A Hard Lesson in Sizing During the 2020 Oil Collapse

Looking back at the infamous $WTI crash into negative territory in April 2020, I still remember the paralysis. My lesson wasn't about missing the bottom, but about position sizing and managing an unprecedented event. I had a small long position from higher up, nothing crazy, but my mistake was twofold: first, not recognizing the true structural break in the contango/backwardation dynamic playing out in the futures, and second, not cutting the entire position when the market became fundamentally unquantifiable. I held on with a "it can't go lower" mentality, which became an increasingly expensive bet. The loss itself wasn't catastrophic, but the mental stress of watching it unfold, the inability to accurately model risk, and the eventual capitulation taught me more about capital preservation in black swan events than any textbook ever could.

The key takeaway for me was to always respect market structure, no matter how illogical it seems, and to understand that some events simply render your models useless. In those moments, protecting capital becomes the only logical play, even if it means taking a smaller loss than you'd prefer.