<p>I decided to close the goog and aapl positions</p>
<p>Ok…I just wanted to make sure you ended up with the positions you wanted.</p>
<p>Nice job on Aapl. That is a really, really, really nice trade.</p>
<p>I never expected to ever be in the position to have to cash in on those put spreads especially in goog with what happened in that stock yesterday.</p>
<p>I should hire you. I would give you a better offer than you offered me. :)</p>
<p>Twenty five years ago, I was a lot more active (by individual standards 25 years ago) in my stock trading. Oddly enough in my very forgettable trading career, the period around Black Monday was a high spot. I had liquidated enough stock to pay in cash for a brand new car just the week before. </p>
<p>Wasn’t even remotely enough to compensate for all the blood letting over the next decade with my Nikkei holdings or those in the tech company I was employed in that dropped from the 40s to below a buck while at the same time laying off most of us.</p>
<p>I was an option market maker. I had 3 of my biggest losing days coming into Black Monday. The market was already getting hit pretty good before Black Monday. I was long. I sold my downside protection, my puts, a couple of weeks before Black Monday. I got jury duty and I didn’t want to lose the premium of the puts, so I just sold the puts.</p>
<p>This pretty much left me with positions of short calls- long stock. Covered writes. Covered writes don’t do well in crashes. 
I spent the Friday before the crash trying to buy puts, but there weren’t too many put sellers around. A lot of put buyers though. </p>
<p>So, after the close on Friday before the crash, my big position was long
stock at 44.25 and short the oct 45 calls. And the Oct 45 calls closed out of the money. Worthless. Would not be assigned. I lost my hedge. I would just be long stock. I went home and realized I am screwed. I sat on a park bench Friday afternoon and thought we were going to crash. Then I watched Wall Street Week and listened to Martin Zweig say we are going to crash. Kind of a crummy weekend. :)</p>
<p>I go to work Monday morning thinking I am long a ton of stock. Look at
my sheets. I see that somebody exercised half my Oct 45 calls even though they were out of the money. My long stock position was half of what I thought it was. I was elated. Then the stock opened at 42. I called my wife and said the losses are not going to be that bad. </p>
<p>Then…the stock started dropping. I started selling at 40 and spent the
day selling all the way down to 30. The stock closed in the low 20’s.
During the day we had very little idea where stocks were trading. It was also the quietest day ever on the floor. The winners were quiet and the losers were comatose.</p>
<p>To give you an example about the markets. I wanted to sell an over the counter stock I owned. In those days you traded with market makers
who advertised their prices that they would buy or sell. The market on the screen was 11 bid. I called the market maker making the bid. He would represent a brokerage firm like Merrill Lynch, Morgan Stanley, or many other firms. I said I would sell the stock at 11. The market maker
said, “No”. I said, “You are showing an 11 bid. I will sell the stock at 9. 2 bucks below your bid.” the market maker said, “No. Please don’t try to sell the stock at 9. I need the 11 bid showing on the screen.” I said, “ok”.</p>
<p>So, Black Monday was the worst day of my career, dollar wise. However, the follwing 3 days were great. Customers and firms were paying the equivalent of 5 dollars for calls that were worth ten cents. They just wanted to get out of their buy-writes. Made back most of the money I lost during Black Monday and the 3 days preceding Black Monday.
I almost didn’t work the following days after Black Monday. I was not clinically depressed, but I wasn’t feeling good. </p>
<p>The next 3 months the Fed was in the traders clearing office sorting things out. Because firms that hold their customers money didn’t know
what their financials were. (Kind of like the banks in 2008). Oct 1987. This is where I learned that free markets don’t work too well. I believed that free market crap in those days. :)</p>
<p>Wow - you must have been pretty young - I thought I’m a bit older than you and I was only 26.</p>
<p>Doct, 1987 was 25 years ago.</p>
<p>I was 31.</p>
<p>I thought you were in your 60’s?</p>
<p>Great story dstark. And Doc & stark, I’m a computer guy and since I’m required to count in hex, I’m a few years from hitting 40. Or I’ll settle for Groucho’s definition and advance it to the early fifties.</p>
<p>It must be alzheimers - you’re right - for some reason I was thinking of 1977! - yes I was 36 in 1987.</p>
<p>Great black Friday stores.</p>
<p>I was mostly in a small amount of cash on black Friday. On Monday I told everyone I knew to buy the market. As usual, I did not follow my own advice and didn’t make any money when I should have. Nothing much has changed since then.</p>
<p>It looks like individual investors are starting to pay attention to the problems ahead of us.</p>
<p>It’s crazy - market goes up and up and up until it doesn’t. I think that I mentioned this a few times this summer.</p>
<p>Razorsharp, when you think there is an excellent opportunity, you have to play. Just play the opportunity in a small way. Otherwise, what is the point?</p>
<p>Dad-of-3, what was Groucho’s definition?</p>
<p>I like this quote from Groucho.</p>
<p>[I</a> must confess, I was born… at BrainyQuote](<a href=“http://www.brainyquote.com/quotes/quotes/g/grouchomar128459.html]I”>http://www.brainyquote.com/quotes/quotes/g/grouchomar128459.html)</p>
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<p>You are absolutely right. Unfortunately I panic. For example, I knew CMG was overvalued. I shorted it at $414 but the market took the price to $424 and i panicked and sold out. Now the stock is $250. I would have made a fortune but I couldn’t take the pain.</p>
<p>I understand the panic.</p>
<p>10 bucks sounds like a lot but on a 400 dollar stock that isn’t much.</p>
<p>Maybe you trade smaller so you can give your stop more room. Maybe trade an option spread instead so you know your risk. We don’t have to hit home runs. That was a great sale.</p>
<p>I am thinking of trading more options instead of trading the futures contract because of the volatility. </p>
<p>I hope you are watching the 60 Minutes show on the ex Goldman VP who resigned by placing an opinion piece in the NYT.</p>
<p>I have my priorities. I am watching the SF Giants game. I wasn’t planning on watching 60 Minutes which isn’t on for another 90 minutes. </p>
<p>Anything in particular the guy has said that stands out to you?</p>
<p>"You are absolutely right. Unfortunately I panic. For example, I knew CMG was overvalued. I shorted it at $414 but the market took the price to $424 and i panicked and sold out. Now the stock is $250. I would have made a fortune but I couldn’t take the pain. "</p>
<p>1 atr for cmg is $12 so a move of $10 is nothing. If you panicked you probably had too many shares.</p>
<p>Greg Smith rats on GS big time. Says they cheat clients. I can’t imagine that guy getting a job on wall street again. There is a professor who says if all the banks had behaved as GS, the financial crisis would have been averted. Interesting.</p>
<p>GS has many great, decent people working for the company. It also employs cheats.</p>
<p>“There is a professor who says if all the banks had behaved as GS, the financial crisis would have been averted. Interesting”</p>
<p>Because GS sold some of the mortgage crap?</p>
<p>GS was in deep trouble during the banking crisis. The company was too leveraged. GS traded with counterparties to hedge their risk or get short and the counterparties were at financial risk. If the counterparties went belly up, the hedges were no good. GS was in danger of a run against it. The deposits firms like hedge funds had with GS could be withdrawn easily. Kind of like the bank runs of the 30’s.</p>
<p>Who was the professor?</p>