Greed- A lesson well learnt

I have to describe in detail a lesson I have learnt on momentary greed. So one early morning I came across an article in the newspapers where the writer warned that the way one stock, Asiasons, had rocketed 50% overnight was ridiculous. The stock had started to ram up when news broke out that it was acquiring some oil and gas company in the US. The writer mentioned that the target company's Balance Sheet was in pretty bad shape and that the price earning ratio of Asiasons was trading at over 500 which made it more overpriced than even the frothy dot.com companies in their heydays.

Now Asiasons was one stock I had held some time back on a roller coaster ride before disposing it with great relief and some small profits. When I read the said article early in the morning I thought to myself the stock price would surely plunge that very day after people read about it. So I thought I could make a quick buck by selling short (sell naked and cover by buying back later). I was so sure I could outsmart some fools and make some money. I knew that I had to do it fast, real fast. However I had never carried out a short sell trade before. Nevertheless I was so carried away with the idea of gaining from what I thought was prompt information that I quickly logged on to my trading platform. The stock had closed at $2.72 the previous day and I almost clicked the short sell bottom for 2 lots at $2.72. However it occurred to me that I may need to get permission from the security house to short sell. So I called up the AM in charge of my account. Unfortunately she had just stepped out but her colleague assured me I could short sell but I need to cover up within the day (because I have not signed up for share borrowings). I was delighted , but even as we spoke over the phone the stock had dropped very very fast from $2.72 to $2.52. I thought to myself if the stock could move up almost a $ in one day it could drop just as much and I would have no problem covering the short position within the day. So my right hand just clicked and I short sold 2 lots at $2.55.

That morning saw my heart beat double its normal rate (well it was a long time since my last visit to Genting and no Genting trip had caused half as much excitement cum panic). Instead of dropping (which I was so convinced it would), the stock was steadily climbing. In less than half an hour it had climbed back to  $2.62 when my remisier called back. Her colleague had told her about my call and she had noticed that I short sold 2 lots. She told me to be careful because the stock was controlled by some players and the volume was not high; meaning it could be more difficult to cover. I told her I probably would have to pay a bit of tuition fees for my first short sell transaction. So the price yoyoed the whole morning and I was glued to the laptop screen. I couldn't do my normal chores and I was so unsettled that I couldn't even  read the newspapers. What more I couldn't have the peace of mind to prepare for the story telling session in the same afternoon; and yes I forgot I had to leave the house at 2 pm which meant I had less than a full trading day to cover my position. Just one hour before I had to leave the house, the stock suddenly jumped another 10c and more. Gosh did I panic as I watched the price climbed. In the end I was forced to buy back at $2.70, incurring a loss of over 350 bucks.

Now I have paid to learn a few things about myself and about greed in general:

1) I certainly do not have the fearless composure of a trader or a gambler
2) I am too emotionally attached to a trade ( as a reflection of my cleverness or foolishness ) to view the situation objectively
3) I can not stomach big losses or rather my heart isn't game for such thrills
4) Because of greed, I lost a whole morning of quiet and calm reading as well light-hearted moments preparing for the afternoon story telling session
5) Because of greed, I was really not my normal self. It was as if I lost control, my head was tight and tense and I was muddled.

After this episode, my AM called me to enquire whether I would like to start a share borrowing facility. With that I can borrow shares and need not cover short positions within a day. She got to be KIDDING!!!   I thought the $350 well spent to gain awareness that I am not cut to be a trader. It was also a $350 well spent to experience the ills of greed in general, a lesson most useful to reflect upon when encountering greed of larger scale in future.