And for the next 11 months, it worked!
October 16, 2024 12:17 PM Subscribe
A 30-year-old carpenter from Vancouver approaches the Royal Bank of Canada and says, “I want to buy a house. Can I take a loan against my portfolio?” A representative from RBC’s Private Bank raises an eyebrow as he reviews a portfolio consisting of millions in Tesla call options, before shaking his hand, saying, “Of course!” and setting him up with a financial advisor. A few months later, this carpenter is calling his RBC-appointed financial advisor, instructing him to buy C$75 million in weekly Tesla call options. Of course the advisor complies: it’s the client’s money, after all! And those call options represent trading fees. Then Tesla tanked, and DeVocht took a C$20 million personal loan from his own LLC to try to “recoup the losses” by trading his personal account, which went about as well as you’d expect. from How a Canadian carpenter became an options trader, made $300 million, and then went bust [Sherwood]
Past performance is not an indicator of future results.
posted by 1970s Antihero at 12:33 PM on October 16 [3 favorites]
posted by 1970s Antihero at 12:33 PM on October 16 [3 favorites]
Losing that much money would haunt me for the rest of my life.
posted by any portmanteau in a storm at 12:35 PM on October 16 [5 favorites]
posted by any portmanteau in a storm at 12:35 PM on October 16 [5 favorites]
(my TSLA position was doing good too in late 2021 with the Hertz announcement and peak Elon pumping, I saw it all collapse in late 2022 but I did do some strategic LEAPS call jiggering to cheaply recapture any recovery before mid-2024 . . . I missed my $250+ exit in June 2023 on those but was able to get out with some trading profit last December . . . clearly TSLA's $300 price level in 2022 was being supported by a temporary happy condition of selling BEVs when gas on the West Coast was $6 and demand was overwhelming what Fremont could supply . . . once Austin got rolling I guess Tesla's capacity could cover their incoming order book so Model 3 & Y prices had to come back down to earth . . . but I did think the return of the $7500 tax credit would boost TSLA a lot more than it has so far . . . clearly with a 60+ P/E today's market cap is predicated on serious growth out to 5M/yr or so, which to me seems doable but Elog has yet to clearly articulate to investors how and when we're getting there)
posted by torokunai at 12:36 PM on October 16 [1 favorite]
posted by torokunai at 12:36 PM on October 16 [1 favorite]
I noted this story in passing the other day and was curious to know more. This account seems to confirm my suspicion, i.e. that the carpenter assumed lightning would just keep striking the same spot over and over again, to his benefit.
posted by senor biggles at 12:36 PM on October 16 [1 favorite]
posted by senor biggles at 12:36 PM on October 16 [1 favorite]
Also, once you’ve made $300M, why not stop? It’s not like you couldn’t park that in stable vehicles and live off it for the rest of your life in extreme comfort? Is it just another gambling addiction?
posted by GenjiandProust at 12:56 PM on October 16 [20 favorites]
posted by GenjiandProust at 12:56 PM on October 16 [20 favorites]
I think everyone who has $100 million and says, "I want more" is greedy.
posted by MisantropicPainforest at 12:57 PM on October 16 [8 favorites]
posted by MisantropicPainforest at 12:57 PM on October 16 [8 favorites]
Options, man, they're a deathtrap for the unwary. And even the wary, often enough. Friends don't let friends trade options, unless you're selling them to meme stock lunatics.
The last few months have been utterly hilarious as the meme stock crowd discovered options and promptly got wrecked, repeatedly, by them.
...because, of course, they'd do deeply out-of-the-money options based on their delusional stock valuations, and then were surprised to find GME did not, in fact, go to $250 but instead fell to $22.
posted by aramaic at 1:03 PM on October 16 [4 favorites]
The last few months have been utterly hilarious as the meme stock crowd discovered options and promptly got wrecked, repeatedly, by them.
...because, of course, they'd do deeply out-of-the-money options based on their delusional stock valuations, and then were surprised to find GME did not, in fact, go to $250 but instead fell to $22.
posted by aramaic at 1:03 PM on October 16 [4 favorites]
Even when he hit 26 Million. There are stable places to park that for 4% a year.
