The creator of the WallStreetBets Reddit page explains the genesis of the 'mischievous, lawless, chaotic' platform - and describes trades that have created millionaires and ruined lives
- Jaime Rogozinski - the man who brought the WallStreetBets Reddit page into the limelight - explained the inception of his controversial trading forum on a recent podcast appearance.
- Today, WallStreetBets touts over 700,000 users featuring traders of all backgrounds. They use the platform to share high-risk, high-reward ideas.
- Rogozinski shares some the most outlandish trades where users minted and lost millions.
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Jaime Rogozinski, the man who brought the popular WallStreetBets Reddit page into existence, could never find what he was searching for on traditional investment platforms.
He wasn't interested in buy and hold strategies or passive indexing. And no matter where he turned, conservative platforms would repeatedly frown upon his high-risk, short-term trading desires.
"They'll just send you away and say: 'No, no, no you're risking too much. You should just consider indexing into a low commission ETF,'" he said on the Chat With Traders podcast. "The motivation definitely came from the fact that there was just no place to call home."
For the uninitiated, WallStreetBets is a neatly tucked away subreddit (or forum within Reddit) where traders of all backgrounds come to share trading ideas, extraordinary triumphs, and crippling defeats. But there's a twist. It's a vicious, no-holds-barred, uncensored group of individuals vetting and critiquing trading ideas, trying to strike it rich.
Rogozinski himself refers to it as "a mischievous group of people" who are "lawless" and "chaotic." But he says there's frequently real substance to their posts.
"You do have this mixture of the people that actually go into these conversations that through humor actually make some very brilliant observations," he said. "Through their ironic, satirical perspectives they do make some points."
This is exactly what Rogozinski set out to accomplish. He wanted to create a community that was open to peer overview and critique where traders of all skills and abilities could openly share ideas.
"The majority of people that you see, they want to try and get rich quick," he said. "The most dangerous thing that can happen to a trader - especially early on - is if they make a lot of money."
"Millionaires have been made on the subreddit"
Over the years, Rogozinski has seen some extraordinary stock trading successes and a plethora of even more epic failures. Remember, most of these individuals are looking for windfall profits. They're looking to gamble with high-risk, high-reward strategies - not to play it safe.
Most trades discussed in the forum involve options, revolve around highly volatile events (such as earnings reports), and are highly leveraged. In fact, the platform's users have coined a term that's touted as a mantra for some of the biggest, riskiest gambles: "YOLO" trades, short for you only live once trades.
Rogozinski describes a user who nailed a "YOLO" trade in forum's early days.
"A guy by the name of 'disgruntled trader' ... he made like $120,000 off of some Google earnings call trade," he said. "That was the first huge, huge win."
Call options are financial contracts that provide the buyer with the right, but not the obligation, to buy a stock at a specific price within a specific time frame. It's an easy way to bet on higher prices with a relatively low amount of capital. But the payoffs can be enormous.
"The most amount of money that I've seen somebody make was $2.5 million from about $100,000 or $200,000 at risk," he said.
When asked about the worst trade he's ever seen, Rogozinski shares an incredible story. It involves a 20 year-old, self-taught trader who turned $50,000 into $4 million and then subsequently suffered a crippling loss.
"Oh that one is easy - $3.8 million or $3.2 million dollars," he said in reference to the loss. "He got hit by a black swan event."
The unfortunate trader had the majority of his money in the VelocityShares Daily Inverse VIX Short-Term ETN (XIV) - an instrument designed to provide single-day returns that were the inverse of the Cboe Volatilty Index, or VIX. When the VIX spiked 84% in a single day in February 2018, the XIV and another short-VIX product imploded, erasing billions of dollars in value in mere minutes.
The XIV was eventually dissolved, and Rogozinski says the trader lost a fortune on that fateful February day.
With all of that established, it's important to note that adhering to any piece of information that's touted on WallStreetBets should be carried out with a proverbial boulder of salt. The platform tends to applaud gamblers and risk-takers, not investors.
"There are examples where people have become millionaires on the subreddit," he concluded. "There's a lot of people who's lives have been ruined as well."