The Ballast Run

Host: Welcome back to Sea Shanties, the stories and lessons passed down through the crew. I'm your host. Today we're sitting down with a captain who learned the most expensive lesson in trading — and lived to tell the tale. Captain Mike, welcome to the Mess Deck.

Mike: Thanks for having me. I don't love talking about this, but if it keeps one person from making the same mistake, it's worth it.

Host: Let's set the scene. This was 2019. You'd been trading for 15 years. You weren't some rookie. You knew the rules. And yet...

Mike: And yet I broke the most important one. Position sizing. It sounds so basic, right? Don't risk too much. Everyone knows that. But knowing and doing are different animals.

Host: Walk us through the trade.

Mike: Biotech company, phase 3 trial results coming. The stock was at $28. I had done the work. I knew the drug, the market, the competition. I had contacts in the industry who were optimistic. And the options market was pricing in a 40% move either direction. I was convinced it would be up.

Host: How convinced?

Mike: That's the problem. I was 90% convinced. In my mind, it was a coin flip weighted heavily to heads. I had $2.4 million in the account. My normal rule was 2% risk per trade — $48,000. That would have been 1,700 shares with a stop at $20. But the options were so expensive, and I wanted leverage, so I bought calls. Deep ITM calls. $480,000 worth.

Host: Twenty percent of your account. On a binary event.

Mike: Twenty percent. On a coin flip. I look back now and I want to slap myself. But at the time, I had logic. I had conviction. I had done the work. That's the most dangerous word in trading — conviction. It justifies every sin.

Host: The FDA announcement came on a Tuesday morning before the bell.

Mike: I remember exactly where I was. Standing in my kitchen, coffee in hand, watching the headline cross. Trial fails to meet primary endpoint. The stock opened at $8. My calls went from $480,000 to about $12,000. I didn't even have a stop. The gap blew through any mental stop I might have had. By the time I could react, the market had spoken.

Host: You lost $468,000 in minutes.

Mike: In seconds, really. The opening print was the print. I sat down at the kitchen table and didn't move for an hour. My wife came down, saw my face, and didn't ask. She just made more coffee and left the room. She knew.

Host: What did you do next?

Mike: Nothing. For three days, I didn't trade. I didn't even open my platform. I just sat with the number. $468,000. That was two years of profits. Gone. Not because the market was unfair — the market is never unfair — but because I was arrogant. I thought my research made me immune to the rules.

Host: The rules being?

Mike: The 1% rule. Maybe 2% if you're feeling aggressive. Never more. Never on a binary event. Never when you can't define your risk. I violated all three. And I paid tuition.

Host: But you didn't quit.

Mike: I thought about it. Seriously. I had $340,000 left. That was still meaningful money, but psychologically, I was wrecked. I started seeing a therapist who specialized in traders. Best money I ever spent. And I started journaling. Every trade. Every emotion. Every deviation from plan. I became a machine about risk.

Host: How long did the rebuild take?

Mike: Four years. Four years of 1% risk, mechanical entries, mechanical exits, no exceptions. I didn't try to make it back. I tried to survive. And slowly, the account grew. By 2023, I was back to seven figures. By 2025, I had exceeded the old high. But I was a different trader. The old Mike was dead. The new Mike doesn't get excited about winners. He gets paranoid about losers.

Host: What's your position sizing now?

Mike: One percent. Always. No exceptions. If I have ten positions on, each is 1%. If I have three, each is 1%. I don't size up for high conviction. I don't size down for low conviction. I size the same every time. The trade either works or it doesn't. My size doesn't change because my opinion changed.

Host: What would you tell the Mike of 2019?

Mike: I'd tell him: your edge is not your research. Your edge is your discipline. The best trade you ever made was the one you didn't take because the setup wasn't perfect. The worst trade you ever made was the one you forced because you were sure you were right. Conviction is the enemy. Process is the only friend.

Host: Captain Mike, thank you for sharing this. I know it's not easy.

Mike: If one person hears this and changes their position size before the next trade, it was worth it. The market will give you every opportunity to be humble. You can choose humility, or the market will choose it for you.