• 755 days Will The ECB Continue To Hike Rates?
  • 755 days Forbes: Aramco Remains Largest Company In The Middle East
  • 757 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,157 days Could Crypto Overtake Traditional Investment?
  • 1,161 days Americans Still Quitting Jobs At Record Pace
  • 1,163 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,166 days Is The Dollar Too Strong?
  • 1,167 days Big Tech Disappoints Investors on Earnings Calls
  • 1,168 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,169 days China Is Quietly Trying To Distance Itself From Russia
  • 1,170 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,174 days Crypto Investors Won Big In 2021
  • 1,174 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,175 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,177 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,177 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,181 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,181 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,182 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,184 days Are NFTs About To Take Over Gaming?
The 1,000th Unicorn Has Just Been Minted

The 1,000th Unicorn Has Just Been Minted

According to data from startup-tracking…

Optimism for an Airline Rebound With First Profits In

Optimism for an Airline Rebound With First Profits In

Rebounding with each holiday travel…

  1. Home
  2. Investing
  3. Stocks

Reddit Trader Scores 14,000% Returns On Rogue Trade

Rogue Trade

Ever since the dawn of the Internet, like-minded individuals have gathered in online chat rooms (among the more sophisticated, they were known as "forums") to share gossip and insights about their hobby. Coupled with the dawn of the discount brokerage in the early 1990s and a blistering boom in tech shares, and the groundwork for a new class of digital day traders had been laid.

To acknowledge the drop in trading fees on some of the biggest electronic discount trading platforms (an innovation spurred by the millennial-focused RobinHood), Bloomberg on Thursday published a wild story about one day trader's prodigious string of luck. In a span of just two trades, Eddie Choi, an amateur trader who hangs around the Reddit community "WallStreetBets" (profiled by MarketWatch back in the spring of 2016), turned an initial $766 investment in Roku puts into $107,758. That's an ROI of roughly 14,000%.

Here's how it started: First, Choi plunked down $766 on out-of-the-money Roku puts. On Sept. 20, shares of the streaming-service provider sunk 20%, leaving Choi's options with a value of $50,553. In an instant, the options went from worthless, to extremely valuable, while catching any traders who thought they could make a quick buck by shorting the contracts into expiry in a brutal short squeeze, according to Bloomberg.

But instead of walking away with his winnings (a roughly 6,500% gain), Choi embraced "WallStreetBets" "YOLO" aesthetic and plunked it all down on another risky trade: A few days later, Choi bought more puts, this time they were puts tied to the S&P 500 exchange-traded fund that trades under the ticker "SPY". That fund is one of the most popular ETFs in the world. But just to be clear: Choi wasn't buying shares of the ETF directly. He was buying options tied to the SPY ETF.

On Sept. 24, the first time the fund closed below $297 in more than two weeks, Choi's putts with a strike at $297, which were set to expire the next day, saw their value soar as the price of one share of the index slid to under $296. This left his options with their final value - roughly double the investment he put into the options the day before.

Before talking to the BBG reporters who interviewed him for this story, Choi credited luck, and his friends on WallStreetBets, for helping him learn the game.

"I use it to develop my watch list,” Choi said. “Of course, there are threads where people are just trolling, but you can find good entry points."

Just check out this example from one of Choi's friends on the forum explaining why the VIX hasn’t really soared during the trade war yet (though we've had a few intense periods).

(Click to enlarge)

BBG verified all of Choi's winnings via screenshots from his RobinHood account.

(Click to enlarge)

(Click to enlarge)

Of course, Choi is sitting pretty with his cash winnings. But there are thousands of traders like him who got burned piling into BTC earlier this year at $12,000, or buying Uber and Lyft during the IPO.

According to the terminology of WallStreetBets, we call these men bagholders.

By Zerohedge.com

Back to homepage

Leave a comment

Leave a comment