121–130 of 223 posts
I understood that options trading is zero-sum: to win, someone else has to lose. In this sense it’s like gambling, also in that the house always wins because they collect the fees no matter what. Like gambling I’m sure there are plenty of people with success stories too. Is this assessment wrong?
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But they don't actually invest in businesses. Yes, the asset happens to be an operating corporation. But the actual business of that corporation is not what they invest in. They're not interested in portions of revenue or profit sharing. What they want is the asset to increase in value, and that asset is their preferentially protected share ownership of the corporation. Whether or not the business is a true business…
> But they don't actually invest in businesses. Yes, they do. > Yes, the asset happens to be an operating corporation. Not just any operating corporation. A business . Not all corporations are businesses. Not all businesses are corporations. VC's invest in corporations (almost invariably Delaware C corps) which are also businesses. VCs make equity investments in businesses, and not other asset classes. Saying that th…
And to the point on Ferrari collectors. They know that their asset is not a car, it's a Ferrari. They could potentially drive it around, but they don't. So to that example, they're actually not investing in cars, they're investing in Ferraris. You could make the same argument and say, well Ferraris are cars. And I'd say yes of course, but that's not the point. Ferraris could be boats or paintings, and it would be just as relevant. It's the asset value not the functionality they're investing in. That's why I say VCs invest in corporations not businesses, in the same way that Ferrari collectors invest in Ferraris, not cars.
Honestly this is why after dipping my toes into this some time back (along with some very limited time spent in crypto without any kind of derivative shenanigans) I came full circle back to index funds and just putting what I can away at the end of the month. Are index funds going to make me crazy-bonkers-rich? No, but neither was anything else in all likelihood. What they’re brilliant at is giving me my time and att…
Is this sorta like a Buffett rule thing?
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Options in particular are a trap IMO because they require a LOT of active attention to the market day to day, and in the end aren't really worth it. I also dabbled in options a while back, and ditched them after losing much more than I should. I did learn a lot about the stock market while doing options though, so I guess that is a plus.
Your point about the attention required was my takeaway too. I traded paper in college for awhile out of curiosity, and I made a decent amount of "money" doing it too! I was surprised by this because I thought the stock market was insanely difficult to understand and constantly unpredictable beforehand. It was like that but not as often as I expected. For example, intraday movements could often happen at very predict…
YTD I'm up more than 300% on my options trading account. Options trading is making bets. The way I make bets is in regards to unusual news events. The events that made me the most money this year were Powell raising interest rates in a relatively unprecedented way, the monkeypox crisis and catching the end of the crisis before the mainstream, and the Nord stream pipeline blowing up. I didn't anticipate these events,…
this is the catch. you are perpetually in a mental struggle because all it takes is one big bad bet to undo enough of your work that it wasnt worth it. So the options portfolio that you are up 300% on is probably less than 10% of your entire portfolio. Whether it is or isnt under 10% is not actually important, the point is that the stress involved should begin snowballing past that point
not to mention you probably have a decent amount of money liquidated at any given time. for most people it is way for efficient to put the entire portfolio into an index, preferably a tax beneficial account like 401k or roth IRA, and then use all that extra time and energy bettering their workable skillsets so that they can increase their raw income and reduce the odds of unemployment.
That said, when i was unemployed for a year - I did a lot of options/crypto trading because i just had so much time on my hands. Since I've been back at a full time job, it's just too draining for not enough benefit. I can work a few hours of OT and guarantee more money that week than trading would get me, and the OT is way less of a struggle
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"There are low risk strategies like the wheel that basically guarantee you income for doing nothing but being patient." I haven't found any. And every time an option trader tells me about their "low risk" strategy I see a disaster waiting to happen. The "low risk strategies" of option trading are usually strategies where you make a bet that will give you a low income if things go about the way they have been going ab…
Anytime you're holding stock, you obviously take a theoretical risk. How risky something is is a judgement call that each individual needs to make for themselves. That said, using something like a wheel strategy on stock XYZ is inherently less risky than merely buying the stock outright because the premiums can at least be collected until your target price is hit.
I'll sell options on underlying boring securities. I may cap my short term gains to 15% or so, but I'll get an immediate couple of % points several times a year. it turns a boring blue chip into a less boring blue chip, but going from 8% to 12% is no joke.
Now talk about the times this strategy hasn't worked/the inverse (loss instead of profit) has happened to balance it out so it doesn't sound too good to be true :)
Options are just a tool that lets you dial in the amount of risk you want, they can be set up to be more conservative or more risky than the underlying. The latter is what makes the news.
Honestly this is why after dipping my toes into this some time back (along with some very limited time spent in crypto without any kind of derivative shenanigans) I came full circle back to index funds and just putting what I can away at the end of the month. Are index funds going to make me crazy-bonkers-rich? No, but neither was anything else in all likelihood. What they’re brilliant at is giving me my time and att…
whats a good way to start with a Bogle strategy, as it were? I never heard of this before and I'd like to learn more. Is this sorta like a Buffett rule thing?
The idea is just: invest in an index fund, highly diversified, cheap. There are some variations, like using an equity and bond split, but you can just get a world all cap stock ETF and sit back.
That's all. It's hard to accept you don't need to know more than this, but it's what most people should be doing.
Honestly this is why after dipping my toes into this some time back (along with some very limited time spent in crypto without any kind of derivative shenanigans) I came full circle back to index funds and just putting what I can away at the end of the month. Are index funds going to make me crazy-bonkers-rich? No, but neither was anything else in all likelihood. What they’re brilliant at is giving me my time and att…
whats a good way to start with a Bogle strategy, as it were? I never heard of this before and I'd like to learn more. Is this sorta like a Buffett rule thing?
else, the forums are where a ton of folks hang out and discuss the minutiae of being boring ;) - https://www.bogleheads.org/forum/index.php
Earlier quoted context omitted.
Anytime you're holding stock, you obviously take a theoretical risk. How risky something is is a judgement call that each individual needs to make for themselves. That said, using something like a wheel strategy on stock XYZ is inherently less risky than merely buying the stock outright because the premiums can at least be collected until your target price is hit.
Wrong, it is inherently more risky. You are fooling yourself.
If you buy the stock outright: you can lose everything if the company goes out of business.
If you use a simple wheel, you can still lose everything, but the blow is blunted by any premiums you collect.