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How to Lose Money

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Re: How to Lose Money

#141

Post by ramraj07 »

smiley1437 wrote: post #136

Options are effectively Zero Sum - meaning that whoever is on the other side of the contract is predicting the opposite of whatever you're thinking. Successful long-term options traders don't trade options 'directionally' (like buying 50K of GME calls), they manage a whole portfolio of options, and then take directional portfolio risk. This is sort of like diversifying, then running risk analysis, then figuring out w…

But the truth is all the awesome analyses with those programs still cannot actually predict the STOCK PRICE right? If I truly believe I have a better guess about whether a stock is going to go up than the general market conensus (which is what I'm assuming is powering options pricing), then I do stand a chance of making money right?

None of what you say seems to change anything about how a regular investor looks at an option as - it's just a magnifying glass on how much you can make or loose by betting on a stock. Either you get lucky or you are actually insightful in some stocks, that's the edge you have (if any) over the career traders who don't want to rely on this luck to make their money.

Re: How to Lose Money

#142

Post by ilikehurdles »

thiago_fm wrote: post #22
aphextron wrote: post #5

>The nice thing about options is that there isn’t just one way to lose money. No, you can lose money in many different ways – far more than I can write on this page. This is the most important lesson of options. It's never just a coin flip. You have an unimaginably huge number of factors riding against your success. It's not even remotely close to a 50/50 win/lose scenario. There are a million ways to lose, and just…

Even though I agree options is generally a losing game, it does serve a purpose. You can actually even hedge your risk with options -- there are many usages, just because SOME people use it as a casino, it doesn't mean it is. A lot of hedging companies do to raw materials, oil etc follows a similar pattern. The author doesn't mention anytime that, he seems clueless, just use it to play like casino and complain about…

People often think of options as a cheap shortcut to wealth. They end up losing everything with that strategy. No one becomes wealthy in trading with one-off trades.

Trading options effectively and sleeping at night starts with studying and monitoring 30-50 underlying securities across different sectors, understanding their price action, liquidity, binary events, current volatility (both relative to their own volatility range and to their markets’ volatilities), the effect of that volatility on expected prices, and how these underlying selections balance a portfolio’s risk and expected moves. Of course there’s a lot more to it beyond that, but having that list helps you pick an underlying to play with at a given moment.

There are many strategies of options trading out there for managing risk while making money in every kind of market. If you’re intellectually curious about options, don’t take tips and lessons from people on Reddit, twitter, or hn.

Why do people spend years honing a craft like software development yet spend no time vetting symbols they hear about online before dumping money money into trading them? How is that acceptable?

If anyone is intellectually curious about this, I suggest they go to YouTube and start by watching tastytrade’s videos as well as basic introductory videos on option definitions, mechanics, and strategies.

Re: How to Lose Money

#143

Post by JumpCrisscross »

ramraj07 wrote: post #141
smiley1437 wrote: post #136

Options are effectively Zero Sum - meaning that whoever is on the other side of the contract is predicting the opposite of whatever you're thinking. Successful long-term options traders don't trade options 'directionally' (like buying 50K of GME calls), they manage a whole portfolio of options, and then take directional portfolio risk. This is sort of like diversifying, then running risk analysis, then figuring out w…

But the truth is all the awesome analyses with those programs still cannot actually predict the STOCK PRICE right? If I truly believe I have a better guess about whether a stock is going to go up than the general market conensus (which is what I'm assuming is powering options pricing), then I do stand a chance of making money right? None of what you say seems to change anything about how a regular investor looks at a…

> If I truly believe I have a better guess about whether a stock is going to go up than the general market conensus (which is what I'm assuming is powering options pricing), then I do stand a chance of making money right?

Yes [1]. But a one-way single-leg options bet is far less likely to make you money, in that case, than just going long or short the stock.

[1] I am going to parse “truly believe” as have an information edge, i.e. you have seen something nobody else has acted on. Which happens surprisingly often to individual investors.

Re: How to Lose Money

#144

Post by shellfishgene »

zuhayeer wrote: post #9

School is such a guaranteed one now during Covid – you don't even get social serendipity. You're literally sitting there on Zoom burning through cash. What common folk don't realize is that college is just a luxury consumption good of the rich.

I've been wondering, what most degrees from a good school provide to you, and prospective employers, is just a guarantee that you know your stuff and are probably smart. Nowadays you can pretty much teach yourself anything online and from books. Why is there no institution that just does the testing and provides a certificate? You get a syllabus for a few years, and then come back at the end, or in some interval, to be tested on the material. Sure, the tests would have to be pretty comprehensive, but that's not really a problem. If they're done well and cheat-proof, I'm sure employers would start to trust those degrees pretty quickly. Then the benefit would be similar to paying for a full university education, but much cheaper. Of course this only works for people who can teach themselves well.

