Reflections on my $5 Million Week

2020-08-27 | John Carter

It’s Saturday, August 22, 2020. I packed up my family on Friday and we headed to South Padre Island, a 5 ½ hour drive from Wimberley. Never mind there are twin hurricanes forming off the coast and are scheduled to hit in a few days. I needed to get away and process the past trading week. Did I lose a lot of money and need to take a break and reset? No. Quite the opposite.

My large trading room account gained 156% this week. I’ve had 150%+ weekly gains before in my trading career, but they were on account balances of, normally, less than $100K. This gain happened on a multi seven-figure account, so the real dollar profits for the week in my brokerage account was a big number: $4,935,092.14.

I started this account with $1,350,000 at the beginning of the year. Total P&L for the year now stands at $9,464,172.98. I wired out $2,802,865 to pay for taxes, a new home in Austin, and some land in Wimberley. I also donated $50,000 to charities in Austin which, frankly, as I’m writing this doesn’t seem like enough. It’s good to give for a number of reasons. From a practical standpoint, I’ve also learned over time that, in order to receive more, you need to be willing to give more. The more you take, take, take, the more you eventually lose.

This leaves a trading balance of $7,911,978.43 in my brokerage account. This is on an account where my goal has been to crank out 2.5% per week to pay for zebras, high fences for those zebras, and end up with an account of around $2M by the end of the year, after all the wire outs. Safe to say that this year has so far exceeded expectations…

Oh, I almost forgot. I also wired $200K over to TastyWorks last week so I could start actively trading there again. That account also had a good “first week” ending up 176.92% or $460,562.46 in gains, ending the week with a balance of $720,877.76.

Grand total for the week? $5,395,654.60.

Am I ecstatic and happy? Scared to lose it? Feeling like I can double it again?

I don’t know. That’s why I drove to the beach. I’ve been trading long enough to know that if I don’t process this and figure it out, I am opening myself up to a trading disaster.

If suddenly I’m euphoric and overconfident, I know that the market could take these profits away in a matter of weeks. I’ve seen that movie more than a few times. I don’t need to see it again. I’m good.

If I’m suddenly scared to lose it — the market will also make mincemeat of me.

So, do I take out 80% and put it in a CD and start again?

Hell no. I’m a trader.

To be clear, my main fear at this point is that I don’t fully process what happened this week and I give the profits back.

In addition to this, I’m concerned that I’m repressing euphoria. I know this sounds strange, but I haven’t been excited this week. I’ve been numb. Grateful, for sure. But numb.

I also think that’s part of why I was able to continue holding onto these trades. It’s like I had an out-of-body experience, watching myself trade instead of actually experiencing it.

It might be because ThinkorSwim was down Monday and Tuesday. I think it also had to do with how I structured the initial big trade.

I set up 500 contracts of a 1700/1800 call debit spread when TSLA was at $1,650. The expected move for the next week was $150. On Thursday and Friday it didn’t do much, and the long call lost money. However, the premium decay in the short call exceeded the losses on the long call. What does that mean? The trade was up slightly during the chop phase, making it much easier to hold onto. Way easier. Holding onto small trades is easy. Holding onto big trades is hard.

After a slightly nervous weekend (big trade, remember) on Monday, TSLA gapped up. It gapped up big and never looked back, closing strong, up over $100. This made it super easy to hold. If I had held long calls I think I would have bailed. But the call debit spread structure basically said, “Just hold on and I’ll continue making money for you.” Why? Because after Monday’s action, opportunity for additional profit was based more on premium decay than actual price advancement.

Tuesday we rallied again — and ThinkorSwim was still down. I did end up closing the debit spread at $86 per contract that day from my phone, after entering at $17 per contract. I closed it out because at that point it wasn’t worth risking $86 to make an additional $14. (Max profit on the spread was $100 per contract).

Lesson learned? On big trades, call debit spreads are easier to manage than straight calls. I remember when I was watching this trade on Friday, TSLA was choppy. While I lost money on my 500 long calls, I made money on my 500 short calls, and those gains were more than the long call losses. This was HUGELY comforting and made it easy to hang onto. Again I’m talking about a MAX size position here, which is harder to hold than a normal position.

Anyway…

How to process this and what to do next?

The main thing standing out here is that I’m a trader and my job is to just keep trading. That means nothing changes, except my 2.5% weekly goal gets bigger.

My concern here is that I start thinking more about the money. “Wouldn’t it be cool to push my balance over $10M?”

Well, I can guarantee that if I started thinking that way, I would destroy my account.

I’ve also talked about money plateaus, which are 100% psychological, based on what we think we are worth. I first noticed this back when I was trading a $50K account. I would regularly run it up to $75K, and then it would “magically” come back to $50K, often quickly. Once I saw this pattern, the next time I got to $75K, I wired out $25K and “started over” at $50k. This worked amazingly well and I reframed my job as a trader at that time.

