Spy--Thanks for posting that. I damn near got caught in one of those "pure trading vehicles," and just escaped with my you know what... What follows is completely off-topic, but I think interesting if someone wants to learn from my pain...
On friday I stayed home to enjoy something I rarely get to do: watch the market do its thing. About noon i noticed a stock i used to own--ELCO (elcom systems)--had jumped about 120% on the day! I'd suffered through this stock for a long time--I had it when i first discovered what a stock discussion thread was--and i knew quite a bit about the company, including the fact that it had no business going up 120% in a day, unless they had found a way to double the intelligence of their doltish CEO. Briefing.com did an analysis on ELCO's appreciation that day (when it had only gone up 60%, not 120%), and said that the move was "unwarranted." Greedily smelling an opportunity to try something new and make money at the same time, I decided to short the stock, which was then around $14. Every time I tried to short it (using a limit order) its price kept moving higher when I "previewed" it, so I chased it to $15.50 when I finally hit the "submit" button, which was then filled at $16--even better, for 1,000 shares. By the end of the day, it had floated down to $15 1/8, giving me about an $850 paper profit. I'm a fuckin' genius. I figured.
Wrong!!!!
First let me say that ELCO is a company which is absolutely bleeding red-ink, it's revenues are stagnant (at best), it's trying to make the transition from being a computer reseller to a business-to-business ecommerce company, and not doing it at all well as far as I could tell. And get this, the deal that caused it to move up 90% in the day (it had come down some from 120% at the close) was a "non-exclusive" deal with VISA that would add all of $8-10MM in revenue, which to a company with $800MM in revenue, was a roughly 1% increase.
A 1% increase in revenues equals a 90% increase in market cap??? I don't think so.
In other words, money in the fuckin' bank.
Then I decided to visit my old Yahoo ELCO thread, a place I hadn't been to for a long, long time. The old regulars (Doo Wop, Omegacat, the Mav) had mostly moved to WAVX, a much more promising company, and I knew none of ELCO's current posters. What I found, though, was the weirdest damn subculture I'd ever seen on a thread (and I've seen some weird ones). The 1% Visa "deal" (using the term very loosely) was cause for frenzied celebration here, stagnant revenues meant nothing, the 90% appreciation in the stock was simply an appetizer for the $50 level ELCO would be at in a couple of weeks. "GIMMEE THE DAMN NEWS, BABEEEEE!!!" posts abounded, "WE GOIN' TO $200!!!!"
I'd fallen into the rabbit hole--their mojo was a mystery I could not comprehend.
I spent the weekend trying to, admittedly, manipulate the discussion to my benefit, meaning: to give some of the insane longs some caution so that I didn't get killed on Monday. Sweat beaded on my forehead. If this thing doubled again, I'd be out $15 grand--and it wouldn't be paper losses like I get from time to time, this would be an off-the-bottom-line TODAY, blood-on-the-damn-floor, time-to-curl-up-in-the-fetal-position loss.
I became the most hated man on the ELCO thread.
"DIE YOU SHORT BASTARD!!!!" one of the all-caps posts said. "YOU'RE TOAST, SHORTY!!!" said another. There was a post entitled something about "castrating the shorts," which I didn't bother to open.
"Why, oh why, didn't I cover on Friday?" I thought to myself. An article in the Boston Globe on Saturday said that "more news on the VISA deal would be forthcoming on Monday," causing loud, all-caps huzzahs from the longs. "What more can be said about a deal adding 1% to annual revenues?" I reasoned futilely, "that it's actually going to be 1.5%???"
"BLOW IT OUT YER ASS, SHORT-STUFF!" was my answer.
Then someone posted that news was coming about ELCO spinning off one of their subsidiaries--elcom.com--as an IPO, and that might be announced on Monday, also. More all-caps celebration from the longs. "WE GOING TO $200!!!"
