What not to do

Hi Saul et al,

Here’s a story of what NOT TO DO whereas most of the info on this site is how TO DO more successfully. At the risk of looking foolish, my aim here is to help someone avoid a similar mistake and also, forage for ideas of where to go from here.

As you may know my wife is quite a bit younger (and sharper) than I and after many months of managing my 2 portfolios, (I started at ground zero as an investor), I realized she was much better an inputting orders than I. I make more mistakes now in a week than I used to make in a month (when I was working). I chalk that up mostly due to diminishing intellect which I am comforted in knowing comes with the inevitable aging process, viz., don’t see the small icons on the IB platform, the IB platform itself seems to be created to help one make mistakes, emotional flightiness that ends in panic moves, slower thinking, slower grasping of concepts, etc.

So for maybe a year now I still do most of the stock buys but she has been using IB’s Option Trader with very few mistakes. I have gotten out of sync with Option Trader and any memories of how to do this or that are of the same quality as a deja vu experience. The few times I jumped in to do an apparently easy option trade further confirmed to me that SHE WAS THE ONE to handle all inputting.

On this particular day following TMF Pro, I had an in-place SPY hedge that was turning over on the expiration date in October so I got up very early on October 16 to try and catch the guided price. We’re on the West Coast and my Julie sleeps much later than I and never sees the market open.

After careful deliberation, double/triple reads of the recommendation and moving cautiously, the first thing I did was to double the position, instead of my intention to buy it back and roll it. That was really unnerving but I’ve done this before. As I looked at how that happened I could feel the panic rising. During that panicked assessment, I realized I didn’t know if I had bought or sold the bear put spread that I had in place and I had either bought or sold the original and should be either selling or buying it back and then selling or buying the new one…I still don’t know what the hell I did.

So now I had 2 of the spreads that had to be closed out and/or rolled. I entered a “2” into the Option Trader SPY trade box. Then, I saw a button that said “Reverse Position” and another one right beside it that said “Close Position”. I sure didn’t want to reverse the position since I didn’t know what the hell I had done in the first place. I then thought, “I just want to close the (now 2) positions” and then I’ll do the roll separately but I wasn’t sure if the screen was taking into consideration the original position and the faulty purchased position…right at that point I saw another button beside the other buttons that said, “Close All Positions”. I hit that one.

Next thing I saw was my financial life running backwards before my eyes, like the guy that receives a fatal wound and watches his life pass in front of him before the ultimate darkness, i.e., every stock and option position I had (and there were over 60) were alphabetically and in rapid succession, being closed so fast that when I saw a particular position

  • that I had labored successfully for months to initiate - flashed before my eyes, before I could get my finger to the keyboard to do (I still don’t know what)…something…6-10 more positions had joined it in the trashcan/history books and were closed out. This went on until they got to “Z”. It was the fastest decision making I had been involved with since I started managing my own portfolios.

In the midst of it all I panic screamed for my Julie, who was still sleeping; I thought of turning off the computer but realized that only stopped me from watching the show, not the production of it. So by the time my darling came out of the bedroom, and I think it was less than 15 seconds, everything was closed out. I didn’t see it but it felt like smoke was coming out of my computer or my ears or both.

All those many positions I sweated bullets over to buy, increase, trim, etc, were GONE. I took losses that probably would have reversed; I sold stocks I had NO INTENTION of selling EVER. My beloved positions in AAPL, GILD, CELG, AMT, a beautiful DIS long call that had tripled and was on its way to quadrupling, etc.

The good news was it was only one of my 2 portfolios…but the larger one. My IRA was safely unopened at the time. The bad news was it had caught me in a market downdraft such that I am now $18K down from the year’s start whereas at one point I was 22% ahead. A mess to be sure.

Take aways for me:
Stay the hell away from IB Option Trader;
Try to get Julie to bed earlier so she can get up with the market for early maneuvers;
Have Julie input orders and I check them before pulling the trigger;
and lastly,
NEVER vote for anyone over 70 as President of these great United States. Even with fail safes, a nuclear mistake could happen since after all, it’s just one button (or maybe 2).

