Every now and then, I receive an email like this:
“Hi Hugh, I would like to chat with you for a few minutes about an urgent situation ASAP.”
Marvin was interested in learning to trade with us and almost signed up for some training. We talked several times and he was provided ample information as to the risks, costs and benefits, including the cost of not joining.
I found it odd that he did not partake, despite repeated affirmations that he was going to. But, I see this a lot so it did not surprise me that he hesitated.
When I contacted him regarding his email, his wife took the phone rather quickly. She advised me that they were at the hospital and that he was worried about a possible heart attack or impending stroke. I knew from before that he had some health issues, especially volatile at an elderly age.
Marvin asked me what I thought about some SPY puts, expiring in a couple days. He was in for an average price of $1.14. Unfortunately, they were worth only about 3 or 4 cents now. We had 2 days left. When I did my analysis, SPY would have had to drop about $10 in the next day or so for a break even. This was hardly going to happen… of course nothing is impossible, but highly unlikely.
What was frightening was the number of contracts. Turns out he had about $35,000 invested in this trade. I explained that I likely would not average in as it would require about another $100k to bring the price down. I would cut my losses. His last words to me: “Lesson learned, thanks.” I’m afraid to call him back, fearing the worst.