31–40 of 147 posts
Nitpick: you can’t lose over 100% of your investment using a put option. You can only lose the premium.
You can lose up to 100% of premium (which makes up 100% of your investment in that option) if you BOUGHT the put option. You can lose up to Strike Price minus the premium received if you SOLD the put option.
Nitpick: you can’t lose over 100% of your investment using a put option. You can only lose the premium.
You can lose up to 100% of premium (which makes up 100% of your investment in that option) if you BOUGHT the put option. You can lose up to Strike Price minus the premium received if you SOLD the put option.
I can see the risk in short positions - you theoretically could lose an infinite amount (if you borrow X shares of something, sell them, but then can't find any to buy when it comes to returning them), and it's certainly possible to lose more than you put in (sell 100 short at $10 netting you $1000, price doubles overnight on new news, you have to buy $2000, losing a total of $1000 in the process. If price trippled o…
Also, prices for these options (Tesla is a good example) aren't cheap. For example a bet that Tesla will be below $900 by Jan 19th 2024 will cost you about $250 / share at the moment. That means Tesla needs to actually be below $650 on Jan 19th 2024 before you make 1 dollar.
As long as you understand whats going on and what you are actually betting on, you are fine. But options have lots of 'gotchas'.
Super useful! However, I get a “504 Gateway Time-out” error for https://betagainst.fun/asset/bz__f_bno/ . HN hug of death?
"We calculate the correlations between 2 securities on the daily closing values of the last 20 years." It's better to correlate daily returns than daily prices, since the latter are nonstationary, and I suggest using 1 year of daily returns rather than 20 since correlations do change over time. When I worked as a financial quant no one looked at 20 year correlations to measure near-term risk.
For a retail trader, the fees are higher, affording fewer trades in a given period. As such the holding period might be on the order of 1 year for some people, so just 1 year of daily returns might invite too much trading if you're rebalancing.
Very cool, although index funds like S&P 500 and DJI don't seem to work. https://betagainst.fun/asset/_gspc_spy/ https://betagainst.fun/asset/_dji_dia/
That doesn't make any sense anyway. You're asking what are the highest and lowest correlations of the market against the market itself. You cannot compare the same or roughly the same basket of assets against itself.
Random question: Would it be illegal to use insider information to trade on the result of a correlated stock that you suspect will be affected by the actual company you have information about? (I mean I get that it probably is since you're using insider information but wouldn't it be really hard to prove.) Just curious, I'm not intending on doing it myself.
Earlier quoted context omitted.
You can lose up to 100% of premium (which makes up 100% of your investment in that option) if you BOUGHT the put option. You can lose up to Strike Price minus the premium received if you SOLD the put option.
I know next nothing about option trading, but doesn't betting against a stock have infinite loses?