Re: How to Lose Money

#145

Post by [deleted] »

ramraj07 wrote: post #141
smiley1437 wrote: post #136

Options are effectively Zero Sum - meaning that whoever is on the other side of the contract is predicting the opposite of whatever you're thinking. Successful long-term options traders don't trade options 'directionally' (like buying 50K of GME calls), they manage a whole portfolio of options, and then take directional portfolio risk. This is sort of like diversifying, then running risk analysis, then figuring out w…

But the truth is all the awesome analyses with those programs still cannot actually predict the STOCK PRICE right? If I truly believe I have a better guess about whether a stock is going to go up than the general market conensus (which is what I'm assuming is powering options pricing), then I do stand a chance of making money right? None of what you say seems to change anything about how a regular investor looks at a…

[deleted]

Re: How to Lose Money

#146

Post by Xevi »

ronyfadel wrote: post #19
zuhayeer wrote: post #9

School is such a guaranteed one now during Covid – you don't even get social serendipity. You're literally sitting there on Zoom burning through cash. What common folk don't realize is that college is just a luxury consumption good of the rich.

Yes and no. A Comp Sci./Eng. degree is pretty much guaranteed to get you a decently paying job. My ROI has been > 20x. Learning a 3-5 yr curriculum on your own is a surefire way to get you demotivated and/or depressed.

> Yes and no. A Comp Sci./Eng. degree is pretty much guaranteed to get you a decently paying job.

This is not true in a lot of countries according to my experience. I would not suggest this path for anyone that might start college in a couple of years. Unless you manage to get into a big company you'll probably find it easier to get a job and a good salary in many other sectors. I know pre-school teachers that had a 30% higher entry level salary than me, and they didn't even finish their education before getting jobs thrown their way.

The supply of Comp Sci./Eng. people has increased A LOT. And there will be an explosion with all of the new graduates that have been told exactly what you're saying.

Re: How to Lose Money

#147

Post by JumpCrisscross »

throw0101a wrote: post #76
newcrobuzon wrote: post #38

Earlier quoted context omitted.

Options should be used as intended: as a hedge. E.g. If I am net long in my portfolio and I fear some headwinds I can buy a put or two for the peace of mind. Now those puts should be always considered as worthless, and it is just the price to pay for the peace of mind. Similarly you sell options. Trading options on the other hand is just pure gambling. Even if you get the direction right you likely won't get the timi…

> E.g. If I am net long in my portfolio and I fear some headwinds I can buy a put or two for the peace of mind. Now those puts should be always considered as worthless, and it is just the price to pay for the peace of mind. Why don't you just change your allocation? If you can't sleep at night because of your current portfolio, and gyrations that are occurring, or that you are worried could occur, I would say it's ob…

> If you can't sleep at night because of your current portfolio

You are correct. Buying options for peace of mind doesn’t make much sense.

Buying them to e.g. avoid being short squeezed, protect against a margin call or insure against losses that will get you fired does.

Re: How to Lose Money

#148

Post by the_only_law »

shellfishgene wrote: post #144
zuhayeer wrote: post #9

School is such a guaranteed one now during Covid – you don't even get social serendipity. You're literally sitting there on Zoom burning through cash. What common folk don't realize is that college is just a luxury consumption good of the rich.

I've been wondering, what most degrees from a good school provide to you, and prospective employers, is just a guarantee that you know your stuff and are probably smart. Nowadays you can pretty much teach yourself anything online and from books. Why is there no institution that just does the testing and provides a certificate? You get a syllabus for a few years, and then come back at the end, or in some interval, to…

I’be thought about this for a while as well.

For one, for a lot of the “useful” degrees, getting a hands-in learning experience just isn’t possible without equipment your average person can’t afford or likely even purchase if they could afford it. Outside of that is CD, which is already reasonably easy to break into without the credential.

Re: How to Lose Money

#149

Post by ffhhj »

awefasdfasdf wrote: post #140
CoffeePython wrote: post #83

Building an online course[1] has been one of the easiest ways to make money in my personal experience. Other things I've tried building: SaaS, Trades business, Freelancing business. I've made over $8k since I launched last month and it's been a great stepping stone into other ideas. The main problem I see going forward is getting consistent traffic. Building the course was the "easy" part and now I'm focusing hard on…

How do you arrive at $100-$300/day?

Selling something and doing a lot of promotion in the right places.

Re: How to Lose Money

#150

Post by CoffeePython »

awefasdfasdf wrote: post #140
CoffeePython wrote: post #83

Building an online course[1] has been one of the easiest ways to make money in my personal experience. Other things I've tried building: SaaS, Trades business, Freelancing business. I've made over $8k since I launched last month and it's been a great stepping stone into other ideas. The main problem I see going forward is getting consistent traffic. Building the course was the "easy" part and now I'm focusing hard on…

How do you arrive at $100-$300/day?

My conversion rate is right at 1%. Product is $25. I think I can realistically drive 400-1200 visitors a day to the site with some focused SEO work.
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