The S&P 500 was down, really down, down hard, and then I heard the news on CNBC behind me.
“Another plane just crashed into the World Trade Center.”
I was short the S&P 500 E-mini futures, my system had me short, my analysis. I had no idea what was causing the S&P to fall so much up to that point, and it had been falling since the may highs of 1320 but more importantly to me, I had really aggressively been short selling since $1209 on August 8th, 2001.
The market had been selling off since March of 2000, the dot com bubble had burst, we were generally in a bear market, trending lower and lower. By summer of 2001 we had already sold off about 30% from the highs, thus officially entering bear market territory. But the buzz from the roaring tech bubble bull market was still a star in everyone’s eye, we all wanted that big dip buying momentum to return.
Spoiler it didn’t.
When the news hit CNBC, and we started to have an idea of what was actually happening, I was already profitable well over 100 points on this short position. Each point in the e-mini is worth $50 per contract (multiply that by how many contracts you have), so I was well-positioned at this point with massive profits.
When I woke up that morning I had no idea what was happening. I checked my screen’s as I do when I wake up, and futures were down again, my trade was working, I was ecstatic. This was the first time that I had built such a massive position and that it had played out, I thought about taking some profits but I didn’t as my system kept telling me to stay in.
I had a plan, but not really sure about what to do here. This was unprecedented. I was in disbelief, watching what happened on TV, watching my screen as the market went “limit down” and everything stopped trading.
Limit Down means that the exchanges stop trading for a period of time to let things cool off a bit before starting trading again. This one was so big the market didn’t start trading for another four days.
Before 9/11 the market had been selling off, I kept getting more and more indicators to add to my short position, so I kept adding. I had the maximum position that was allowed for me at that time.
And there I was, massive profits, huge short position that my system had “predicted”.
I did everything according to my trading plan, proper position sizing, increased my position as new levels were breached, everything was “by the book”, but there I was, watching the World Trade Center collapse on live TV.
Other planes were still in the sky, the Pentagon got hit, this was unprecedented fear and chaos.
While trading was halted there was nothing to do but to watch and worry.
Where will they attack next?
Are there more planes out there ready to attack?
What about Los Angeles?
Is it safe to leave? Can I go get food? Is anyone going to work today?
All we could do was watch live news coverage and listen to people speculate as to what’s next.
The next four days, while the markets were closed, we all just watched and waited for more information.
Traders talk to each other all day about the market, analysis, news, and what they think will happen. We speculated when they would open trading, how far down the market would be when it opened, or if the government would come in and support the market and buy everything until it stopped selling (aka the rumored “Plunge Protection Team”).
No one knew anything.
We started building out plans for the what if scenarios.
What if when trading opens and they only allow single contract trades, so I can’t cover my position quickly?
What if the market is down 1,000 points on the open, do I cover?
What if the market is up 1,000 points on the open and I can’t cover in time?
What if the market is open but no one is trading and it just sits there and I can’t cover my position?
What if they don’t open the market until 2002?
On Sept 17th they did open the market. They also gave us a heads up, we knew that the New York Stock Exchange would open and everyone basically followed along.
The S&P 500 opened 50 points lower that morning and traded within a 40 point range.
It was insanity, complete chaos, volume was huge, the world was ending, the world was saved, over and over.
Believe it or not, I did not cover my short position.
Having the time to think through everything during those days off, I realized that I needed to stick to my trading plan and prove my thesis.
Why? If there was no signal to cover my short position, and my trade was sized correctly I couldn’t get hurt enough to take me out of the game.
This outlier event, 9/11, the most dramatic event to ever happen in the United States, was actually covered in the trading plan. Not by name, but certainly the rules were broad enough and effective to keep me in a winning trade.
Eventually I did cover for a massive profit, but I left plenty on the table, like nearly every good trade.
I learned a lot about myself in the days that the market was closed, while I was able to reflect on what happened.
I learned that the market can give you insight before something happens. There is speculation that 9/11 was heavily shorted by certain parties that participated in the planning and execution of the attacks.
I learned that taking time to breath, think, relax is better than simply reacting. I upped my meditation practice.
I learned to think of more and more outcomes that I’ve never considered, new threats, what the world might look like in the future, a completely different future, and have a plan for different outcomes.
Trading is my job, my feelings about what is happening is not. I can be angry, sad or any other emotion about something that happened, but not letting that interfere with decision making is a muscle that needs to be exercised often.
I had gotten out of the Marine Corps 2 years prior, being patriotic and being short the market while the US was attacked was a mix of perspectives. Little did I know at the time that I would spend the better part of the next 10 years in the Global War On Terror (GWOT).
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