That's a million a year. Enough for anybody to my mind. Greed and stupidity take over I guess.
posted by vacapinta at 1:05 PM on October 16 [12 favorites]
That's a million a year. Enough for anybody to my mind. Greed and stupidity take over I guess.
posted by vacapinta at 1:05 PM on October 16 [12 favorites]
I just like the phrase "to reduce his exposure to taxes". So neat. One time I saw someone carry a bottle of wine under their jacket and it actually reduced their exposure to prices.
posted by Ashenmote at 1:17 PM on October 16 [29 favorites]
posted by Ashenmote at 1:17 PM on October 16 [29 favorites]
I don't know anything about Canadian law, but in the U.S., make sure that your financial advisor is a fiduciary, who is legally required to act in your best interest.
And by the way, the current administration is attempting to increase the number of financial advisors who are required to act as fiduciaries. Not everyone supports the idea.
posted by Mr.Know-it-some at 1:32 PM on October 16 [6 favorites]
And by the way, the current administration is attempting to increase the number of financial advisors who are required to act as fiduciaries. Not everyone supports the idea.
posted by Mr.Know-it-some at 1:32 PM on October 16 [6 favorites]
Ashenmote: They were advising him on how to avoid taxes (legal), not evade (illegal). Your analogy isn't valid unless the store had a sign that said "Products under jacket are not required to be paid for." The problem isn't tax professionals who explain how to minimize loopholes, it's the legislators who enact them.
posted by Mr.Know-it-some at 1:37 PM on October 16 [5 favorites]
posted by Mr.Know-it-some at 1:37 PM on October 16 [5 favorites]
Yes, it's more like avoiding exposure to prices by refusing to tip your below-minimum-wage waitstaff, in that it's totally legal and some assholes think they're clever for doing it.
posted by biogeo at 1:41 PM on October 16 [10 favorites]
posted by biogeo at 1:41 PM on October 16 [10 favorites]
I noted this story in passing the other day and was curious to know more. This account seems to confirm my suspicion, i.e. that the carpenter assumed lightning would just keep striking the same spot over and over again, to his benefit.
Also he was a retail investor buying a single stock. I know Tesla isn't exactly a meme stock, but it seems like the kind of thing people might get really obsessed over.
posted by RonButNotStupid at 1:48 PM on October 16 [2 favorites]
Also he was a retail investor buying a single stock. I know Tesla isn't exactly a meme stock, but it seems like the kind of thing people might get really obsessed over.
posted by RonButNotStupid at 1:48 PM on October 16 [2 favorites]
Also, once you’ve made $300M, why not stop?
Have you seen rents and food costs in Vancouver lately?
posted by They sucked his brains out! at 1:50 PM on October 16 [10 favorites]
Have you seen rents and food costs in Vancouver lately?
posted by They sucked his brains out! at 1:50 PM on October 16 [10 favorites]
That is perfectly true, Mr.Know-it-some, and I ignored it because I didn't feel like I was trying anything as ambitious as an analogy. But yes, it looks a lot like one and fails at being that.
posted by Ashenmote at 2:27 PM on October 16 [1 favorite]
posted by Ashenmote at 2:27 PM on October 16 [1 favorite]
A couple years ago I remembered I had a few shares of Tesla I had bought pre-Elon. I paid off a bunch of debt with that.
I kept just 1, so I can symbolically vote against him.
Never play with options using your nest egg.
posted by funkaspuck at 2:31 PM on October 16 [3 favorites]
I kept just 1, so I can symbolically vote against him.
Never play with options using your nest egg.
posted by funkaspuck at 2:31 PM on October 16 [3 favorites]
The last few months have been utterly hilarious as the meme stock crowd discovered options and promptly got wrecked, repeatedly, by them.
I thought retail investors discovering options-as-gambling was basically the root of the wallstreetbets/meme stock culture. Particularly after Robinhood caught on, as they set a low bar for access to options trading compared to more traditional brokerages.
posted by atoxyl at 3:32 PM on October 16
I thought retail investors discovering options-as-gambling was basically the root of the wallstreetbets/meme stock culture. Particularly after Robinhood caught on, as they set a low bar for access to options trading compared to more traditional brokerages.
posted by atoxyl at 3:32 PM on October 16
I think everyone who has $100 million and says, "I want more" is greedy.
Your post reminded me of the time I was working for a dude in a gated community. He pointed to a neighbor in the distance and said to me, "If you are ever unfortunate enough to talk to that one, he'll tell you he's worth three hundred million. I'm worth three hundred million and I never tell anybody."
