My balances are absolutely savaged and I am having to take emergency measures.

music selection:  “You Can Do Magic” — America

I made some missteps this year.  The first was hanging onto a short of TSLA far too long.  I lost about 75,000.  The second was deciding to hold MRRL without a stop loss in the belief the rising distribution rate of falling REITs put a floor under them.  It is trading at 65 cents (and I bought it for 16.00).  I’m down about 28,000.  Add in other losses to my main trading portfolio and it is down to 74,000.

I use the “portfolio margin” feature at IB and am locked out of trading until the balance is over 100,000.  I am taking emergency measures.  My IRA account is also savaged by recent volatility.  I liquidated positions in alphabetical order until I raised 63,000 in cash.  I’ll be withdrawing 50,000 and paying the taxes and penalty for early withdrawal.  I’ll then be transferring those funds into the main IB trading account to allow future trades.

With many positions stopped out, I no longer have the passive income to support my full baseline budget.  This is an undesirable position to be in.  I’ve been thinking about part time work for some time to make a little fun money.  This may force my hand.

I am stopped out of TWO, HNW, PCI, OXLC, NVG, REM, IIM, GPMT, and AVK.  Losses are high.

I’m not panicked yet.  My backup plan was always to liquidate the IRA and that plan is in progress.  If things go as planned, I’ll refrain from trading for another couple weeks while I wait for volatility to subside (hopefully, things return to normalcy soon and the worst is close to priced in) before resuming trading.  I’ll trade on cash and not margin (the 80k margin loan after the TSLA disaster is really killing me.)  That will limit how many spreads I can trade and thus limit my income.  I’ll trade deeper in the money because I don’t have much room for risk assets and thus have even lower income.  But I think I can still claw my way back out.  Wish a lizard luck.

Devour your prey raptors!

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22 thoughts on “Lizard King steps in bronto sp. poo

  • March 20, 2020 at 12:14 am
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    Wow, very very sorry for your losses, … I also lost a lot on MORL and also was trading in margin with the whole account…. This definitely will teach us a lesson…

    Reply
  • March 20, 2020 at 8:23 pm
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    Sorry to hear this 🙁 I’m sure you’ll manage to recover. Holding your distressed bonds at this point?

    Reply
    • March 20, 2020 at 8:49 pm
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      Still holding the distressed bonds as I think they are “money good” and are some of the last passive income I have left.

      After my deposit from IRA hits, I’ll need to make a 20% annual return to meet my core budget. That is achievable “sometimes” and I’ve done as much as 72% in a year. But to do it consistently? Not conceivable unless your last name is “Buffet.” I’m going to apply to VIP kid to see if I can bring in some income and also look for accounting contract work. If I can earn 10k a year, it gets down below 15% target return which is entirely achievable.

      I won’t go bankrupt (and the house is paid for!) but it means a radical change in lifestyle for a couple/five years.

      Reply
  • March 21, 2020 at 2:57 pm
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    Articles like this one are the reason I read this blog. This is some real stuff. So many blogs make it sound as if they are always ahead of the new trend before it happens. Good luck on getting things back in order. It may take a while, but I feel like you’ll get there.

    Reply
    • March 23, 2020 at 5:54 pm
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      Agreed – really appreciate your transparency!

      Reply
    • March 26, 2020 at 12:57 am
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      Thanks.

      I’m coming down off the “ledge” emotionally. I’m going to be OK but I’m going to need a “job”. I did back of the napkin tonight and 20 hours a week at Costco will bridge the gap. I’m going to seek that tomorrow and do such until I can find contract accounting work at a better pay rate.

      Reply
  • March 21, 2020 at 4:09 pm
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    Really sorry to hear this news. We are all negatively impacted by this, as I have five puts that are about to be assigned. I will be out $55k, but as long a I hold long term, it will only be a temporary measure. Lots of lessons for all of us to learn here. Margin is especially dangerous, so keep cash on hand in case of emergency. You will bounce back better and stronger, so just have to be a little bit patient.

    Reply
    • March 26, 2020 at 12:58 am
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      Ouch. Thanks for the kind words. I’m going to make it. I just need to make sure I learned a lesson.

      Reply
  • March 21, 2020 at 6:52 pm
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    I am sorry for your losses. I had a synthetic short position in UVXY. The margin was over 100% resulting in smaller and smaller excess liquidity. So I liquidated the position at a big loss. I think that I now can withstand a further downtrend in the markets. I also was short TSLA via puts, but this was not a big position. In the near future I will have to study proper risk management.
    Thanks for this great blog and all the best!

