Millionaire TradersQ: The Emulex saga was a very famous story of the Internet age,
when a fake press release caused the stock to plummet and then
bounce back hundreds of points in one day. Worst trade ever that
you can remember?
A: Oh boy. It would have to be probably some of the overnight
bleeders that I held back in the day. Some of these stocks don’t
trade anymore. I do recall one that we traded a lot before it got
bought out. It was a stock that traded over$400 and we would
typically try and make the spread on it because it would carry a
10- to 20-point spread at times. We might flip 100 or 200 shares
and, if we made the spread, it was a nice little winner. Actually it
traded north of$600.
Q: So these were very big stocks?
A: Yeah, in the Nasdaq. We thought we could play the bid-offer
game on some thin pricey stocks. The bad trade I was shorting,
and I actually got too many on, can’t remember—at least 400 or
500 shares—and the news came out: A buyout. I got steamrolled
probably for like$20K.
Q: Ouch. Was the stock halted?
A: Yeah, it halted, came unhalted, and I just got rolled. It was
such a thin stock and, of course, any volume at that point was just
volume coming in to buy it.
Q : So you are short the stock. It gets halted—takeover
news—what’s going on in your mind at that point? What did you
decide to do the moment you heard all that news?
A: Pucker up, it’s going hurt. Nothing good was going to come
out of it. So I just had to get out.