When this little experiment started back in February, I had no idea the roads it would take me down and the incredible feedback the story would receive. My son, the $TSLA kid, as I refer to him on Twitter, not only entertained me, but many others. The lessons it taught him, the emotional roller coaster it put him on, and the journey it took both of us on were chronicled here. However, this was not the end of the journey. Since we wrote the first part, the market has sold off a bit—maybe you noticed. This led us to a few new twists and turns as well as lessons that I thought were worthy of a sequel.
I know most sequels suck and are just money grabs. However, there’s no money grab here and there’s no way this story lives up to the original—but I wanted the story to go on. First, a disclaimer: In our first part, $TSLA kid sold out of his stock for a $61 loss after having as much as a $200 gain on paper. He experienced a full cycle from exuberance to despair within weeks. However, this cycle lasted less than 30 days.
Given my job, I have rules in place on how I must trade stocks. One of those rules requires a 30-day holding period. He was up $203 in just 7 days and he tapped out down $61 on day 15. If he asked me to sell when he was up $200, I would’ve given him the profits in cash. He didn’t. When he said sell at $680, I stopped out his loss at $61. However, the reality was that I still had to hold for another 15 days. Those are just my rules—rules he learned about when I let it slip at dinner. He was still in the game…
He was quickly back to his cocky self as the stock had a nice relief rally and got back to the $700’s. However, that was short-lived as were his texts. The stock, like the overall market, went into a free fall. The good news is that he limited his own loss with the $680 paper sale; the bad news—I still owned one share that I had to hold until March 12th.
When March 12th rolled around I had forgotten about that trade. I, like everyone else, was focused on the world around us. The night of March 11th is when the new reality hit most of us. The NBA shut down while games were being played, the NCAA cancelled tournament games, schools were shutting down, and one of America’s best known actors, Tom Hanks, reportedly contracted the virus. Who cares about one share of TSLA? Not me. So clearly this went on the back burner for a while. Here’s what March 12th looked like from my view at the NYSE:
The volatility and selling continued. The kids were home from school now and with no sports to watch many new eyes focused in on the markets. Of course, one set of those eyes was the $TSLA kid. As the market was getting hammered, he sent me this gem:
That text came on a day the DJIA closed lower by 2,997 points. The kid was watching. $TSLA fell $74 to $560. That night we talked about dollar cost averaging. If we bought 3 more shares for $500, that would bring our average cost down to $560. He liked this and his head was back in the game. He was waiting for his moment. That moment came on March 18th.
Well I’ll be damned. The kid nailed the bottom. When he sent that text the stock was trading at $380. It was the day of the low in $TSLA. However, dad was busy. This was the day Bill Ackman screamed fire in a crowded theater and took the market lower. It was also the day we learned the NYSE was going to temporarily close the trading floor. I wasn’t focused on $TSLA.
I missed the big opportunity. Meanwhile, he figured out what his average cost would have been had I pulled the trigger when he wanted me to. We could’ve purchased 5 shares – not 3 – at $380 and brought our cost down to $440 on six shares. So I’m proud of him for learning that. The only problem now is that I hear it all of the time. He won’t let me live it down. I don’t get the occasional text I can happily share on Twitter. Instead, I get it in in my face all day now that I’m temporarily working from home. That’s no fun.
(and yes, I know it’s you’re stuck at home not your. If only they’d come up with an edit function)
Over the next few days he had gotten a little less bitter and asked a lot of good market questions. He’s been following Davey Day Trader over at Barstool and enjoying that show. He yells at the screen–“That’s not how you day trade”–like he’s a pro. He has even used the term “pajama traders” to describe the “stupid” moves in the after hours. He’s into it and it’s fun to watch.
Finally, he came to me the afternoon of April 16th. He sounded despondent and asked if I had seen Tesla after hours. I hadn’t. He said it was “up like 50 bucks” and it’s time to sell. I asked if he was sure and he said yes. I asked should we sell it at the market on the open tomorrow or put a limit on it? He goes “A limit? You can do that? That’s kinda cool.” So he slept on it.
So the next morning we checked out the stock in the pre-market and it was trading at $785—a sale there would be about a $45 profit. However, he liked the limit idea and pushed his luck. He put in an order to sell 1 share at $810—a potential $69 profit.
Well his greed didn’t pay off. The stock peaked at $785 and didn’t reach his limit. He was still long his share over the weekend. The new game plan was to re-evaluate on Monday before the open. Sadly, he didn’t wake up until 10:00 a.m. (I hope his teachers are reading this), and as a result, he missed the open—no trade. The stock was now back to breakeven. Finally, he pulled the trigger. He sold one share at the market on the open.
Overall, this experience was beyond rewarding. I got to share my passion for trading and the markets with my son. It taught him some valuable lessons and gave him a look at what I do, while having a lot of fun along the way. It was the best $12.64 I ever spent.
