The Great AdapterQ: Were you finally ready to leave your couch?
A: Yeah. Actually, you can only stay on a good couch for so long
[Laughter], longer than I should have. Obviously the bottom fell
out, and it didn’t kill me. But it put a little crimp on the easy
money. I had maybe lost 10 or 20 percent drawdown from highs,
but nothing I couldn’t recover from.
Q: At that point, it was an utter, sheer collapse. Did you learn to
take losses? Or did you simply not put on large positions?
A: Yeah. As I saw the bubble pop, something inside me said,
“Relax.” Everybody was still buying them, and it would sort of
bounce here and there. But overall, guys were just getting crushed
left and right around me. It was pretty sad to see. There were
guys—kids that made a million, two million over the last year—and
they were just giving it away at an alarming pace. The bells and
whistles went off at that point, and I started to look around the
firm and look for guys that weren’t big traders taking these huge
swings. I tried to find anybody who was making consistent money.
There was one guy. He kept pretty private, but a nice guy. So I got
to talking to him. He said he always made around five grand, day in
and day out, no matter whether the market went up or down. He
said, “I’m not going to make$20K or$50K like that guy sitting next
to you. But I’m never going to lose money.” I said, “Wow, how do
you do that?” [laughter.] So that was when the light went on and
I said, “Okay this guy is an actual trader, not a buy’em and hold’
em and hope for the best guy.” He’s actually trading stocks up and
down. I never really went short anything prior to that point. If you
wanted to trade—scalp—them both ways effectively, you had to
put on some conversions to enable selling on the downtick.
Q: Let’s just step back and explain what conversion is. At that
time you would basically be allowed to buy a put, right?
A: Yeah, it was a married put.