    Reply
    • March 26, 2020 at 12:58 am
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      Thanks Hendrik. I lose 74k in my synth short of TSLA. I’d not be going back to work if I had respected stop loss there.

      Reply
  • March 23, 2020 at 8:31 pm
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    One positive effect of high volatility is that spreads waaaay OTM and with very short durations have decent yields. Might I suggest far-OTM bear spreads on the indices as a way to claw back or at least tread water until bond yields by themselves are attractive? There are still many people out there who think this is a repeat of December 2018 rather than an economic impact bigger than the mortgage debacle of 2008, and they are willing to bet long. I do not recommend any bull spreads because we have yet to digest the impact on banks, Italian bonds, etc. The tide is not all the way out, and some swimmers are naked and nervous!

    My own partially-collared portfolio is down about 19%, but has hit the floor due to liquidations and hitting the strikes on my puts. From here, I wait a few months and pounce when I can buy a full retirement income. Preferred stocks for example, which people hate exactly because they do what they’re doing now, are yielding over 7% and rising weekly! Time for patience.

    If you want to get a job, do it now. They’re about to dry up. The point would be to avoid selling investments low. Expect this episode to last 18-36 months.

    Reply
    • March 26, 2020 at 12:59 am
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      I’m already thinking along these lines. But I’m currently locked out of trading until I can deposit some cash. 50k is in transit from my tIRA.

      Reply
      • March 27, 2020 at 4:40 pm
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        Are you paying the early withdrawal penalty to cover naked positions in your taxable account?

        Reply
        • March 27, 2020 at 11:59 pm
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          I am paying the penalty and tax on 50k worth of early withdrawal. That will extinguish my remaining margin loan.

          Reply
  • March 24, 2020 at 4:12 pm
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    Sorry for all the hits to your portfolio. That is why I keep coming to this blog. Not only do you show your victories, you also show your defeats. My portfolio has taken a pretty big hit through this too, but thankfully I am all in dividend growth stocks so the income is still sound. No dividend cuts to my stocks yet, but I expect some to occur. Keep your head up. Will you be doing quickbooks accounting work? I have clients that occasionally need it, but I hate doing it so I always try to farm it out to others.

    Reply
    • March 26, 2020 at 1:00 am
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      Thanks for reading. I doubt it will be Quickbooks. I have experience in the big ERP systems like JD Edwards, SAP, Hyperion, etc. The big companies will hire me for bigger bucks (in time). For now, I just need some low wage slop to get the pump primed.

      Reply
  • March 27, 2020 at 4:36 pm
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    On the bright side – you are only now back to the point of needing gig work, and probably still wealthier than 80-90% of people. And how many years of financial independence did you earn for yourself? That was worth something.

    High-risk portfolios work sometimes, and in other times they are wiped out by black swans. Luck is a bitch. But you played your cards in such a way that you spent a big chunk of your life on your own terms.

    Did you win the lotto? No. Did you burn a fraction as many years of your adult life sitting in a cubicle as the douche next door with the leased mall crawler Jeep and 5 TV subscription services? Yes!

    Now you get to decide the next steps. Work and invest until you have the traditional 25x? Try again once you have a 6-7% WR? Big do-or-die bets on a depression vs quick recovery? Best of luck with whichever direction you pick, and I hope you still find the time to update us.

    Reply
    • March 27, 2020 at 11:59 pm
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      Thinking very strongly on this. More on the 31st when I can trade within IB again.

      Reply
      • March 29, 2020 at 10:53 am
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        Hi Raptor,
        I am very sorry for your big draw down, raptor. You’ll get through this, you know it. I hope you don’t stop trading and writing in this wonderful blog.
        I am writing you from Spain and I wish you and all the people that reads this blog the best with this Covid thing. Here our governors believed that this was a shitty flu and here we are, all the country in quarantine with everyone infected (this shit spreads quickly as hell), and almost thousands dying every day, and growing.
        I hope you won’t get to this level in the areas that you are living considering that your health care system is not public like ours (even though they are already collapsed).
        Thanks for sharing your thoughts and investment ideas with all of us.
        Regards

        Reply
        • March 30, 2020 at 7:23 pm
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          Spain will do better than the US. People here are still in denial (even despite the early warnings from Italy and Spain). I took a drive yesterday and saw large public gatherings all over the place. There’s still no testing, so no telling how bad the numbers really are.

          Reply

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