Mine is pretty straightforward -- I was trading E-mini futures and somehow left a position open without closing it and it was sitting open for like two days until I got an alert and noticed I was ~ $2,800 in the red. Naturally it would move in the wrong direction. Lesson Learned: Pay attention to your active positions.
Let’s play, can you top this: I was a Market maker on the AMEX. One of the symbols I traded was RIMM, BlackBerry Ltd, back before the split when it was trading around 225-235. The stock was up 7 points that morning and the options were busy and I was having a good day. At lunch time, I wanted to treat myself to a Cuban sandwich. With one click of my mouse, I widened all my market to 5 points wide. Straddling the fair value by 2.5 points in each direction. I was quoting the first 6 months, EVERY option. There were a lot. There were DITM calls from the 80 strike up and DITM puts to over the 350 strike. That is a lot of strikes that are ITM. I was also quoting 11 other options including AAPL, but they were not the problem. Without my knowledge, when I widened my markets, my quote server froze after sending out the wide quotes. Most of the time, that would not be a big deal. On that day, RIMM dropped about 4 to 5 points after I left. When I came back, I was stunned to see transactions. A lot of them. 67, 10 lots to be exact. I bought or sold a total of 670 , 100 delta options making me long 67,000 deltas. I was long calls and short puts. I was a small local market maker with much less capital than most. My P/L was down about $85K. I withdraw my quotes, rebooted my server and took a step back. I looked at the stock chart and the market, and decided to bring my quotes back up in all my other option wide again, so I did not do other trades. I was required to quote. I tried to figure out where the stock had to go to break even. In the next 45 min, the stock, very slowly, started to rise. When it finally hit by breakeven point, I started to sell 5000 share block short, until about 30 min later, I was flat deltas. I then started to sell OTM puts to complete the reversals on those line and sold more stock. I did not do every strike, but tried to do every 3 to 5. That day, by the grace of g-d and not panicking, I made $17,000. Most of that was offset by the net cost to carrying the positions for 3 months. The interest difference from what I owed on the long call (I had to borrow) vs the short stock credit I got. I had this huge $16mm to $17mm position with nasty marks every day. The best breakeven day I ever had, but I aged 5 years. Bob
I don't really make crazy mistakes trading -- atleast not relatively recently. But in the past, around when I first started trading ...I would hold on to a losing trade in hopes of it turning around. this was really painful...it just went further deep down (sounds gross, i know) Another mistake was laying down in bed, just watching my computer from bed while waiting for a trade to play out...and I would fall asleep and wakeup when the market closed with an ugly loss. Those were really dumb, stubborn, close-minded amateur moves. In hindsight, now, I'm way more open-minded and mature about approaching trading.
That is an amazing story! Thanks for sharing. I'm glad you were able to turn that snafu around to your advantage. Bob -- quick question for you (I love your posts, btw): Do you remember the May 6, 2010 flash-crash? Do you have any stories about that day?
Yes and No. I do remember but I closed my BD the last day of Feb 2010. I joined a prop firm but was not trading yet.
Craziest mistake I've made? Hmm. I think that one time when I decided to trade the NFP announcement with a large lot definitely counts.
When I was learning to auto code futures on Sierrachart, went to work in the morning with computer running in the belief my software was set to 'idle mode' but it placed a long trade at the day's peak as soon as I was out the door. I came home late that evening and saw that I was long when the market had been falling all day. You should have heard my language to put it mildly. My dad taught me how to swear but he had nothing on me that day.