161–170 of 300 posts
#0 - Be pessimistic about the stock market. This is by far the most meaningful way most people lose money over the course of their lifetime.
IMHO...that "fastest" method to lose money(in the markets) is the commodity futures market. You get 200:1 leverage there, almost no rules, and it's open 23 hours a day, 6 days a week. The securities market and derivatives within are small fish by comparison. If commodity futures don't scratch your itch for losing(or gaining) money very quickly, you can also trade forex with similar leverage. Both of these market types make securities and options look like the kiddie track at the go-kart park.
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…
Yes but options aren't just about direction, they're about timing too. The thing about holding a stock is you only have to be right about one thing but with options you have to be right about two.
A secondhand anecdote: An acquaintance of mine used to be a professional options trader. A fairly successful one, too. He retired from the job in his early 30s. After that, he tried doing a little options trading on his own behalf, for old times' sake. The look on his face as he recounted how that went down was a sight to see. I don't know exactly how much money he lost, or how quickly, but my take-away was, roughly,…
I would think it can also be a bit easier playing with 'other peoples money' as you can hold for longer, double-down and so on, whereas with your own money, the risk is even more real and the pot usually much more limited. However, a trader that doesn't do well and makes losses won't last long in the job either. Luck could make or break either type of trader too.
>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…
This is true in most markets, and the casino isn't going to charge you a commission either.
>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…
> There are a million ways to lose, and just a few narrow ways to win. I'm not sure I understand. You can take either side of the trade you want, so if you think you've determined how lopsided it is, why aren't you doing the opposite trade?
Even if you get the direction right you might not make money.
Earlier quoted context omitted.
Year ago when we were reading the news about what is happening in Wuhan, some of my friends bought SPY puts as an insurance against the potential crisis. The best outcome for them would be if those puts expired worthless. When you insure your house, you don't usually wish for it to burn down. I haven't acted and my portfolio took a -30% hit right after. Your suggestion (to change the portfolio allocation) would mean…
How does holding money have an "unlimited loss potential"? You just buy back at whatever value the stock is at the time. I would argue that money is a neutral position (adjusting for inflation which is nowadays quite low). After all, we buy stuff with money, not stock. Now, selling short, that has an unlimited loss potential, but it's very very different from a cash position.
It does not have unlimited loss potential, I'm not sure why the poster said it did. It's the opposite - holding has unlimited upside potential(however slim).
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…
> whoever is on the other side of the contract is predicting the opposite of whatever you're thinking.
If you are a retail options trader, the person on the other side is a professional market maker who doesn't have a "prediction" the way you'd think about it. He made his money at the moment you did the trade, because you traded at a disadvantage relative to the fair value of the product.
> And, to run an option portfolio, professional options traders run risk management software like Blackrock Aladdin and Goldman Sachs SecDB. These cost a LOT of money (close to 6 digits a year)
No, options desks run (usually proprietary) models whose job it is to price options and strategies along the curve in a self-consistent way (i.e. via no-arbitrage arguments) relative to some more liquid instrument like futures. OR on a bank exotics desk, they run custom models that try to price exotic products from first principles (monte-carlo simulations of cash flows, basically.)
> (close to 6 digits a year)
Way more expensive than this, the quants and developers who build these proprietary models are paid a lot of money.
> Sure, you could get lucky once in a while but in the long run, not knowing the odds is going to hurt you and you are likely to lose all your money.
This is both accurate and not, it depends what you are doing. I believe sophisticated retail traders can find mispricings, especially in less liquid products. If you are not looking at the vols and building curves, (or you don't know what that means), this is not you.
I really hate advice like this. Have you ever seen a business before? Have you ever met a person? Pretty much no interests are monetizable and almost all companies are doing really boring work. I don’t believe anyone in the world is truly passionate about things like payroll software. If I followed my interests I would be homeless.
The whole “if you want to do X, you have to not be doing it for X” attitude is useless and doesn’t give any actionable advice.
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.
Thats a very US American (anglosaxon?) viewpoint to take. Education is paid for by society in most Western parts of the world.