You will see that it began to rise at around 4:10 EST on 11/18. It took 30 minutes for it to get to above $7. And it did not get to $18 until 7:30 EST.

This could have been managed in after hours trading.
The game taught me the game.
  •  Guest
  • | IP XXX.X.230.206
Unfortunate and obviously too late in this case, but when taking positions one should always consider the worst possible outcome: what could happen, however unlikely. No offense but it sounds like he dumped way too much and gambled it. But these things happen and people do recover. Just be careful.

I know people who have lost even more than this and recovered. Good luck.
  •  Guest
  • | IP XX.XXX.20.249
Trading like that.....would have happened sooner or later, basic MM is the first thing a person should learn, always have a plan if things don't work out. Hard to believe a guy trading with 37k, is betting the farm on risky stocks and not concerned about possible gaps. Do they not happen all the time in that arena?? Live and learn, I feel bad for the guy, but I'm sure he wouldn't be splitting the winnings had he hit it big.
  •  Guest
  • | IP XX.XXX.166.8
Love the idiots who have no clue what a price gap is about. The SNB killed fx brokers and retail traders this year and still the concept of gaps eludes people.

Keep watching those continuous lines on the chart and thinking that is what the price action is.

There is no intermediate pricing available to retail. Unbelievable.

KBIO gapped down in February of '14 and again in January of '15. I would wager Joe Campbell thought he was quite clever at those times and was laughing at the traders on the other side.

This a thinly traded stock that has had massive volume spikes at the beginning of September and for 3 days prior to the gap up. Shorting what amounts to a penny stock while the glaring and obvious warning signs were ignored is akin constantly driving through red traffic lights, you will crash. The market cap after this huge rise is still only $42 million.



The only surprise out of this is why this is news. This clown's account was doomed the moment he opened it.
I am sorry for him, that was a proper "black swan" event but it goes to show these things can and do happen. Shorting tiny priced stocks and holding them overnight are, though, risks he could have and should have evaluated before he started. It's all greed and no fear here so I have little sympathy in wanting to help bail him out.
  •  Guest
  • | IP XX.XXX.56.19
As they say on Wall Street, "Past performance does not guarantee future outcomes." Seems before this trade you had a nice winning trade. Then you thought it will be all bliss; you went fullblast on leverage on this trade.... the cardinal sin in trading! unfortunately on these corrindors we dont show sympathy.... its Zero sum game!
The moral of the story is whenever we trade on leverage, and whether we long or short an asset class, please please place a stop loss order to ensure adequate risk management.
Quoting dekguang
The moral of the story is whenever we trade on leverage, and whether we long or short an asset class, please please place a stop loss order to ensure adequate risk management.
You'll probably only learn how a stop loss works when you trade something that gaps. The lesson might be very expensive.
Quoting dekguang
The moral of the story is whenever we trade on leverage, and whether we long or short an asset class, please please place a stop loss order to ensure adequate risk management.
Bro you don't understand, the price gapped huge against him. a stoploss would have done nothing to prevent this. The moral of the stry is to bet small positions no matter how good you think it is.
All posts are my personal opinion
if he had been on the other side of this trade would he distribute the earnings?..fuck this guy.

It makes me sick that there are clowns in this world foolish enough to actually give money to this degenerate.
RTM; I agree with you that size of the trade also matters in risk management. Yes, it's unfortunate that the price of the equity gapped so ridiculously.

Then again, if one is trying to speculate on speculative equities with low liquidity, then, one is asking for trouble. Then, I agree with Rtm, do smaller size trades and also preferably no leverage. Of course, a stop loss level should still be placed.
Quoting Rtm
lol pay for your loss! Fuck no, this is the price some of us have to pay to learn how to trade.
Too right, gradings about the only place left on earth where bailouts don't exist, thats why its so efficient at sifting the Wheat from the Chaff and why Central Banks are full of "Stupids", if you don't learn by your mistakes you'll repeat the same mistake over and over, which is Einstein's definition of "Stupid" .... Mark Carney "Heads Up !!"
Isin't this broker fault for not margin call the potion before it reach negative?
That's what Shrekeli does to people, Shreks them out...
sorry bro, I wouldnt advise a short sell, been long u only stand to loose your capital, when short selling u loose a lot more,....
Quoting toptrader11
Isin't this broker fault for not margin call the potion before it reach negative?
NO stocks trading on margin are totally different!!! IT SAYS right in the terms disclaimer conditions your loss can exceed your deposit which is why I will never trade stocks because you can owe money if shit gets real bad. You best just to buy and hold major index if you want to try and trade stocks but that is not really trading. Day trading stocks at home is a good way to lose your shirt. Stick to forex.
All posts are my personal opinion
Quoting Rtm
NO stocks trading on margin are totally different!!! IT SAYS right in the terms disclaimer conditions your loss can exceed your deposit which is why I will never trade stocks because you can owe money if shit gets real bad. You best just to buy and hold major index if you want to try and trade stocks but that is not really trading. Day trading stocks at home is a good way to lose your shirt. Stick to forex.
nice comment bro , thumps up .
Quoting Rtm
Bro you don't understand, the price gapped huge against him. a stoploss would have done nothing to prevent this. The moral of the stry is to bet small positions no matter how good you think it is.
OK, so in this case it is NOT optionable.. but say that it was. Couldn't you just buy a OTM option for like $20 as gap protection and then still be able to do this pretty large in size? That way you know your ultimate loss.