Now I have the task of deciding to:
Rebuild the portfolio (it’s now 89% in cash as I have been pecking away at some stocks and options that appear reasonably priced). If I choose this I still have decisions about what kind of portfolio I will try to build this time and what service to follow, or maybe I should hold onto the cash for that supreme moment which may or may not be coming within a year so I can buy back in at 2008/2009 valuations, etc, so lots more decisions with lots less confidence that I can pull them off.

My old plan, when I took over from Morgan Stanley in mid 2013, was to build my portfolios higher such that a 5% return on the total base would give me enough yearly income to live on. Once I got to that higher base, (all the while converting my positions focused on mostly safe, income production vehicles) I intended to exit what I call the hampster wheel investing style in early 2016.

Mainly I wanted out of managing because it kept me in front of a computer 12 hours a day, most days of the week and it was work that I really was not cut out for (though with TMF I was able to do much better than Morgan Stanley).

I was making very good progress with this build and then convert to an income portfolio strategy. But now with an $18K YTD loss in my taxable portfolio, my timetable is seriously behind.

Progress before the fat thumb/brain move was based upon a combination of selections from Pro, Options, TMF One, some SA picks, my darling AAPL, etc, but starting over again, back to step one seems daunting and especially now with a tad less confidence.

There’s the long and short of it. Probably not many lessons for you all in there but for sure, stay away from any button that says, “CLOSE ALL” no matter WHAT you think it refers to. I was in IB’s Option Trader order screen and I had SPY in the STOCK box with 2 spreads to close and somehow, I ended up selling all options and all stocks. (I called IB and they offered their condolences. Seems like there should have been a big BOMB icon next to it.)

Actually, I feel much better about it now since it could turn out to be a good move (though I feel badly about the $18K and am trying to make some of that back). If there’s a market crash before I can figure out what to do with the bulk of the cash, (89% cash position now), I’d look pretty smart but that thought is just to make me feel better. I really don’t want to be out of the market based upon a stupid mistake. For me to profit from a crash I would have to consciously choose that path and have a plan waiting to capitalize on it.

As it stands now, I have bought SKT for the first time and at a great price, bought back AMBA but higher than my original purchase price, and entered some no brainer option plays on GILD, SWKS, WFC and DIS. What I don’t want to do is move forward with no plan or rather a loosely based rules plan and then find myself somewhere I may not want to be. Been there, done that.

So here I sit with many decisions to make. Any and all suggestions on how to move forward will be happily received since feedback, whether positive or negative, is a gift.

Ciao and hope this helps somehow.

Mykie

34 Likes

Alas, your warning comes 5 days late.
Much like you, I was wanting to close out a short call (AAPL actually) and stumbled upon that Close All button.
I think I was a bit more fortunate in that it was set to split the bid/ask. So I had a few more milliseconds than you and was able to click the cancel button on about 30 orders.

This did leave me with some naked short calls and I really didn’t want to increase my tax load this year. So, I got busy and was able to restore most of the positions at the exact same price by setting limit orders. I still have about 3 more positions to restore (including my AAPL shares)

I did decide to leave some positions closed out, but those were ones like NILE.

Come tax time, I hope to ignore this little bit of ugliness. My lesson cost was probably closer to $60 in commissions.

I realized I didn’t know if I had bought or sold the bear put spread that I had in place and I had either bought or sold the original and should be either selling or buying it back and then selling or buying the new one…I still don’t know what the hell I did… So now I had 2 of the spreads that had to be closed out and/or rolled. I entered a “2” into the Option Trader SPY trade box. Then, I saw a button that said “Reverse Position” and another one right beside it that said “Close Position”. I sure didn’t want to reverse the position since I didn’t know what the hell I had done in the first place. I then thought, “I just want to close the (now 2) positions” and then I’ll do the roll separately but I wasn’t sure if the screen was taking into consideration the original position and the faulty purchased position…right at that point I saw another button beside the other buttons that said, “Close All Positions”. I hit that one.

Any and all suggestions on how to move forward will be happily received since feedback, whether positive or negative, is a gift.

Hi Mykie, It sounds scary! As an over 70 guy myself, I’d make two suggestions:

  1. Stick with stocks. It’s simple buy or sell and much less complicated than all those option trades.

  2. Consider moving to a simpler trading platform. (I use Schwab’s StreetSmart).

Best,

Saul

6 Likes

Consider moving to a simpler trading platform

This is the best advice I can think of. Any platform that has a self-destruct death star button that doesn’t ask at least twice if that is REALLY what you want is too scary. I use e-trade which has (for me) a very clear interface, and always previews my order before submittal.

