February 2018 Incident Report (Part 1)

This will serve as my incident report from February 2018.

In retrospect, warning shots were fired on the first Friday of the month. According to Yahoo! Finance, VIX increased from 13.47 to 17.31 (close-to-close) on this day: an increase of 28%.

The following Monday, February 5, is when the market went completely to hell with VIX closing at 37.32, according to Yahoo! Finance: an increase of 115%. This is largest single-day VIX percentage increase since calculations are available (1990).*

For this reason, all I did after 2:00 PM was close losing positions at [far beyond] maximum loss. Bid/ask spreads were gigantic, which forced me to lose a significant sum to transaction costs (slippage). It felt like playing whack-a-mole for the better part of two hours. I would close one position, record relevant notes in my spreadsheet, and then determine what open position was at largest loss and in need of being closed next. Around 3:15 PM, the Schwab website became unresponsive. I had to call in and speak to a representative (thank goodness I was able to do this before hold times became prohibitively long) to get the rest of my trades executed. I was also trading a smaller account, which meant I had to execute mirror trades. During all this time I was envisioning dollar bills (or $20s or $50s) flying out the window. I could detect the shakiness in my voice, and at one point the representative even gave me a couple empathy statements. Between all the waiting for orders to work and eventually fill, I felt as though my breathing had stopped in wait only to resume once the bloodbath had concluded.

I exited positions throughout the week until I was totally flat on February 9. When the smoke had cleared, I lost roughly half my profit from all of 2017 in six trading days with the vast majority of those losses coming in just one.

Perhaps as much as the financial, the emotional repercussions of catastrophic losses like this are why trading is so difficult. My mind was abuzz for several days. I felt like a deer in the headlights even though I was now out of the way. I felt like the proverbial “run over by a steamroller” had come to pass. As a trader, I have encountered catastrophic loss 6-7 times to date and it is always difficult. More than the painful moments of the present, in February it felt like I was simultaneously reliving trauma from catastrophic loss events of the past.

I will continue next time.


* I find it interesting to see different sources report different numbers. Business Insider, for
   example, reported VIX up 84% on the day. A closer look at that article reveals a posting
   time of 3:38 PM, however, which explains why the numbers don’t match. Either way, it
   was the largest single-day percentage increase ever.