Loss Porn- How Gambling Addicts Lose Everything in Options

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The subreddit known as Wall Street Bets is well-known as the haven for inexperienced young “traders” who are always on the prowl for the next easy, surefire way to make some quick money. As one might guess – – since we live in a rational world in which gamblers are swiftly parted with their money – – the vast majority of them bleed their accounts out in short order.

With all the self-inflicted financial suffering that takes place, naturally there is a strong desire for commiseration, and the community is happy to oblige. The site is littered with “loss porn” from fellow users, which are often the most popular posts, and their equity curves usually look a little something like this:

The weapon-of-choice for all this self-inflicted pain tends to be options – – and particularly aggressive positions, at that – – and even modest 2% drops like that from last Thursday are enough to cause the amount of loss porn to utterly saturate the site.

There was one particular bit of loss-porn which caught my attention, because the loss was so substantial. The author stated he had lost $500,000 – – his entire account – – since June (merely weeks ago) based on going “all in’ on, of all things, American Airlines call options. Here was the trade, if we dare use such a lofty term:

Now, only a month ago, this chap was as sure-as-sure-could-be that he was going to absolutely make a fortune.

As airline stocks continued to erode, and as the expiration date of his one giant trade drew closer, he started to sweat. This was from a week ago:

Well, no mercy was forthcoming from the trading gods, and thus, on expiration day:

Now, I take no pleasure out of this man’s losses (and, let’s face it, you just know it’s a guy). I think this kind of wipeout is probably pretty common among the young lads prancing around the skeevy domain of /wsb, but I think there’s a larger lesson here.

It is this: there is an entire generation which has been imbued with a sense of risk-free trading……….moral hazard, let’s call it………which is going to wreck young lives. I say once again, the sorts of wailing and gnashing of teeth recently witnessed was from the most modest diminishment in prices from the highest prices in human history. If the Dow had gone from 34,000 to 5,000 in a few months, yes, it would make sense for virtually all investors to have been devastated. But we’re talking about 1.5% tidbits of slippage here. The problem, of course, is that these guys are taking on such high-risk, leveraged positions, that unless things go smashingly their way, they’re going to get fricasseed.

Naturally, if and when the market actually does collapse (AKA more than two percent drop from lifetime highs), I fully expect there to be shrieks and pleas for a bailout to save The Millennials. And, considering the Fed’s limp-wristed acquiescence to the demands from anyone who has suffered any kind of loss, they’ll probably just fire up the ol’ digital printing presses again and bail them out, poisoning the well even further. But I merely wanted to point out that the signs are all out there, and a future Tom Brokaw will undoubtedly produce a multi-part series about this crowd titled The Lamest Generation.