As you note, it may not end up being as bad as you think. It does offer the opportunity to make sure all your positions are high conviction, and allows you to rethink your plan going forward. Also, if you are spending 12 hours a day doing something that you don’t just love doing, maybe it is time to think about low cost index funds? In most cases you’ll do just as well as picking individual stocks for yourself.

DT

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Mykie,

Your coming to the boards to tell this story is terrific.

I am an IB user, too. I have seen that “Close All” button. It would not be hard to hit by mistake. We have all made mistakes in order entry, especially those of us who have used options or hedges. Your telling this story helps all of us, at any brokerage, remember to check and double-check our order entries.

Once you sort tax issues and think through how you want your portfolio built for the long term, I think this is an opportunity, though not one you would have chosen.

John

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Wow - Close All? that sounds like the worst idea since a “launch all” button.

I use TDAmeritrade and Fidelity. I find both easy to understand, but would recommend Fidelity for you. They have a nice large font trade ticket that pops up and it is very easy to use. As others noted, 12 hours a day is way too much for something you don’t love to do, and if you can’t beat the S&P consistently then it can’t be justified. If you spend less time investing, maybe you can spend more time with your wonderful wife and enjoy the life you have, not chase the life you might get someday.

Happy Trails.

11 Likes

How Foolish and brave you are to post a major pickle you experienced so that everyone else may benefit from your little “life lesson.”

I don’t do options, so I haven’t had that one happen. Although as has been mentioned, I would think a more user-friendly trading platform would be a first step, if you’re going to continue trading options.

Anything that can allow you to do that much damage should ideally have a big interim screen pop-up that says, “Whoa! You are about to take a MAJOR trading step with your portfolio. Are you ABSOLUTELY SURE you want to do this?”

Simply allowing you to close all positions with no strongly-worded warning (or two!) would have me running for the nearest button that says, “Close this trading account and migrate to another one.”

Years ago, I made an error that I wished I hadn’t done, but it was much smaller potatoes, thankfully. I meant to sell 3/4 of a small position after it had more than doubled, because I just didn’t want to be in that company anymore, but instead I bought the number of shares I had meant to sell. Sheesh!

I went ahead and kept all of the shares (really not much, even with the new buy) to remind me of the folly of not paying attention when making trades. I see it every time I look at my port, and the position I bought has lost ~40% in the meantime. The dollar damage is absolutely minimal, so really no harm, no foul in the grand scheme of things. I could have chosen to turn around and sell all but the original 1/4 position that I had intended to keep, and the only thing it would have cost me was the extra commission, but I’ve kept the shares as a reminder to NOT DO THAT AGAIN!

Back to Mykie, I would also advocate at least considering getting away from options trading entirely, since it is taking up so much of your time. Just tell yourself you decided to exit that methodology a few months sooner than expected. :o)

These are the days to enjoy life, live in the moment, do the things that add vitality and quality to your life, and spend more time with your lovely wife – and any others you care about.

But thanks for sharing your story as a cautionary tale for the rest of us!

Best regards,
Kathie

4 Likes

Mykie,

What a tale! Thanks for sharing. It is certainly a cautionary note for us all.

I agree wholeheartedly with the three major suggestions in this thread so far:

(1) Ditch IB. Go with a broker that has an easier-to-use interface. Schwab. TD Ameritrade. E-Trade. Fidelity. Pick one, and move your portfolio(s) over.

(2) Consider strongly the idea of going to an all-stock portfolio. Options are nice, if you are good at them, but twelve hours a day is waaaaaay to much time to be spending on your portfolio. I spend maybe an hour a month, tops, actually reviewing and managing my holdings. That doesn’t include reading time… but I would be reading anyway.

(3) Last, because it depends upon executing the first two suggestions, live a good life. Freed up from the anxiety of managing an options portfolio, and with time to spare, you can enjoy your retirement fully. No more having to worry being up placing orders at market open, or at market close, or market anything… just check on your holdings every so often before you and your wife head out for a nice meal together.

(4) Use the power of this community writ large as you rebuild your portfolio. You might be surprised at the wisdom and insight that can be gained from Fools.

Best wishes to you!