My job was not to be right. It was not to catch every move. It was simply this: To turn $50K into $75K. I could do that, and it was fairly easy. That was my niche at the time.

I don’t understand all the mechanisms behind this, but I think it has to do with the following:

  • Self-image and self-worth as it relates to money
  • Not understanding how to manage euphoria and “house money”
  • Deliberately putting your back to the wall, which typically increases performance
  • Subconsciously destroying your account in order to feel alive and be grateful for what you have
  • Self-image and how you relate it to money, is based on how we were raised. I grew up on the cusp of the middle class. I remember my parents fighting about money. It doesn’t grow on trees, you know. My father was also very bitter about people who had more, as he felt he should also have more. He numbed those feelings with alcohol. My stepfather, a physicist turned stock broker, had a better sense of how money worked.

    Euphoria and house money? Euphoria makes a person feel invincible, which in trading, is a death sentence. The market has no idea you feel invincible. It’s going to do what it’s going to do, regardless of your feelings, goals, and prayers.

    House money is almost worse. This is where a trader thinks, “Well, these are just profits, let’s take more and bigger risks with this and go for it!” Welcome to losses and starting over again at, hopefully, your original balance instead of completely blowing out.

    Back to the wall? Every time I’d go from $75K to $50K I suddenly got “focused and serious” again. Man, I don’t want to go below $50K! I need to be careful and methodical. I liked this feeling, this focus.

    Under those conditions, I did great. At $75K I would loosen up and relax. I’d lose that razor-sharp focus. I could relax now! Be undisciplined! Combine that with confusing feelings around money and, presto, back to square one. By wiring money out and getting back to $50K, I put myself back behind the 8 ball again where I was focused and sharp vs. loose and “care free.”

    Subconsciously destroying your account in order to feel alive? This is common with gamblers. That feeling of hitting bottom and starting again can be as addicting as it is devastating. Looking back, I noticed this pretty early on. I’d blow out an account and suddenly just start feeling grateful for being alive and being healthy. So I got this crazy idea. Why not just be grateful every day instead of blowing up in order to feel alive and grateful? Crazy, right? But it worked. Blowing up is 90% subconscious driven, if not 100%.

    It is so important to understand the unconscious threads that run our lives. It’s not easy work and it can sometimes be revolting. Therapy can help. Plant-based medicines help more and even faster. Reading books like Letting Go help as well. The key here is to release stored emotions and trauma learned in childhood or you will create situations, over and over and over again, where those feelings can finally express themselves.

    I had what I would consider a good childhood. There was no trauma as far as I could tell. My parents did divorce but at the time I thought it was normal and I honestly didn’t think they were compatible. But what I unconsciously learned at 12 years old is that “I can’t depend on anyone, I’m on my own.” That got wired into my survival instincts without me even being aware of it. Even deeper, I experienced rejection, which leads one down the path of seeking validation.

    I didn’t know any of this at the time, but it’s been an unconscious thread through much of my life until I became aware of it. I could only see it in hindsight. The problem with this is we start creating situations in our lives for these repressed feelings to play themselves out. In trading, it’s not pretty. In human relationships, it creates the same situations over and over. “I can’t believe that person screwed me over?” Oh, you realize later, that’s what my unconscious wanted me to experience so I could express these repressed feelings of rejection until I learned to forgive and let go. Yeesh.

    Once you understand and release it — life gets way easier and you stop getting triggered by people… and by stocks gapping against you.

    Fast forward to today and I have trading accounts around $8 million. I’ve never had an active trading account this large. How is my self-image around this? Am I going to unconsciously take my accounts back down to a level that I feel I’m more worthy of? Or have I done enough work over the years that the plateau thing isn’t as big of a deal anymore?

    The answer is, “I don’t know.”

    So what to do? I don’t want to lose this money, and I want to be open to whatever the market is willing to give me.

    The answer is simple.

    Follow my damn plan.

    On each trade, focus on improving your skills.

    It helps to get all of these thoughts out of my head and down on digital paper.

    If I was in my early twenties I’d be looking at this differently. But I’m not, thank God – LOL. I don’t need to go to Vegas.

    Ultimately, I’m a trader and I’m not doing it for the material things I can buy, but more for the experiences I can have. Trading a larger and larger account successfully is an experience in and of itself. Being able to spend the weekdays around my family is an experience. Being able to wake up on a ranch and see zebras is an experience. Being able to ease the suffering of other traders is an experience. Being able to help Simpler Trading grow into a company that is making a difference and also providing meaningful and fun challenges and adventures for our team is an experience.

    So I’m reframing my trading. Yes, my goal is still to wire out 2.5% a week while steadily growing my account balances, even after the wire out. But instead of getting reckless and unconsciously sabotaging myself, I’m just going to stay aware, follow the plan, and remain unattached to the outcome.