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How to Lose Money

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Re: How to Lose Money

#11

Post by kgwgk »

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…

It's a 50/50 bet if you pick sides at random. You may have a loss in expectation but it will be because of spreads, transaction costs, taxes, etc.

(Only half-joking.)

Re: How to Lose Money

#12

Post by _a1_ »

> I’ve written four short books and they have literally grossed hundreds of dollars.

I hear this argument pretty often.

A book is not a binary thing: there is a book, and there isn't. It's not about the "book", it's about the contents of the book.

So in other words the author has gathered some knowledge and he didn't make much money off of it. Therefore, the knowledge you will gather will not allow you to earn any money. Does that make sense? I don't think so.

I will probably be downvoted, but maybe more important thing is the subject of the book, than the actual book itself?

Disclaimer: I did not write a book. I did write a chapter to a book, and I got some money off of it. I'm not rich because of it, but I see the potential.

Re: How to Lose Money

#13

Post by zdkl »

llamataboot wrote: post #8
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…

Why would an option ever be 50/50? You are getting the odds you pay for... On a double zero roulette wheel, you have about a 47% chance of hitting red. There's options I'd buy at that price, and options I wouldn't. With options in particular you also have your various calculations regarding time, volatility and so forth. But you can be pretty sure if an option is being bought and sold, that the buyer and the seller a…

I believe an important point is that happy != informed.

Re: How to Lose Money

#14

Post by Pyramus »

llamataboot wrote: post #8
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…

Why would an option ever be 50/50? You are getting the odds you pay for... On a double zero roulette wheel, you have about a 47% chance of hitting red. There's options I'd buy at that price, and options I wouldn't. With options in particular you also have your various calculations regarding time, volatility and so forth. But you can be pretty sure if an option is being bought and sold, that the buyer and the seller a…

I think the OP is pointing out that many people think of options as a bet on stock price movement with the probability of success being the probability of the stock moving.

When in fact volatility, time decay and many more factors are really shaping the success probabilities.

Re: How to Lose Money

#15

Post by Pyramus »

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.

Thats a very US American (anglosaxon?) viewpoint to take. Education is paid for by society in most Western parts of the world.

Re: How to Lose Money

#17

Post by eCa »

Pyramus wrote: post #15
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.

Thats a very US American (anglosaxon?) viewpoint to take. Education is paid for by society in most Western parts of the world.

To be fair, there’s still an opportunity cost, and most people also need student loans.

Re: How to Lose Money

#18

Post by KMag »

A12-B wrote: post #4

Damn, am I the only one who does adequate research before I dive into things? I mean, buying patents for a dog alarm before knowing your customer? Really? Losing money on trading i understand because it's a very seductive venture and it's mostly just gambling that you can hedge slightly with some smart info. Otherwise, yeah, some of these things can only happen when you already have too much money to play with. Someo…

> seductive venture and it's mostly just gambling that you can hedge slightly with some smart info

I think part of it is the populist meme that professional investors don't really know what they're doing and accidentally make money hand-over-fist. Yes, it has been shown that free stock tips are on average no better than monkeys throwing darts, and most hedge funds under-preform the S&P 500 in risk-adjusted returns.

It was an eye-opening experience when I asked a good friend of mine who was a portfolio manager if he beat the S&P 500 on a risk-adjusted basis. His reply was "I hope that's not how I'm being evaluated". He went on to explain that he was attempting to maximize expected returns while remaining uncorrelated to the market... so that an investment basket containing a bunch of ETFs plus investments in his portfolio maximize risk-adjusted returns. (See portfolio optimization and (post-)modern portfolio theory as to why maximized risk-adjusted return isn't just a basket of 100% the highest risk-adjusted-return asset.)

Re: How to Lose Money

#19

Post by ronyfadel »

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.
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