章 14: All In
The reason why I didn't mind waiting until my birthday to open a brokerage account is because I knew that the market wouldn't truly bounce back until early September, when many of the software and IT stocks that had plummeted would regain ground.
Almost all the major indexes, like the DOW and NASDAQ would continue to slide down until late July.
My best bet would be to throw that money into health stocks until the big upturn hits; that's when I'd be raking in serious cash in no time.
After the weekend, on May 14th, my father went through the formalities of opening a brokerage account. I specifically told him to open an account on ETRADING that would allow for easy online trading.
Most serious traders and investors at the time used groups like Charles Schwab or other more established institutions, but the fees for trading were much smaller on ETRADING.
The account opened was a cash account, meaning that I would only be able to buy stocks with my buying power and no leverage.
I still planned to open another account somewhere in late September that would allow me to borrow shares and increase my buying power.
On Tuesday evening, I went into the home office.
My father had a computer he used to manage purchases for his company.
The bulky CRT monitor sat on his desk, and the tower below it was as loud as a vacuum cleaner.
Yellow sticky notes with login credentials and reminders were stuck to the white edge of the monitor.
The computer ran on Windows XP. The desktop background was the iconic rolling green hills.
I started Internet Explorer and after a couple of clicks, I opened the ETRADING website.
The site loaded slowly. The internet speed was a drag and a half.
Once it appeared, I copied the credentials from one of the sticky notes and logged in.
I was greeted with a crude looking main page.
Trading apps evolved very quickly in the following years.
I couldn't even change the theme to dark...
The interface might have been basic, but I had everything I needed to get started right there on the top bar.
[ETRADING]
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[Account Code: 173259]
[Account Name: Jason Somnus & My Dear Son]
[Account Type: Cash Account]
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[Total Balance: $14,981.50]
[Available Balance: $14,981.50]
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[Market Value of Holdings: $0.00]
[Buying Power: $14,981.50]
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Recent Transactions:
[Fee: $18.50 (Account Opening)]
[Deposit: $15,000.00]
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I noticed that they had already deducted the fee for opening the account.
The painful thing was that every trade would cost me $17.50. This was on the low side for fees back then.
Looking for fees of around a few cents was like chasing a dream in the clouds.
It was impossible for smaller traders to make money on daytrading.
I scrolled down to the section with the biggest winners over the last month
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[Nvidia Corp. ($NVDA)]
[% Gain: +15.7%]
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[eBay Inc. ($EBAY)]
[% Gain: +12.5%]
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[Yahoo! Inc. ($YHOO)]
[% Gain: +10.2%]
------------
Those gains were impressive. However, I knew the truth: these were not the actual biggest gainers. Trading websites at the time often excluded penny stocks from their main dashboard to protect their clients from scams.
Those daring enough to dabble in penny stocks followed the market on separate, less regulated websites or accessed private chats.
Even in 2002, fortunes could be made or lost in a heartbeat.
I quickly clicked through to the health sector stocks, scanning through some of the biggest gainers. As I scrolled, my eyes quickly landed on one particular gem.
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[USANA Health Sciences ($USNA)] [$6.72]
[% Gain Over Last Month: +75%]
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The company sold nutritional supplements and healthy weight-management products. They opened operations in many new markets over the last few years, but the market slowdown was keeping them down.
I remembered that in 2002, they would be one of the best-performing stocks. Many new patents and big jumps in sales will get investor's attention.
But no one in their right mind would jump into a stock that's already up 75% in the last month, right?
Well... I was that crazy person.
I knew that this stock would continue soaring all year round.
However, I had no intention of limiting myself to puny gains like 100%.
There was no need to.
In situations like that, options come in handy.
I quickly tapped my fingers on the old keyboard to get to the call-option chain for USNA.
I found an option that interested me.
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[Expiration Date: September 1, 2002]
[Strike Price: $12.00]
[Price: $1.99]
[Open Interest: 0]
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"It's time to capitalize on my future knowledge. I'm ALL IN!" I mumbled under my nose and smashed the buy-order button right next to the listing.
[Open Interest: 0] -> [Open Interest: 7,500]
I committed the entire sum in my account to opening interest on the call option.
"Now I just have to sit tight and wait for the non-believers to bite the bullet and get wiped out."
I had the biggest grin on my face.
If the price of the stock goes above $12.00, I'll have the option to exercise my calls. The poor suckers on the other side will have to cough up their shares to me at a measly $1.99 each.
That's the beauty of options—they let you steal without going to jail.
I gave the dashboard a last look.
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[Total Balance: $14,925]
[Available Balance: $0]
------------
Recent Transactions:
[Fee: $56.50 (Options Fee)]
[Options Buy-Order: USNA Call Option, Cost $1.99, Quantity: 7500, Volume: 200]
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'I will never know how they calculate the fees...' I thought.
I felt like I was getting robbed.
The good news is that my first 'business partner' was found in less than a minute.
Someone placed a sell order and 200 of my colls had been matched.
Right as I was patting myself on the back for the great play, the door to the office swung open wide and my dad sauntered in with a can of non-alcoholic beverage in his hand.
"What are you doing, kiddo? Mom's been calling you for dinner," he said, taking a sip from the can.
"I was looking through the brokerage account," I replied.
"Have you bought something already?"
"Yes. Want to check it out?" I offered.
"No need. I have faith in you, son," he said warmly, turning to leave the room.
It is a good thing he did not want to check.
I made sure beforehand that the worth of the calls would show as total balance on the account so it wouldn't go under the 30% loss limit, but if I told him the truth about what I bought, he might as well disinherit me.
...
Later that evening, Lakers triumphed over Spurs and Kings defeated Mavericks. Both secured their place in the finals.
Grandpa called me right after the games were over.
He asked me to join him for coffee and cookies.
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