Tiptree, Fool One guide

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So IB really has a button that closes all open positions? Seems like this is by design to make sure they earn more commissions due to mistakes. I would ditch IB and go to someone else.

Personally, I like to stick with stocks only. I do trade very few options, but never liked complex options strategies and limit my option trades to simple call or put buys, and the rare covered call. I see all these complex options strategies that some traders are fascinated with the same as the insurance or bets that casinos offer you on the gaming tables. If the casino is offering you a bet, it is a sucker’s bet. It is designed for them to make the money.

Mehran

4 Likes

The IB platform is called Trader Workstation for a reason. It’s designed for traders, and there’s a fair number of day traders who would want such a button to close out at the end of the day, or to close everything in a suddenly volatile market.

Thus, it is a feature rather than a malevolent attempt to raise commissions. (That said, Trader Workstation is pretty customizable. It wouldn’t surprise me if there’s some way to remove that button from the user interface.)

Richard

2 Likes

Mykie,

Thanks for the cautionary tale. It actually makes feel better to know someone else struggles with the oft touted IB interface. I switched about 4 months ago and have placed a handful of trades in error since switching. Particularly with options trades the traderworkstation can be very non-intuitive. Just last week I was trying to roll some puts and couldn’t figure out if I was offering to pay to roll them or get paid to roll them. I am saving money on commissions, but certainly lost a few dollars on the erroneous trades I’ve made.

Of their three interfaces: mobile app, Webtrader, and traderworkstation, I find the ease of use to fall in the order listed above. I have a hard time entering a trade in error with the web interface or my phone.

I too have found many of the TWS tools to be very unhelpful.

I really liked the optionshouse (now trademonster) interfaces. Very easy to use.

I hope I gain proficiency with TWS and make fewer mistakes.

I am sorry to hear about your losses.

-Brandon

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Saul
Are you buying back into Bofi?
Also, are you still long amba?
Thanks

I switched about 4 months ago and have placed a handful of trades in error since switching.

I took the liberty of quoting that when I posted a link to this thread on a paid board devoted to IBKR.

I believe you will find the answers here:
http://discussion.fool.com/my-portfolio-at-the-end-of-october-31…

Saul
Are you buying back into Bofi?
Also, are you still long amba?
Thanks

Hi pamelan, I think it is better if I don’t post what I’m doing all the time, and just wait until the end of the month, because too many people seem to try to mirror my trades and positions instead of deciding for themselves, and they get into trouble that way. This board is meant to try to teach you how to invest for yourself, not how to follow me, so I think that that is the best solution except in occasional rare circumstances.
Best,
Saul

29 Likes

I’m over 70. Before I became an investor I was a software designer.

That trading interface is badly designed. A “Kill All” button is OK provided it has confirmation dialog box after it to give you a second chance.

But, and there is always a “but,” the IB platform is for traders, not for investors. A day trader usually does not want to leave any open positions overnight and when it’s getting close to closing time, the “Kill All” button is probably a life saver for many of them.

The lesson is that one should use the right interface for one’s needs. I do some trading but I’m primarily an investor. I don’t need the speed (or the complexity) of a trading platform (some traders have three or four screens going at once!). I set up my trades often days in advance. A few seconds – or even a few hours – make little difference to me.

KISS – Keep it simple stupid!

Denny Schlesinger

3 Likes

Hi again Mykie,

It looks like you have near unanimous responses with two recommendations. It’s nice when everyone, or near everyone, agrees. This is what everyone seems to be saying:

Quit the complicated options trading!

Get a simpler trading program interface!

Best
Saul

2 Likes

Hi pamelan, I think it is better if I don’t post what I’m doing all the time, and just wait until the end of the month, because too many people seem to try to mirror my trades and positions instead of deciding for themselves, and they get into trouble that way. This board is meant to try to teach you how to invest for yourself, not how to follow me, so I think that that is the best solution except in occasional rare circumstances.
Best,
Saul

Hi Saul,

I’d offer one other suggestion as well which is that you only post the stocks that you traded but not when or the price. The board is educational enough but sometimes it feels your good timing contributes to members wanting to follow you.

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…which is that you only post the stocks that you traded but not when or the price.

Since price clearly enters into Saul’s buy decisions I think that is important, but whatever Saul decides is fine with me.

1 Like