If I ever go short in size, i'd probably do this. I'm most likely just going to be short in defined risk options spreads ever though.

Is there something I am missing here? I cannot see short stock (with a stoploss) AND an option hedge failing. If that happens, I think I would cry...
i pray you find peace again..... because this is gonna create a big hole in your career .... i always tell myself one thing before i trade.... WITH BIG LOT SIZES COMES BIG LOSSES....as soon i remember this the greed goes away and i trade small contract and i am extremely happy i dont trade big contracts... to save myself the pain
Quoting skillz16
OK, so in this case it is NOT optionable.. but say that it was. Couldn't you just buy a OTM option for like $20 as gap protection and then still be able to do this pretty large in size? That way you know your ultimate loss.

If I ever go short in size, i'd probably do this. I'm most likely just going to be short in defined risk options spreads ever though.

Is there something I am missing here? I cannot see short stock (with a stoploss) AND an option hedge failing. If that happens, I think I would cry...
Yes, absolutely. This is how to do it. If the price gaps, the OTM options you bought will cap the loss. Very simple. Options are a complicated instrument few understand. I intend to spend extensive time on them in the coming years, as they are an incredible risk management tool.

However, I just want to state again that price did not gap. If you look at the after-hours chart for this stock, it moved up from 4 PM EST to 7:30 PM EST to $18. There would have been time to exit in after-hours trading, if this had been watched. Unfortunately, stop orders do not work in after-hours trading. You have to always use a limit order. So, a stop-limit would have worked, if he had marked it as an after-hours order.
The game taught me the game.
well he clearly had none of this so, yes an option trade or limit loss would have been key but he clearly didn't do this so hopefully we can all gain something from this. I like the idea better of his loss and our gain >: D
All posts are my personal opinion
  •  Guest
  • | IP XXX.XXX.59.5
A type of order traders use to protect against losses is being phased out, as stock exchanges seek to deal with the ramifications of huge intraday swings.

http://www.marketwatch.com/story/nyse-joining-nasdaq-in-eliminating-stop-orders-2015-11-18
Quoting Guest
A type of order traders use to protect against losses is being phased out, as stock exchanges seek to deal with the ramifications of huge intraday swings.

http://www.marketwatch.com/story/nys...ers-2015-11-18
Yes, this is an odd idea. Instead of doing this, they should just open the market 24 hours a day.

I will be avoiding the NYSE as much as possible. If I can trade a stock on BATS or another exchange, I will not touch the NYSE. In my mind, this is a death knell for the NYSE. The other exchanges have evolved beyond it.
The game taught me the game.
Woah, I had no idea NASDAQ was phasing them out too. WOW. Thanks for the post.
The game taught me the game.
Quoting Gregory_
Yes, this is an odd idea. Instead of doing this, they should just open the market 24 hours a day.
Like this idea (24 hours)! I wish forex was also open on the weekends as well.

On a side note: does anyone know of anything decent that can be traded on the weekends? Am I going crazy- there is nothing decent to really trade right? It still needs to be somewhat liquid also (not something too esoteric).
Quoting Guest
A type of order traders use to protect against losses is being phased out, as stock exchanges seek to deal with the ramifications of huge intraday swings.

http://www.marketwatch.com/story/nys...ers-2015-11-18
What this means is that only programmers will have stop loss orders. This is what I will do. I will write a program to automatically "stop" me out when price hits a target.
The game taught me the game.
Quoting skillz16
Like this idea (24 hours)! I wish forex was also open on the weekends as well.

On a side note: does anyone know of anything decent that can be traded on the weekends? Am I going crazy- there is nothing decent to really trade right? It still needs to be somewhat liquid also (not something too esoteric).
I guess you could take up poker?
The game taught me the game.
Quoting Gregory_
What this means is that only programmers will have stop loss orders. This is what I will do. I will write a program to automatically "stop" me out when price hits a target.
Agreed! I am a programmer, and I pretty much already have done this.