"Sweet Jesus, what have I done?" I thought to myself. My wife tells me I've lost my mind. I say nothing in response--she, of course, is right.
I posted in a frenzy on Sunday--arguing, insulting, cajoling, trying anything to slow down the steamroller clearly headed my way.
"HEY SHORTY, GETTIN' SCARED???"
Uh, yeah. And your point is??
I woke up today at 5:30, my gut churning. How much would I lose today--$5 grand, $10 grand? If the stock doubled on a 1% revenue-gainer, what would it do if ELCO announced an IPO from their subsidiary? What if CMGI bought it out, as many on the thread predicted. Visions of Wall Street suspending trading on ELCO under the situation clarified, then re-starting it with a gap-up to $35 terrified me.
I nervously posted on the thread a few cautions, all of which were treated as if they were placed there by Saddam Hussein.
"HEY SHORTY, YOU'RE GONNA BE SPENDIN' XMAS IN A SHELTER! SLEEP ON YER BACK!!! HAHAHAHAHAHAHAHAHAHAHA"
Then the Instinet, pre-open trading begins. With the sort of horrific fascination of the doomed I move between my computer and CNBC, which carries the Instinet numbers on a ticker-tape at the bottom of the screen.
"We're at $17!!!!" Someone posts, "GO ELCO!!!!" This is five minutes into the pre-open session.
"We're at $18!!!"
"We're at $19!!!" I'm down more than $3,000 in just 15 minutes...
WHY DIDN'T I COVER ON FRIDAY?
I am, without a doubt, fuckin' toast--they're right. This had started out as a lark, a way to make a little quick money and one which could only cost me a few hundred, maybe a grand, at worst. I start to whine to myself, something I almost never do. Hell, I'm a nice person. I try not to hurt people. What did I do to deserve this?
Then, a miracle happens--a ray of sunshine cutting through the gathered gloom--the inexorable climb to $19 pauses, the TV screen keeps running "Elco 19, Elco 19, Elco 19." Maybe the momentum has stopped. Maybe, just maybe, it won't reach $25.
Then, Elco 32. No shit. Elco 32. I have a heart-attack.
Then Elco 19. It was a mistake. Thank God.
Then it actually goes down to $18 3/4. $18 1/2. $18 3/4. $18 1/2.
It bounces around like that, sometimes getting to $17. It actually reaches $16 1/2!! I celebrate. My body relaxes--I'm only 15 minutes away from 9:30 and I can call an end to this madness, only losing $500 or so, right?
WRONG!!!!!
When 9:30 hits, I place my "buy-cover" order in at $16.25. I miss covering by what can be no more than an 1/8th of a point. I see that the ask is at $16.50 when I hit "preview." Okay, I can live with that, I type 16.50 in and hit "preview" and see that the ask now has moved up to $17.25 in about 45 seconds. DAMN!!!! I type in $17.25, hit preview and see that it's now $18!!! WHAT AN IDIOT I AM!!! WHY DIDN'T I JUST PUT IN $16.50 AT THE START AND THIS NIGHTMARE WOULD BE OVER!!! MY GREED COST ME $1,500, AT LEAST!!!
I stubbornly refuse to go higher than $17.50 for my limit order. I don't give a shit. I can live with a $1,500 loss, but they can take my house away, I ain't gonna go any higher. Fuck 'em.
I trudge to work, an idiot on a fool's errand. I successfully avoid talking to anyone other than quick, simple pleasantries, close my door, nervously fire up my computer, and go directly to E*Trade.
There isn't any notice that my cover was executed, but I go into "trading history" and scan to ELCO, see my short purchase on Friday at $16 and my buy to cover was executed...
...at
...$15!!!!!!!!!!!! I make a cool grand!!!!!!
How could a $17.50 limit order--when the stock was at $18 or higher when I placed it--get filled at $15????
I don't know.
I probably never will know.
But I can tell you this: I never will complain about the speed with which E*Trade fills their orders... |
