I missed a 12% move.
WTI fell from 101 to 89, down 6.4% in a day, with an intraday drop of as much as 7.85%. Brent fell 8.4%.
And four days ago, I closed out my entire 111-barrel short position to go in on an IPO.
If I’d still been holding, I’d be up more than 600 now. My account would be at 5,500, not 4,400.
I got the direction right. I sat through the unrealized loss at 108, resisted the temptation at 82, sat through the rebound to 106, and in the end, got off the ride four days before the finish line.
But I want to think through that “what if” a little more completely.
The trigger for this drop was a public statement by Trump. That information didn’t exist on October 29.
And what was in front of me on October 29? The Brent-WTI spread was 11 to 13, compared with 3 to 5 in a normal year. U.S. crude inventories had fallen for four straight weeks, and gasoline inventories in the Midwest were at record lows. Several Persian Gulf countries had been told to prepare for military action against Iran. Three bullish factors, one bearish.
If I’d made my decision based on the information available that day, I would’ve added to my short, not closed it.
So the “if I’d held on” scenario is essentially “if I could’ve known four days in advance what the news would be.” That’s not a scenario you can meaningfully review.
Still, there was one thing I did get wrong.
The cost of closing a directional position to pursue an arbitrage opportunity isn’t the commission. It’s the opportunity cost. At the time, I only counted the commission: ten to thirty-five dollars. I didn’t account for those four days.
Those four days happened to be the four days the market made its move.
Next time I’m in this situation, the right move isn’t “don’t close.” It’s “close only part of the position.” Trade 40 barrels for six BNB and keep holding the rest. That way, I don’t miss out on either side.
There’s a deeper realization, too.
Over the past two months, I actually got the direction right. What I got wrong was “not getting out at the right time.”
When I was up 1,378 at 82, I didn’t get out. This time, I got out before 89. Both times, I got the timing wrong and the direction right.
The difference: the first time, I couldn’t bring myself to get out; the second time, I got out too early. Same reason both times—no rules, just instinct.
Oil is at 89 now. Should I chase the short?
No. Shorting at 89 means making 9 bucks if it falls to 80, but losing 31 bucks if it rises to 120. The risk-reward ratio is 1 to 3.4—the worst I’ve seen in two months.
And it’s the midterm elections today. Anything could turn around. I got this move right, but it’s already over. I need to work out the risk-reward ratio again for the next one.
One last thing.
What hurts isn’t that I lost a thousand. It’s that “I could’ve made six hundred.”
But that “could’ve” requires me to have known four days ago what would happen today.
I didn’t miss an opportunity. I missed an opportunity that was impossible to catch.
But one thing is true: if I’d only closed half my position back then, I’d still have half of it on at 89 now.
That’s not a regret. It’s a lesson for next time.
WTI fell from 101 to 89, down 6.4% in a day, with an intraday drop of as much as 7.85%. Brent fell 8.4%.
And four days ago, I closed out my entire 111-barrel short position to go in on an IPO.
If I’d still been holding, I’d be up more than 600 now. My account would be at 5,500, not 4,400.
I got the direction right. I sat through the unrealized loss at 108, resisted the temptation at 82, sat through the rebound to 106, and in the end, got off the ride four days before the finish line.
But I want to think through that “what if” a little more completely.
The trigger for this drop was a public statement by Trump. That information didn’t exist on October 29.
And what was in front of me on October 29? The Brent-WTI spread was 11 to 13, compared with 3 to 5 in a normal year. U.S. crude inventories had fallen for four straight weeks, and gasoline inventories in the Midwest were at record lows. Several Persian Gulf countries had been told to prepare for military action against Iran. Three bullish factors, one bearish.
If I’d made my decision based on the information available that day, I would’ve added to my short, not closed it.
So the “if I’d held on” scenario is essentially “if I could’ve known four days in advance what the news would be.” That’s not a scenario you can meaningfully review.
Still, there was one thing I did get wrong.
The cost of closing a directional position to pursue an arbitrage opportunity isn’t the commission. It’s the opportunity cost. At the time, I only counted the commission: ten to thirty-five dollars. I didn’t account for those four days.
Those four days happened to be the four days the market made its move.
Next time I’m in this situation, the right move isn’t “don’t close.” It’s “close only part of the position.” Trade 40 barrels for six BNB and keep holding the rest. That way, I don’t miss out on either side.
There’s a deeper realization, too.
Over the past two months, I actually got the direction right. What I got wrong was “not getting out at the right time.”
When I was up 1,378 at 82, I didn’t get out. This time, I got out before 89. Both times, I got the timing wrong and the direction right.
The difference: the first time, I couldn’t bring myself to get out; the second time, I got out too early. Same reason both times—no rules, just instinct.
Oil is at 89 now. Should I chase the short?
No. Shorting at 89 means making 9 bucks if it falls to 80, but losing 31 bucks if it rises to 120. The risk-reward ratio is 1 to 3.4—the worst I’ve seen in two months.
And it’s the midterm elections today. Anything could turn around. I got this move right, but it’s already over. I need to work out the risk-reward ratio again for the next one.
One last thing.
What hurts isn’t that I lost a thousand. It’s that “I could’ve made six hundred.”
But that “could’ve” requires me to have known four days ago what would happen today.
I didn’t miss an opportunity. I missed an opportunity that was impossible to catch.
But one thing is true: if I’d only closed half my position back then, I’d still have half of it on at 89 now.
That’s not a regret. It’s a lesson for next time.