Another side note: does any one have an account where they can trade spot FX and also use foreign currency options (calls and puts?)
  •  Guest
  • | IP XX.XX.143.38
some of the middle eastern stock exchanges, e.g. Israel, Dubai, Egypt are open Sunday. not sure about India on Saturday. sorry, no idea what platforms they can be traded on.
Quoting skillz16
Agreed! I am a programmer, and I pretty much already have done this.

Another side note: does any one have an account where they can trade spot FX and also use foreign currency options (calls and puts?)
Interactive Brokers (IB) allows me to trade foreign stocks, U.S. stocks, options, currencies, bonds, warrants, pretty much anything out there (no poker though ). I love the interface. Many do not love the interface. There is a learning curve, although IB has taken pains to simplify things. (I do not use the simplified platform.)
The game taught me the game.
Quoting skillz16
Another side note: does any one have an account where they can trade spot FX and also use foreign currency options (calls and puts?)
I looked into this once, and as Gregory_ wrote Interactive Brokers offers Forex Options. And it was the only Retail broker I could find which offers them. You can download IB's demo platform without an account and can see the Options chain and Bid-Ask spreads. I haven't gone in this direction but I've been told Open Interest and Volume can be low.
  •  Guest
  • | IP XX.XX.164.80
the "no stop-loss rule" is really grim news for veteran wall street traders, especially those that know a little about HFT. how are we going to make a living now that we have nothing to hunt anymore? we are going back to pre-internet days: survival of the fattest. what a shame.
this guy just the Sacrificial lamb of the stock market lol
All posts are my personal opinion
Quoting Rtm
NO stocks trading on margin are totally different!!! IT SAYS right in the terms disclaimer conditions your loss can exceed your deposit which is why I will never trade stocks because you can owe money if shit gets real bad. You best just to buy and hold major index if you want to try and trade stocks but that is not really trading. Day trading stocks at home is a good way to lose your shirt. Stick to forex.
Thanks..I didn't know abt this..
When Scalpers win, I lose and Vice varsa...
What wud happen if Global indices go into -ve territory?
When Scalpers win, I lose and Vice varsa...
they are not ending stop orders for the likes of you peons :-)...

This change is geared towards institutional traders who could move millions of dollars worth of stock in a single trade. This tells me that the smart money knows that the market is headed down soon. They are afraid of the implications of an entire market selling their stock all at once.
Quoting beastwork
they are not ending stop orders for the likes of you peons :-)...

This change is geared towards institutional traders who could move millions or dollars worth of stock in a single trade. This tells me that the smart money knows that the market is headed down soon. They are afraid of the implications of an entire market selling their stock all at once.

that's the reason I don't trade the share market
ONE MUST LEARN, DO IT AND IT WILL BE KIND TO YOU
Quoting Rob Mondave
You're kidding, right? He was short a stock which gapped 800%. It had closed yesterday at $2.07 and opened this morning at $14.00 The only way he could have protected himself is with Call options, except KBIO doesn't have options.
That is why you do not short stocks and only you buy them after market crash and wait 3-4 yrs to reap nice profits. Every other way is pure gambling. Nothing to see - just another man that tried to make $1 000 000 with one trade on 30k account.
This is one of the reasons why you should never trade on a personal account. With a properly set up corporate account he would still have lost his account but wouldn't have gone into debt.
.. and I thought forex was bad .. (:

You are a "trader" if you win
You are a gambler if you lose
What "shocked" me is how the dude can short the hell out of this share near all time lows. What did he expect ?

The dude probably didn't know how to trade
COT: The precious data ignored
Short selling in stocks is very risky...Combine that with reckless money management and you get a formula for bankruptcy
Also, Interactive Brokers notifies me when my account is up or down a certain percentage (this can be changed as needed but starts as a default of about $1,000). Therefore, if I had been in this scenario, when the after-hours market went up $5 in 30 minutes (4:10 PM EST to ~4:45 PM), I would have received a text message indicating that my account was in SEVERE trouble. Then, I could have acted by going to my account to exit after-hours.

After that, I probably would have kicked myself in the head, flexibly, because I entered a trade without a PA entry.
The game taught me the game.
Quoting michaelpelly
That is why you do not short stocks and only you buy them after market crash and wait 3-4 yrs to reap nice profits. ...
Correct! Seems to work every time, for me.
Carbon-Dioxide: the gas of life!
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  • | IP X.XXX.47.240
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  • Posted: Nov 19, 2015 12:27pm
  • Submitted by:
     Newsstand
    Category: Entertainment News
    Comments: 62  /  Views: 14,003