This week I witnessed something on StockTwits that really caught my eye. There is a user named Paul that has been a fairly active writer (poster? tweeter? I don’t know the correct term) about the movement of $AAPL. He was around in the fall of last year when the stock was trading in the mid to high 400’s. (before the split, of course). He was an adamant advocate of buying and holding the underlying stock, which as we know was a good strategy in hindsight. This strategy is in sharp contrast to me as I trade options almost exclusively with the calendar diagonal being my favorite strategy.
I noticed over the last month that Paul had discovered the power of options in that they can provide massive leverage and he was advocating buying October calls predicting that this would capture new product announcements. For the record I agree and I own a fairly hefty position of $AAPL calls that expire not only in October but in January 2015 as well as some in August, which will also capture the next earnings announcement. One difference in our strategy is I am ALWAYS short some near dated calls, and in this case I am short calls that expire July 19 and then on July 25. But I digress. . . . . .
As Paul started more aggressively advocating his long position, he PREDICTABLY started being challenged. If in the short term things didn’t go the way he predicted he was being slammed and some of the posts were ad hominem attacks. If you spend any time on StockTwits you know the community will pound on you mercilessly when you are wrong, but rarely give you kudos when you are right. Paul was the recipient of such treatment.
One morning this week Paul was looking to get some more followers. Why I am not sure, but maybe because when someone follows us, we feel affirmed in our value to the community. But 12 hours later Paul posted that he was closing his StockTwits stream as the hatefulness had gotten to be too much. Wow. What a quick turnaround . . .
Witnessing this drove the point home to me that trading is primarily an emotional experience. How we feel drives what we do. Some anonymous jerk with absolutely no “skin in the game” can post something on StockTwits that totally changes our thoughts about the market in general and individual stocks in particular. When your thoughts change, you trade based on how you feel, sometimes right but many times wrong.
As time goes on, I get more and more dispassionate about my trading. I am less certain about the direction of any particular name but try to take advantage of short term trends. You won’t see me telling anyone on StockTwits that any particular name is going to take off, or tank.
Paul’s story has reinforced to me that if you listen to what others say, it can have a profound effect on your emotions. Your emotions drive your trades. I don’t get attacked on StockTwits because I make very few predictions, so I don’t hear the noise and I think I trade better for it. But what I do hear every trading day is the tv and SiriusXM and for the last 8 years that has primarily been CNBC. This week I have decided to severely limit my exposure to them as I believe they try to either frighten me or to anger me because if you are frightened you feel you have to continue to watch as they will then give you a heads up about danger ahead. Anger just feels good but it also blinds you to reality, so you continue to watch. I’m going to switch to Bloomberg as, at the moment, I think they are merely more informative and less hyperbolic. I’ll still watch Fast Money Halftime but mostly because Josh Brown is on there, and I trust his analysis more than most others.
Will it make a difference? I’ll just have to wait and see. . . . . . .