It's hard to admit that you're stupid.
You could turn $400,000 into $20,000 and still walk away without that self-awareness.
But when one young trader saw such a $380,000 loss on a single call option, it taught him a valuable lesson. He wrote an article for Vice in which he called himself stupid 10 times.
This wasn't even a story of complete stupidity...
Sure, this anonymous trader gambled on "meme stocks" like AMC Entertainment (AMC). Like many young people, he got sucked in by the pandemic's bull market.
But those were the trades where he made money. He emerged from a series of speculative bets having turned $5,000 into $50,000. He was ready to start playing it safe.
That's a smart instinct. But his execution was terrible.
This trader found one good investment thesis. Then he put everything he had into it: the $50,000 he'd made from his previous trading, plus all the savings he'd built up by working a good job and spending conservatively.
The company he pegged all his wealth to was Alibaba (BABA), the e-commerce giant that's like China's version of Amazon. He did some research. This was a stable, wildly successful blue-chip company. Yet its share price ($245) was down more than 25% from its peak.
The company was still making tons of money, pushing down its price-to-earnings ratio. Analysts he found online were confidently calling Alibaba a buy.
He decided to buy BABA $200 calls. If he was right and shares turned around, he'd make a fortune. If he was wrong... well, how far could this great company fall?
He put all his available cash into the trade. Alibaba kept falling. And as he earned more money, he put that cash in, too – another $100,000. He couldn't even pay his $900 rent until his next paycheck came in.
And Alibaba still kept falling. He eventually sold when his $400,000 investment in BABA calls was down to $20,000... a 95% loss. And since he put on his trade, the company's shares are down more than 50%.
The problem wasn't his investment thesis. He was right that Alibaba was a solid company at a good price. We even traded Alibaba several times in my former Advanced Options service between 2019 and 2021.
In hindsight, he realizes his error...
I should have listened to [my mom]. She told me to diversify a little. Don't go all in on one. But I felt like, because she told me not to do it so many times, I actually had to.
As his situation illustrates, everyone and their mother knows you need to diversify. This isn't an insight. It's a platitude or a hand wave, a way to prove that you considered the risks of an investment. It's an admonition akin to "Eat your vegetables"... acknowledging the wiser action without changing your behavior.
That's partly because diversification is a bit boring – it's more fun to go for the big score.
But it's also because diversification is difficult to implement... Sure, putting all your liquid assets into a single option trade is an extreme example. But diversifying properly involves understanding correlations that vary across time between assets with shifting categorizations. This is an area that human minds – even those of accomplished statisticians – can't fully understand.
Do you diversify across stocks and bonds? Growth and value? Cyclical and acyclical? Of course, you can diversify by sector, industry, size, and other features as well.
So telling someone to diversify isn't really like saying, "Eat your vegetables." It's more like telling them to eat healthy. Sure, we'd all like to... But how?
The unsexy answer is that you need to keep slogging away and try to understand your investments.
But when you're competing against the unlimited resources of Wall Street pros, where do you even start?
Well, five years ago, my company hired a man fresh off 20 years at arguably some of the most successful hedge funds on the planet.
He helped manage hundreds of millions in capital every day... structured every trade so the payoff potential far outweighed the risk... did boots-on-the-ground research in upwards of 20 countries... and monitored foreign markets in the middle of the night...
But then he walked away from Wall Street.
That's good news for you.
His brilliant approach is not based on any individual sector or market condition, but on decades of making money for billionaires in a win-or-go-home environment. And last Wednesday, he shared this approach with ordinary folks for the first time ever.
It begins – every time – with looking where 90% of market participants simply aren't.
And then he follows the exact "scripts" he knows from his decades on Wall Street that could lead to multibagger gains in a few short years.
If you missed it, catch the replay – for free – here.
What We're Reading...
- Something different: This is where the International Space Station will go to die.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
November 3, 2025