Camelia Kunin (3:12)

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.

Darian Woods (3:25)

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 Garver (3:41)

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 (3:50)

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 Garver (4:11)

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

Darian Woods (4:20)

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

Chris Garver (4:27)

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 (5:02)

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

Chris Garver (5:09)

That was so hard 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.

Darian Woods (5:43)

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 Garver (5:51)

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 (6:02)

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. Camelia Kunin is a finance professor at the University of North Carolina, Chapel Hill.

Camelia Kunin (6:15)

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.

Darian Woods (6:28)

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 (6:52)

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.

Camelia Kunin (6:59)

There are studies where, you know, we put people in brain scanners and they're given the opportunity to. 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, 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.

Darian Woods (7:30)

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.

Camelia Kunin (7:37)

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 (7:50)

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.

Darian Woods (8:00)

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

Waylon Wong (8:04)

Let's do it.

Darian Woods (8:05)

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 (8:21)

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.

Darian Woods (8:30)

Yeah. 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 (8:38)

No, don't say it.

Darian Woods (8:39)

That $5 call option could be worthless.

Waylon Wong (8:43)

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

Darian Woods (8:46)

Yeah, you are.

Waylon Wong (8:47)

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.

Darian Woods (8:55)

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

Waylon Wong (9:00)

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.

Camelia Kunin (9:15)

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.

Darian Woods (9:26)

And after Chris sought help, he realized 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 Garver (9:37)

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 (9:49)

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

Chris Garver (10:00)

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.

Darian Woods (10:09)

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 Carrera, so the 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 Sponsor Announcer (10:34)

This message comes from NPR sponsor Charles Schwab with its original podcast on Investing. Each week, hosts Liz Ann Saunders, Schwab's chief investment strategist, and Kathy Jones, Schwab's chief fixed income strategist, along with their guests, analyze economic developments and bring context to conversations around stock, fixed income, the economy, and more. Download the latest episode and subscribe@schwab.com oninvesting or wherever you get your podcasts. This message comes from vanta. What's your 2am Security worry? Is it, do I have the right controls in place or are my vendors secure? Enter Vanta. Vanta automates manual work so you can stop sweating over spreadsheets, chasing audit evidence and filling out endless questionnaires. Their trust management platform continuously monitors your systems, centralizes your data, and simplifies your security at scale. Get started. Advantage.com that's V A N T A dot com.