Based16z on his American Eagle trade
by Tufail: American Eagle Outfitters
The part Based16z keeps coming back to isn't the 3x. It's that he was glued to the tick chart the whole time, and that's how he ended up taking profit on a majority position after roughly a 40% move instead of riding the thing out. His own read: sizing smaller would have been better. Not because the trade was wrong on paper, but because the size changed how he managed it emotionally. The setup itself came together instantly, per Based16z. He saw the Sydney Sweeney campaign land, then saw Wagie Capital calling it huge for American Eagle, and in his head it clicked that Sydney Sweeney was the biggest person on earth and this would go the most viral of all time. Add an expert network read that the stock was already very cheap, and he ripped 80% of his book into spot American Eagle. Drawdown risk felt limited to him at the time, since American Eagle is a decent consumer stock unlikely to go to zero tomorrow, and the upside looked great. He was moving the name around because of the position size. Then the stock went 3x and he didn't realize as much equity from the bet as he should have, because he oversized it. Going forward he's tried to size down, and the reason isn't the money. It's that sizing affects how he manages a trade emotionally. 🥲📉
Transcript (en)
and then i saw that sydney sweeney thing come out and then i saw this guy waging capital this is a more just spending time on twitter waging capital being like yo this is gonna be huge for american eagle and it all like came together instantly in my mind where i was like oh sydney sweeney is the biggest person on earth this is gonna go the most viral of all time and the stock is already super cheap according to my expert network here of sleepy soul so like i can just basically full port them so i basically ripped 80 book into spot american eagle i like decent size like i was moving the name around uh um yeah because i was like oh what's my drawdown risk here well it's like a decent consumer stock it's not gonna go to zero tomorrow and my friend already says good and my upside is great so like this is like a real asymmetry now i think as i've learned going forward sizing smaller actually would have been better because i had size so big i'm like glued to the tick chart and i ended up taking profit on like a majority position i like a 40 move and like obviously that was great you know it's very good for my portfolio but like the stock went in 3x right so I didn't actually realize my equity as much as I should have from the bet because I oversized it in that way and so I've tried to size down because it it's not because you know it wouldn't have made as much money like I think that sizing could be right from a drawdown and upside perspective in a Kelly criterion sense but it was wrong in the sense that you have to look at your own emotions and be like is sizing this trade this way going to cause me to you know manage it differently um and so I think that's where I traded it poorly
