|WSJ -- For One GameStop Trader, Wild Ride Was Almost as Good as the Enormous Payoff .................|
Feb. 3, 2021
For One GameStop Trader, the Wild Ride Was Almost as Good as the Enormous Payoff
A small-time trader turns $500 into more than $200,000
Anubhav Guha was initially skeptical of the GameStop exuberance, but the rowdy community on Reddit’s WallStreetBets forum won him over.
By Gregory Zuckerman
Anubhav Guha started day trading a few thousand dollars in March but managed to lose half of his money despite the stock market’s epic rally last year. He made that up and far, far more betting on GameStop Corp.
Mr. Guha turned $500 into $203,411 in less than three weeks with an options trade on the mall retailer.
The rally and now collapse of GameStop was a dramatic clash of small-time traders against hedge funds, but for Mr. Guha it was more of a lottery ticket, though it had more ups and downs than a typical Powerball drawing.
The 24-year-old is a graduate student in mechanical engineering at the Massachusetts Institute of Technology. He pinches pennies by eating the same simple meal for lunch and dinner seven days a week to help get by on his $36,000-a-year income.
With the fall semester over and not much to do in January, Mr. Guha began spending more time on Reddit’s WallStreetBets forum. He was initially skeptical of the GameStop exuberance, but the rowdy community soon won him over. “It was pretty enticing,” he said.
His first day-trading experience hadn’t gone well. He began trading stocks in March, and by January his $4,000 investment was down to $2,000. On Jan. 8, he spent $500 betting on the unlikely event that GameStop shares, then trading under $20, would hit $60 in a month.
They did that and far more. He sold last Wednesday after friends and others helped persuade him to cash out, scoring a gain of $202,911, or 40,582%, according to a statement he shared with The Wall Street Journal.
Mr. Guha is appreciative of his windfall, most of which he will use to live in Boston during his graduate studies. But part of him regrets cashing out.
He already misses the community he had been a part of, if only briefly. “It felt like I was part of something bigger,” he said.
Such has been the allure for GameStop fans. “I’m part of this movement for more than just financial reasons,” said Harsh Bhatt, a 24-year-old software engineer for NCR Corp. in Atlanta. “I wasn’t old enough to remember Occupy Wall Street, but I’ve read enough about it to see that there are some similarities. I can’t remember the last time collective action on a scale like this actually made a financial difference in the lives of so many people.”
Until recently, Mr. Guha didn’t spend time thinking about stocks, though money was on his mind. Mr. Guha grew up in an upper-middle-class household in New York’s Westchester County. But he is on his own now and feels compelled to take unusual steps to save money. Every Sunday for the past three years, he has purchased up to 7 pounds of chicken thighs and cooks them with rice and pasta. It is enough to feed himself all week long, both lunch and dinner, though he sometimes adds frozen vegetables.
“I really dislike the idea of spending a lot on food,” he said.
As a freshman at MIT, Mr. Guha received a piece of bitcoin from the school’s cryptocurrency club as part of an initiative to popularize digital currencies. Early last year, he sold his bitcoin, which had climbed to $4,000, and in March put it all in stock options. Mr. Guha’s timing was great -- the market was about to rebound sharply from its pandemic low -- but his picks were poor, so his portfolio had dropped to $2,000 by the end of the year.
He took some of what was left and, convinced by members of the forum, bet on GameStop. “I treated it as money I was willing to lose,” Mr. Guha said. “It was a fun hobby.”
Within days, the Reddit board lighted up with news that Ryan Cohen, the founder of the Chewy pet-supply site, had gained a seat on GameStop’s board of directors, along with two of his allies. Ten days after Mr. Guha’s trade, GameStop was close to $40 and his position was worth $15,000. He sold the option but quickly bought it back. Then he did it again.
Mr. Guha realized his trade, at the new price levels, had been transformed. “It went from an intelligent decision to gambling,” he said.
Still, like others on WallStreetBets, Mr. Guha wasn’t selling. By Jan. 22, GameStop was at $65 and Mr. Guha’s position was worth nearly $80,000. He saw himself as part of an effort to claim power from Wall Street elites.
“You feel the excitement, the buzz of people on the same ride,” he said. “It is kind of silly, but there’s a big sentiment among those on WallStreetBets that this is a movement, a romanticization of the idea that many people responsible for the 2008 crash didn’t pay for it, and we’re taking back the power.”
Soon, Mr. Guha could barely focus on anything else. While the market was open, he checked his Robinhood account a few times an hour.
“All your mental energy is devoted to it. You know your money is going up or down a lot,” he said. “It is stressful.”
Playing tennis a couple of weeks ago, Mr. Guha looked at the stock after each point. Friends teased him, asking if he was checking tennis rules. That is when he told them about his big trade.
“They definitely thought I was crazy,” he said, “but they were also a little impressed.”
By last week, the friends had turned concerned. Mr. Guha’s trade was approaching a level they knew would be important to Mr. Guha’s future.
“You really need to sell,” a friend said.
He wouldn’t. Some on Wall Street Bets were predicting GameStop would hit $1,000, even $5,000. Hold tight and don’t sell, they urged. We’re in this together.
Finally, his friends staged what Mr. Guha jokingly calls a “mini intervention.” One asked if he would invest in GameStop at the sky-high levels if he had fresh money -- if not, he should exit the trade. The argument won him over.
On Wednesday, he sold his position, just before the shares hit their all-time high. The stock is down nearly 75% since the peak.
Only then did he tell his parents, who hadn’t heard of the frenzied trading in GameStop. His father’s first reaction: “Have you been insider trading?” Mr. Guha assured him that he hadn’t.
His mother was more nonplussed about the gains -- until she heard a segment about the GameStop craze on NPR a couple of days later. That got her excited.
“Don’t be impressed,” he told her. “I lucked into this.”
His adventure over, Mr. Guha is thrilled with his gains and how they will jump-start his life. He will need to pay high short-term capital-gains taxes on the profit and will use most of the remaining money for living and other expenses during his studies.
“I have to put my attention on my research and grad school,” he said. “But I might put a few thousand dollars back in; a part of me misses it. It was a wild, wild ride.”
Copyright © 2021 Dow Jones & Company, Inc.