DOS_patos
Unverified Legion of Trill member
- Robinhood trader said he turned $5,000 into more than $123,000 in five days.
- A Redditor with the username SpeaksInBooleans said he netted the 2,400% return by buying VXX and SPY calls, which paid off when coronavirus fears and an oil shock spooked markets.
- "I got VERY lucky when oil tanked, and that tanked the market," he told Business Insider.
- The amateur investor said he would safely invest most of his windfall but might buy "a $100 bottle of scotch and nice pair of cowboy boots."
A Robinhood trader said he turned $5,000 into more than $123,000 in five days.
A Redditor with the username SpeaksInBooleans netted the 2,400% return by purchasing call options on the iPath S&P 500 VIX Short-Term Futures ETN (VXX), an exchange-traded note linked to the Cboe Volatility Index (VIX). The VIX, known as the "fear gauge" because it indicates expectations of market volatility, soared on Monday as fears about the coronavirus outbreak and the start of an oil-price war sparked a brutal market sell-off.
SpeaksInBooleans then invested a portion of his profits into calls on the SPDR S&P 500 ETF Trust (SPY), an exchange-traded fund that tracks the S&P 500. The benchmark stock index rallied on Tuesday.
The amateur trader posted a screenshot of his massive windfall on the WallStreetBets subreddit on Tuesday. Business Insider reached out to learn more and confirmed his trades by reviewing screenshots of his Robinhood account.
The interview below has been lightly edited.
Theron Mohamed: Can you tell us a bit about yourself?
SpeaksInBooleans: I'm male, I'm in my late 20s, and I live in Colorado. I work as a consultant in the technology sector. I've been investing for over 10 years; however, what I did over the past week was far from investing.
Mohamed: Walk us through the trades you made.
SpeaksInBooleans: On March 5, I bought $5,000 worth of $40 calls on the VXX with an expiry date of March 20. I sold them on March 9. Later that day, I bought $30,000 worth of SPY calls with an expiry date of March 13 and sold them on March 10.
Mohamed: What was your thought process?
SpeaksInBooleans: I bought the VXX calls because the VXX was near a 52-week low. I saw the market potentially becoming more volatile. I got VERY lucky when oil tanked, and that tanked the market. I was right for the wrong reason. My rationale on the SPY calls was that typically after a large drop Monday there is always at least a 2% recovery on Tuesday.
Mohamed: Did you worry about risking your VXX return by buying the SPY calls?
SpeaksInBooleans: I set aside most of my profits and only risked around $30,000 of my $100,000 in VXX profits on the SPY calls. I was happy with my return and wanted to lock in some of my gains. Never a bad move!
Mohamed: What do you intend to do with your return? Are you planning to buy anything fun?
SpeaksInBooleans: Firstly, set aside money for taxes in a high-yield savings account. Secondly, reinvest in a long-term position in the S&P 500 to supplement my retirement accounts.
As far as anything fun, I like to live below my means. Maybe a $100 bottle of scotch and nice pair of cowboy boots, but other than that, I'd rather grow it over the next few decades.
Mohamed: Do you think you'll be able to resist the temptation to buy calls again?
SpeaksInBooleans: I really would love to say I could risk $100,000 or more, but I don't see any real plays I want to make. And I got lucky on the last one, so that's a big nope, staying away from options. I'm smart enough to see a nearly 3,000% return isn't sustainable.
Mohamed: You said you got lucky and wouldn't even call what you did investing. How come?
SpeaksInBooleans: What I did wasn't investing. I 100% got lucky. I hate getting messages from people who say, "I want to be like you, teach me."
My advice is and always has been: Pay off debts, have an emergency fund, max out retirement, then you can decide how you want to spend your money.
I chose to use it to gamble in the stock market. I bought where I thought the VXX would end up because of coronavirus fears and because of the VXX 52-week low. I might not have been wrong, but the primary driver for my gains was the oil, and I didn't see that coming.
I honestly didn't expect to be selling my VXX calls this week — but I take gains when I can get them!
Mohamed: Do you have any advice for investors at this turbulent time? Should they play it safe in the next few weeks, or look for opportunities to profit from the volatility like you did?
SpeaksInBooleans: Disconnect emotions from decision-making that involves financials. This is not financial advice, but I don't think we have hit the bottom.
I'm personally waiting for a number I have in mind for the S&P 500 to buy an S&P 500 index fund and hold for the long term. The stock market may drop more. Fine. I'm not rebalancing my 401(k). I'm not rebalancing my IRA. I'm living below my means.
I've got plenty of time left on this Earth to make money hands-off, and I plan to. Hands-on money management is a great way to lose money quickly and is often the result of emotional decisions. I'm sure there are plenty of great opportunities, and I may participate in some on a small scale in the future. But for now, my luck has peaked.
Update: SpeaksInBooleans posted a screenshot on Wednesday showing $250,000 in his Robinhood account. He told Business Insider that he boosted his previous return by investing in SPY puts.
"What can I say, I couldn't help myself. And hell, if I gave it all back, my life won't change in the slightest," he said.
"I already invest for the long term in other areas," he added. "Anything else I can get on top of that is just frosting."
