The cautionary tale of a recovering day trading addict

Summary

The Cautionary Tale of a Recovering Day Trading Addict

Episode Title: The Cautionary Tale of a Recovering Day Trading Addict
Release Date: January 28, 2025
Host: Waylon Wong
Producer: NPR’s The Indicator from Planet Money

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Introduction

In this compelling episode of The Indicator from Planet Money, host Waylon Wong delves into the high-stakes world of day trading through the personal story of Chris Garver. The episode explores how day trading can spiral into addiction, the psychological factors that drive such behavior, and the broader implications for individuals and society.

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Chris Garver’s Journey into Day Trading

From Savvy Investor to Addict

Chris Garver’s foray into the stock market began in 2010 with what he considered a prudent investment strategy. Initially, he invested in large, stable companies listed on the main British stock exchange. As he gained confidence and delved deeper into trading communities, Chris was enticed by the allure of higher returns through more volatile investments.

Chris Garver [00:24]: "But the deeper I got into it, you start going into forums and people start recommending stocks and you see some of the returns that were happening. And then that kind of opened up another world."

This new world introduced Chris to the excitement of trading smaller companies and using special trading contracts, which promised the potential for significant gains. His initial success was meteoric; Chris recalls:

Chris Garver [01:00]: "It was a world of buying smaller, more volatile companies or using special trading contracts in ways that magnify your gains or losses. Chris remembers investing in one company prospecting. For oil news hit of a new discovery and in two days I'd made over £80,000. And I thought, right, you know, I can make some serious money here."

Chris’s initial success fostered a false sense of security, treating trading as an intellectual hobby alongside his day job in digital media. However, this perception was misleading, as his trading activities began mirroring gambling behavior.

The Descent into Debt

Despite early profits, Chris soon faced substantial losses. To sustain his trading, he resorted to extreme measures:

Chris Garver [03:58]: "At one point, I was spinning nine of my own personal credit cards and another four in my wife's name, which she didn't even know about."

By 2019, Chris was deep in debt, owing approximately $110,000. Determined to regain control, he vowed to adopt a disciplined trading approach and repay his debts. He succeeded in eliminating his debts by mid-2020 but struggled to break free from day trading.

Chris Garver [04:29]: "What I promised to myself wasn't relevant anymore because I was an amazing trader again. And I carried on."

The COVID-19 pandemic further exacerbated his situation. After losing his day job, Chris committed fully to day trading, hoping to recover. However, within two years, his debts soared to £145,000, straining his marriage and personal life.

Chris Garver [04:45]: "I went for it and then, unfortunately, within two years, all those profits had gone and I was £145,000 in debt."

Chris’s obsession with trading became a compulsive behavior, leading to secrecy and distrust within his marriage. The turning point came when his brother intervened, encouraging him to seek help.

Chris Garver [05:27]: "That was so hard because, because there were feelings of sense of guilt, of shame, of embarrassment, you know, I mean, I'm supposed to be, you know, the breadwinner winning male who provides for the family."

Acknowledging his addiction, Chris sought assistance and began the journey toward recovery.

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The Psychology Behind Day Trading Addiction

Day Trading as Gambling

Waylon Wong introduces the concept of day trading, highlighting how modern trading apps like Robinhood and Webull have democratized access to the stock market, making it easier than ever to engage in day trading.

Waylon Wong [01:29]: "Buying and selling quickly on the stock market is known as day trading. And with the dawn of apps like Robinhood and Webull, winning or losing fortunes is easier than ever."

The episode raises a crucial question: Is day trading merely sophisticated gambling? To explore this, Wong brings in expert insights.

Expert Insights: Camelia Kunin and Darren Woods

Camelia Kunin, a finance professor at the University of North Carolina, explains the stark contrast between traditional investing and day trading:

Camelia Kunin [06:21]: "But day trading or buying crypto or foreign currencies, that can be gambling. That's how a lot of people use apps like Robinhood or Webull."

She emphasizes that conventional investing is typically stable and slow-paced, whereas day trading, with its rapid buy-and-sell actions, resembles gambling.

Darren Woods, a neuroeconomist, delves into the neurological aspects of trading addiction:

Darren Woods [07:18]: "There are studies where, you know, we put people in brain scanners and they're given the opportunity to invest in assets. But we can vary in that. In the experiment, we can vary just how much they look like lotteries or not. And what you find is that people do. A lot of people have this even in the brain, this. People love the chance of having a huge payoff, even though that chance is tiny."

Woods highlights how the human brain is wired to seek out high-reward scenarios, even when the probabilities are low. This propensity makes day trading particularly addictive.

Darren Woods [07:56]: "Some investors get hooked on the idea that this could happen again, Right? That they could get this huge return again. So these stocks that have a tiny chance, but for a very, very high payoff, those stocks can attract a lot of people."

The Mechanics of Options Trading

To illustrate how trading can escalate into high-risk gambling, Wong and Garver discuss options trading.

Chris Garver [08:24]: "Okay, so instead of paying, say, $200 for one Amazon share, you pay, say, $5 for the option to buy the Amazon share for $200 in the future. And so if Amazon's share price goes to $250, that's very good for you."

