The Loss

Metric	Value
Starting Capital	$5,000.00
Current Equity	$4,959.26
Total Loss	-$40.74 (-0.81%)
Today’s Loss	-$65.58

What Went Wrong

Rule Violations

Rule	What We Did	What We Should Have Done
Position sizing (5% max)	96% of account on SOFI	Max $248 per trade
Credit spreads only	Naked puts	Buy protective leg
SOFI blackout	Held through blackout	Avoid until Feb 1
Phil Town Rule #1	Averaged down on loser	Cut losses quickly

The SOFI Trap

Jan 13: Opened SOFI positions (stock + naked puts)
Jan 14: Positions underwater, doubled down
Jan 14 PM: Emergency exit triggered - realized loss

We were holding naked puts on a stock with earnings in 16 days. IV was 55%. The position could have lost $4,800 if SOFI crashed after earnings.

The Emergency Exit

At 11:52 AM ET, the CTO triggered an emergency exit:

Closed 2 SOFI puts (buy to close)
Sold 24.75 SOFI shares
Realized loss: -$40.74
Prevented potential loss: -$4,800

The $40.74 was tuition. The $4,800 was the avoided catastrophe.

What We Learned

Research Findings

After deep research on traders who started with $500-5,000:

What They Say	Reality
“3-5% monthly is realistic”	We were targeting 40%
“6+ months simulator first”	We skipped this
“95% fail rate”	We almost joined them
“Process over money”	We focused on money

Revised Targets

Before	After
$100/day	$150-250/month
40% monthly return	3-5% monthly return
Any ticker	SPY/IWM only
Naked puts OK	Spreads required

Prevention Measures

Created scripts/pre_trade_checklist.py:

✅ Is ticker SPY or IWM?
✅ Is position size ≤5%?
✅ Is it a SPREAD (not naked)?
✅ Checked earnings calendar?
✅ 30-45 DTE expiration?
✅ Stop-loss defined?

Every trade must pass this checklist. No exceptions.

Current State

Metric	Value
Equity	$4,959.26
Positions	0
Buying Power	$9,918.52
Next Trade	SPY/IWM credit spread

The Path Forward

We paid $40.74 to learn:

Follow the rules you wrote
3-5% monthly is success
SPY/IWM only until proven
Spreads, never naked

The loss is real. The lesson is permanent.

Day 79 of 90-day paper trading phase. Lesson logged as LL-196.

Our North Star Strategy*