On my final night working for him (it was a contract), he took me to dinner at his favorite restaurant, where he was known by all the staff. At the end of the meal, the server asked if we'd like complimentary desserts. He responded, "No, just a small discount on the bill."
I left a separate tip under my plate.
posted by dobbs at 3:41 PM on October 16 [6 favorites]
Your post reminded me of the time I was working for a dude in a gated community. He pointed to a neighbor in the distance and said to me, "If you are ever unfortunate enough to talk to that one, he'll tell you he's worth three hundred million. I'm worth three hundred million and I never tell anybody."
On my final night working for him (it was a contract), he took me to dinner at his favorite restaurant, where he was known by all the staff. At the end of the meal, the server asked if we'd like complimentary desserts. He responded, "No, just a small discount on the bill."
I left a separate tip under my plate.
posted by dobbs at 3:41 PM on October 16 [6 favorites]
... Particularly after Robinhood caught on...
That's my impression: once people got stock trading on their phones, they went a bit nuts. It's like crypto but somehow more recent. Sports betting on your phone is the current hotness. It's all the same thing, more-or-less.
Tesla was clearly never worth every other car company put together. The current 60x earnings price is almost as stupid as dancers in robot suits. It sucks that Tesla is in ordinary mutual funds, so I almost certainly own some. I haven't figured out how much because I would want to hedge against it, which would make me load up Robinhood, which would probably drive me to ruin.
posted by netowl at 4:16 PM on October 16
That's my impression: once people got stock trading on their phones, they went a bit nuts. It's like crypto but somehow more recent. Sports betting on your phone is the current hotness. It's all the same thing, more-or-less.
Tesla was clearly never worth every other car company put together. The current 60x earnings price is almost as stupid as dancers in robot suits. It sucks that Tesla is in ordinary mutual funds, so I almost certainly own some. I haven't figured out how much because I would want to hedge against it, which would make me load up Robinhood, which would probably drive me to ruin.
posted by netowl at 4:16 PM on October 16
This was discussed on the Slate Money Podcast. Apparently there was a point where he told his advisors that he just wanted to restructure everything so he could live off interest but the bank was making a lot of money off of his activities so this didn't happen for some reason (hence the law suit). The podcast also mentions that there was an addictive element to his trading and an extreme focus on tax avoidance which led to bad decisions. Maybe this is covered in TFA which I haven't read.
posted by Depressed Obese Nightmare Man at 4:19 PM on October 16
posted by Depressed Obese Nightmare Man at 4:19 PM on October 16
Unlike most of us, however, he was pretty good at trading stocks, turning C$88,000 into C$415 million ($306 million) between 2019 and 2022.
And then he lost it all.
He wasn't good at trading stocks. He got lucky. There is no difference between him and a guy hitting the lottery, except that the guy hitting the lottery generally doesn't turn around and put it all back into scratch-offs.
There's an allegation in the complaint that the brokerage knew he wanted to cash out and live on passive income, but his behavior is so inconsistent with that that I am skeptical the claim will be borne out in discovery.
I don't think options trading should be available to the average investor. The replacement of every socially useful way of making money with some form of gambling is doing endless damage to society. I struggle to feel sympathy for this guy (I'm sure he thought he was a genius and had no further need for society when he had $300m, because these guys always do), but I understand that the problem is broader than him.
posted by praemunire at 5:21 PM on October 16 [1 favorite]
And then he lost it all.
He wasn't good at trading stocks. He got lucky. There is no difference between him and a guy hitting the lottery, except that the guy hitting the lottery generally doesn't turn around and put it all back into scratch-offs.
There's an allegation in the complaint that the brokerage knew he wanted to cash out and live on passive income, but his behavior is so inconsistent with that that I am skeptical the claim will be borne out in discovery.
I don't think options trading should be available to the average investor. The replacement of every socially useful way of making money with some form of gambling is doing endless damage to society. I struggle to feel sympathy for this guy (I'm sure he thought he was a genius and had no further need for society when he had $300m, because these guys always do), but I understand that the problem is broader than him.
posted by praemunire at 5:21 PM on October 16 [1 favorite]
I think everyone who has $100 million and says, "I want more" is greedy.
hell, I'd knock that back to $1 million.
posted by philip-random at 5:41 PM on October 16
hell, I'd knock that back to $1 million.
posted by philip-random at 5:41 PM on October 16
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posted by torokunai at 12:22 PM on October 16 [3 favorites]