Waylon Wong [08:38]: "Yeah, that would be amazing. It would mean I could now pay $200 for an Amazon share worth $250. So it's like I win $50."

Chris Garver [08:50]: "So you've basically made 10 times your money minus that $5 you paid for the option. But on the other hand, if the share price of Amazon goes down."

Waylon Wong [08:59]: "Surely that would never happen to me. I'm an investing genius."

Chris Garver [09:02]: "Yeah, you are."

Options trading amplifies both potential gains and losses, turning it into a high-stakes game akin to gambling.

Darren Woods [09:34]: "The average investor just doesn't have the knowledge. They don't understand all of these payoff structures. And the institutional investors on the other side of the trades will take advantage of that."

Woods points out that inexperienced traders are often at a disadvantage against professional investors who understand these complex financial instruments.

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Recovery and Advocacy: Project Well Being

After acknowledging his addiction, Chris embarked on a path to recovery. With the help of his brother and financial support, he began to address his debts and seek professional help.

Chris Garver [09:57]: "I guess it was kind of a relief in some ways for that to happen. There is a route out of that and that you can come out and basically recover from it."

A year into his recovery, Chris founded Project Well Being, an organization dedicated to raising awareness about gambling addiction and providing support to those struggling with similar issues.

Chris Garver [10:09]: "For a lot of people, it's a real eye opener. People just don't realize how much of a situation, an issue that it is out there."

Through Project Well Being, Chris conducts gambling awareness workshops and collaborates with companies to develop supportive policies for employees facing addiction challenges.

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Conclusion

Chris Garver’s story serves as a sobering reminder of the thin line between disciplined investing and addictive gambling. The episode underscores the psychological vulnerabilities that make day trading enticing yet perilous. Through expert insights and personal testimony, The Indicator from Planet Money sheds light on the urgent need for awareness and support systems to prevent and address trading addictions.

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This episode was produced by Angel Carreras with engineering by Kwesi Lee, fact-checked by Sarah Juarez, and edited by Paddy Hirsch and Kate Concannon.

Transcript

[NPR]

NPR.

[Chris Garver]

Chris Garver got interested in the stock market around 2010.

[Chris]

I had some savings and I thought there's no point in them being in, you know, savings accounts because the interest was so bad.

[Waylon Wong]

Chris started with what he describes as a sensible investment strategy. He bought shares in a range of large companies listed on the main British stock exchange.

[Chris]

But the deeper I got into it, you start going into forums and people start recommending stocks and you see some of the returns that were happening. And then that kind of opened up another world.

[Chris Garver]

It was a world of buying smaller, more volatile companies or using special trading contracts in ways that magnify your gains or losses. Chris remembers investing in one company prospecting.

[Chris]

For oil news hit of a new discovery and in two days I'd made over £80,000. And I thought, right, you know, I can make some serious money here.

[Waylon Wong]

£80,000 is about US$100,000. And Chris saw what he was doing as investing an intellectual hobby on the side of his day job in digital media. What he didn't think was that his trading could be gambling. This is the indicator from Planet Money. I'm Waylon Wong.

[Chris Garver]

And I'm Darren Woods. Buying and selling quickly on the stock market is known as day trading. And with the dawn of apps like Robinhood and Webull, winning or losing fortunes is easier than ever. Investors got a taste of just how easy yesterday when tech stocks plummeted off the back of new open source AI from China. So is day trading gambling? Today on the show we hear Chris's story and we speak with a neuroeconomist about the human brain on day trading.

[NPR]

This message comes from Charles Schwab. When it comes to managing your wealth, Schwab gives you more choices like full service wealth management and advice when you need it. You can also invest on your own and trade on thinkorswim. Visit schwab.com to learn more. This message comes from Charles Schwab. When it comes to managing your wealth, Schwab gives you more choices like full service wealth management and advice when you need it. You can also invest on your own and trade on thinkorswim. Visit schwab.com to learn more.

[Camelia Kunin]

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[NPR]

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[Chris Garver]

After his big win, Chris Scarver started to lose money on his investments. He would sometimes win back money, but over the next few years, he had eventually whittled away all of his savings. So Chris desperately tried to fund even more trading.

[Chris]

At one point, I was spinning nine of my own personal credit cards and another four in my wife's name, which she didn't even know about.

[Waylon Wong]

By 2019, the losses were adding up. Chris now owed the equivalent of around $110,000. So he made a vow. He would focus on disciplined bets, wipe away those losses and get out of day trading. And by mid-2020, he did achieve the first part, paying back his debts. But getting out of day trading, not so much.

[Chris]

What I promised to myself wasn't relevant anymore because I was an amazing trader again. And I carried on.

[Chris Garver]

In fact, after being laid off from his day job due to the COVID pandemic, Chris started day trading full time.

