Wildcat

So in the summer or fall of 2009 I was still in the early stages of unemployment. I was not really that into the market yet since my broker-slash -cousin had taken my funds and put them into a few different allocations and the S&P and the Dow had started to lift.  I was slowly making back some of what I had lost in the crash. There was nothing much really for me to do on that front although I still had a little dry powder for opportunistic type trades.

I was doing a lot of golfing at the time and was trying to get my handicap down into the single digits. Back a few years ago I really started taking golf a bit seriously and even was keeping all my stats and compiling them to try to find the areas I needed to work on to maximize my game.

I was pretty good too, and all of the free time I had after I was laid off made me get even better and pretty soon I was down under a 9 handicap. I think I got to the high 7’s at my apex, but just like many things for me, once I get good at something I lose interest and right about then I started turning my eyes back to the markets.

Somehow, some way I became involved in a small cap independent Oil and Gas deep water exploratory driller…they call these types of operations Wildcats or Wildcatters.

So again, I do not specifically remember how I became involved with this company; its name was ATP Oil and Gas with the ticker ATPG (now ATPAQ since it is on the pink sheets.)

Some of you who are in the markets and have more than a few years under your belt and are reading this blog just spit out your coffee or beer or ham sandwich because you probably know / knew about this little company. Suffice it to say that they have now gone the way of the Dodo bird and the Middle Class in the USA but that is getting way ahead of things here and there are far too many twists and turns to this story for that fact to matter much at this point.

For now all you need to know is that in, I believe, around July or August of 2009 I purchased 300 shares of ATPG at $16.30. I remember the price well… $16.30. The next day or so things went pretty well with price continuing to appreciate and I believe by the end of the week I may have been up a little bit with the stock getting up into the mid 17’s. Now one thing you need to be aware of is that in 2008 before the market crashed this company was trading up in the $40’s and in 2007 it had gotten up as high as the high $50’s and so I was thinking that eventually I could be looking at a 2 or 3 bagger if all went well.  Of course when the market crashed they had fallen all the way down to around $3.00 so by the time I got involved they were also “well off the lows” as Maria Bartiromo might say and not exactly a value play.

I was planning on taking off for Vegas for a week-long trip and I remember talking to my cousin on the phone before I left because I had read something on a message board that the recent price gains on ATPG were due to rumors that a deep water well that they had been drilling was about to come on line. I mentioned this to him and asked if he thought it would be a good idea to pick a few more shares up before I left town in case things progressed while I was gone.

Credit to him, he was a bit reticent to bite on mere rumor and innuendo and suggested that if I wanted a little more exposure for a limited time period in order to possibly take advantage of a specific upcoming catalyst that possibly the best way to trade it was to pick up a few $17.50 front month calls.

I had not yet dabbled in options but my cousin was an experienced option trader and when he opened up my account he had gotten me full clearance in my trading account already. I was bullish on this wildcatter and I smelled the money baking in the oven so I agreed and we picked up a starter position in 10 of the $17.50 contracts at a little over $1.00/ea if I recall.

Off to Vegas I went the next day and I honestly forgot all about the markets and about my first foray into option trading when my phone rang in the afternoon. It was my cousin and I picked up the phone and asked if everything was ok?

“MP, it’s fine, it’s fine nothing to worry about. Actually I am calling with good news. ATPG went up over $19.00 today and those options you bought are now trading over $2.00. I was calling to see if you wanted to dump them.”

Holy shit! Double in one day? Fuck, I may be spending many more weeks in Vegas if this keeps up, I thought.

“Why should we sell if things are going so well with the trade? Don’t we have a few more weeks left on the contracts? What if ATPG keeps moving higher, we could make a real killing Cuz” I say…

And then he said something that is very true and that if I had only internalized at the time could have saved me a lot of future heart ache:

“MP, you need to understand something about options. They are not stock and they have a shelf life. They decay and if something happens, you could end up losing not only your profits but your principal. Treat these things like the bitches that they are and get your piece of ass and then dump them. You can always buy more later”

I thought about it for a minute and decided Cuz was right, plus I was not going to be around all week to baby-sit anything so I told him to go ahead and dump them. With me on the other end, he gave me the current bid/ask spread and we did end up selling those contracts at over a double. I was in Vegas and I now had another Grand of gambling money and life was good.

I felt invincible, bulletproof, like a natural in the markets. I must know what I am doing if I am able to make market calls like I did and pull doubles out in a day.

Years later I can honestly tell you that I wish to hell that I had lost on those options. I can honestly tell you that I wish ATPG had dropped like a stone that month and forced me out of that trade forever.

I can honestly tell you that I wish I had never heard of ATP Oil and Gas. But that would have been too easy and if that had happened you probably would not be reading this blog today because a good portion of my eventual misery came from my eventual marriage to ATPG. To be continued….

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