A Fool And His Money

About a week ago, I got a series of tweets from a fellow whom I don’t know and have never heard about. He wanted me to know about a big bet he was making………..

So just to boil this down for you……..this fellow claims to have put 100% of his net worth (not just trading capital………but net worth) into March 2017 VXX $50 calls. Allow me to show you the VXX, and see if you can divine its trend from the chart. I have, as a point of reference, marked where the $50 strike price is.

I took a look at the history of the VXX, and the most explosive up-move I could find was the late summer 2011 debt crisis, in which the VXX went up over twice its value over a period of about nine weeks. Considering how far $50 is from present price levels, I’m not even sure it’s mathematically possible, no matter how tremendous a crash, to get above $50. Indeed, I think there’s a greater likelihood that the Janet Yellen Leaked Sex Tape will win the Academy Award for Picture of the Year in 2017.

Now, I was naturally curious if this same fellow had a track record I could examine. He didn’t have very many tweets, and there was only one other clear trade he had made.

So apparently he put hundreds of thousands of dollars into DRYS around November 16th. Here again, let me show you that chart around the relevant time:

So after that debacle, our hero was chagrined and humbled:

So, keep in mind, the amount “left” is $17,000. That’s how much survived the DRYS debacle. We’ll get back to this guy later.

I was reminded of this when I read this story in MarketWatch about a fellow who supposedly put his life savings into a very aggressive options play based on AAPL earnings that took place after the close on Tuesday. As I dug deeper into this, I found out the guy’s story was that:

(1) He had inherited $2.5 million from a relative;

(2) He spent the last two years pretty much screwing up in every possible way he could by trading and gambling the money away with reckless bets;