[Chris]

I went for it and then, unfortunately, within two years, all those profits had gone and I was £145,000 in debt. My wife actually thought I was having an affair because she could see I was being secretive. I wasn't being myself. I remember driving on a freeway with my iPhone in a cradle, you know, with the markets live, you know, prices on my handset and I'm driving and I'm looking over and looking, if an alert comes up, I mean, that's how wired I had become. It was insanity.

[Waylon Wong]

Day trading was now an out of control compulsion. Chris called his brother, who urged him to come clean to his wife.

[Chris]

That was so hard because, because there were feelings of sense of guilt, of shame, of embarrassment, you know, I mean, I'm supposed to be, you know, the breadwinner winning male who provides for the family. And my wife, I mean, she was shocked. She was annoyed as hell, you know, when I told her that I'd opened four credit cards in her name without her even knowing. I mean, you know, there's that whole trust thing in a marriage. And I blew that wide open.

[Chris Garver]

Chris's wife told him to get help. He had some form of a gambling addiction. But in day trading, I didn't think.

[Chris]

I was addicted to gambling. I didn't bet on horse racing, on sports betting. I didn't go into casinos. I didn't bet on poker. I didn't bet.

[Waylon Wong]

But day trading or buying crypto or foreign currencies, that can be gambling. That's how a lot of people use apps like Robinhood or webull. Camellia Kunin is a finance professor at the University of North Carolina, Chapel Hill.

[Darren Woods]

These apps, basically, they're like a lottery on steroids, right? They're very exciting, really easy to use. You have your phone in your hand all times, and I think a lot of people can get into trouble.

[Chris Garver]

Camelia points out that most investing is pretty boring. You buy a bunch of companies for, say, $10,000, and then if they do well, it's might take you a year to gain maybe 10% if you're lucky, $1,000. If they do poorly, well, then you usually lose some, but not all of your money. It's really quite far away from an occasional lotto ticket.

[Waylon Wong]

But any kind of bet where there's a small chance of a huge payoff can be tempting. That also applies to the stock market.

[Darren Woods]

There are studies where, you know, we put people in brain scanners and they're given the opportunity to invest in assets. But we can vary in that. In the experiment, we can vary just how much they look like lotteries or not. And what you find is that people do. A lot of people have this even in the brain, this. People love the chance of having a huge payoff, even though that chance is tiny. Right. We are sort of hardwired to fixate on these huge payoffs.

[Chris Garver]

In fact, there's evidence that people are attracted to investing in companies that have had a giant gain, even if it's just once.

[Darren Woods]

Some investors get hooked on the idea that this could happen again, Right? That they could get this huge return again. So these stocks that have a tiny chance, but for a very, very high payoff, those stocks can attract a lot of people.

[Waylon Wong]

And further fueling this gamification of the stock market is what's called options. These are special contracts that give you the opportunity to buy or sell stocks at a certain price.

[Chris Garver]

All right, so, Waylon, let's explain how these work with what's called a call option.

[Waylon Wong]

Let's do it.

[Chris Garver]

Okay, so instead of paying, say, $200 for one Amazon share, you pay, say, $5 for the option to buy the Amazon share for $200 in the future. And so if Amazon's share price goes to $250, that's very good for you.

[Waylon Wong]

Yeah, that would be amazing. It would mean I could now pay $200 for an Amazon share worth $250. So it's like I win $50.

[Chris]

Yeah.

[Chris Garver]

So you've basically made 10 times your money minus that $5 you paid for the option. But on the other hand, if the share price of Amazon goes down.

[Waylon Wong]

No, don't say it.

[Chris Garver]

That $5 call option could be worthless.

[Waylon Wong]

Surely that would never happen to me. I'm an investing genius.

[Chris Garver]

Yeah, you are.

[Waylon Wong]

And of course, people aren't just putting $5 on the line, they're buying up lots of options, like maybe 1,000 of them for $5,000.

[Chris Garver]

Yeah. And just like gambling options can give you all or nothing payoffs.

[Waylon Wong]

Chris played with similar ways of trying to magnify his wins. What it ended up doing was magnifying his losses. Like most day traders, he was playing against the pros, basically handing over his money to professional investors.

[Darren Woods]

The average investor just doesn't have the knowledge. They don't understand all of these payoff structures. And the institutional investors on the other side of the trades will take advantage of that.

[Chris Garver]

And after Chris sought help, he realised he had a day trading addiction. His brother lent him some money to help with his debts and he told the banks everything that had happened.

[Chris]

I guess it was kind of a relief in some ways for that to happen. There is a route out of that and that you can come out and basically recover from it.

[Waylon Wong]

A year later, Chris founded an organization called Project well Being. It runs gambling awareness workshops and helps companies develop policies and support support for employees struggling with gambling.

[Chris]

For a lot of people, it's a real eye opener. People just don't realise how much of a situation, an issue that it is out there.

[Chris Garver]

Chris is still married, but he still owes the banks a lot of money. And through his work, not the markets, he hopes to pay his debts back. This episode was produced by Angel Carreras with engineering by Kwesi Lee. Was fact checked by Sarah Juarez. Paddy Hirsch edited this episode and Kate Concannon edits the show. The indicator is a production of npr.

[NPR]

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