Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

No, You Aren’t Going to Get Rich by Options Trading

jacobin.com

Post reply on HN
Print view View original

111–120 of 223 posts

Re: No, You Aren’t Going to Get Rich by Options Trading

#111

Post by SilasX »

jnwatson wrote: post #66
logicalmonster wrote: post #48

Earlier quoted context omitted.

What is your issue with my comment? What I said is true. You can essentially guarantee yourself an income. The risk comes from anytime you're holding stock and the stock value decreases, but you can sell calls on that and earn an income on that until a company goes out of business. This type of wheel strategy is inherently less risky than merely buying stock. There's obviously a lot of nuance to even simple options t…

That's like saying you can rent out a burning house. It is technically true, but folks usually like to preserve their initial capital while making income. There Ain't No Free Lunch in options. Covered calls give up potential upside gains for income now. You still have the same downside risk as the underlying stock.

That is a good point, but is in no way evident from the initial reply[1] and its quotation of the objectionable part.

[1] https://news.ycombinator.com/item?id=33548323

Re: No, You Aren’t Going to Get Rich by Options Trading

#112

Post by ISL »

MuffinFlavored wrote: post #98
NovemberWhiskey wrote: post #77

Earlier quoted context omitted.

It's not advice for a retail trader; it's advice not to be a retail trader.

It's advice for a retail trader on what they are up against, and it confuses me greatly on how retail traders can look at all of the evidence that they shouldn't, and they still do.

I find that my perspective is generally recalibrated each time I observe a professional or professional organization in a field where I think I mostly understand how it works.

It takes seeing how some of the second-order effects matter in order to get an inkling of just how much you don't know.

As an approximate programming example, imagine the difference in productivity between a programmer coming out of high school and someone with a couple decades experience with access to version-control, profilers, documentation, a clear understanding of best-practices, who works on a team of five people who will all do the same job, and has access to $1M in AWS credits.

Can the young programmer compete? In principle. Can they deliver on time, every time, for their clients without making a gaffe like the team of programmers can? Probably not.

Re: No, You Aren’t Going to Get Rich by Options Trading

#113

Post by logicalmonster »

kelseyfrog wrote: post #100
logicalmonster wrote: post #48

Earlier quoted context omitted.

What is your issue with my comment? What I said is true. You can essentially guarantee yourself an income. The risk comes from anytime you're holding stock and the stock value decreases, but you can sell calls on that and earn an income on that until a company goes out of business. This type of wheel strategy is inherently less risky than merely buying stock. There's obviously a lot of nuance to even simple options t…

Right, so in case it's not clear, people are asking you to quantify "basically" and "essentially" with math to get a number out. English words aren't going to make your point. They want you to back it up with a statistical analysis.

> people are asking you to quantify "basically" and "essentially" with math to get a number out

You're hoping to see a specific number? What number are you even asking for? To me, your comment doesn't make even a tiny bit of sense because we're not talking about a specific quantity of a stock at a specific price for a specific time period, we're just talking about the general principles of basic option strategies.

Re: No, You Aren’t Going to Get Rich by Options Trading

#114

Post by d23 »

highwaylights wrote: post #29

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…

That was basically my conclusion after looking into it for a while. There are countless ways of designing an options trading strategy to bet on exactly what outcome you feel is going to happen. But at the end of the day, I couldn't get past that it was all based off of just that: feelings. And that while I could be monkeying around with options trading and timing, I would be missing out gains realized by just being in the market.

Re: No, You Aren’t Going to Get Rich by Options Trading

#115

Post by lisper »

rexreed wrote: post #101
lisper wrote: post #88

Earlier quoted context omitted.

> Venture capital doesn't invest in businesses. It's the biggest head fake there is. They invest in assets, high risk, fast growth assets. That's a bit too facile. Yes, VCs invest in assets, but the assets they invest in are businesses and not, say, commodities or derivatives or options, which are also high-risk and (potentially) fast-growth assets. VC's invest in businesses, but not just any businesses. They want bu…

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 they "do not invest in businesses [because] they're not interested in portions of revenue or profit sharing" is like saying that someone who buys Amazon stock is not investing in a business because Amazon doesn't pay dividends.

It is true that buying Amazon stock is different than, say, buying the local laundromat or opening a lemonade stand. But those are all still businesses.

And it is true that VCs don't invest in any old business. If you try to get a VC to finance your purchase of the local laundromat or to start a lemonade stand on the corner they will probably laugh in your face. But if you try to get them to invest in corn futures they will laugh in your face even harder. (And if you tell a VC, "You don't invest in businesses" they will probably write you off as a pretentious idiot.)

VC's invest in businesses. They specifically invest in businesses with high growth potential, which generally means startups. And it's true that what they care about is the growth and not the business details. But they still nonetheless invest in businesses.

Saying "VC's don't invest in businesses" is like saying that Ferrari collectors don't buy cars. There is a grain of truth there: Ferrari collectors don't buy just any old car, they buy Ferraris. But Ferraris are still cars.

Re: No, You Aren’t Going to Get Rich by Options Trading

#116

Post by ISL »

spacemadness wrote: post #107

Not to disparage the article here, just more of an observation in the trend of “now you tell me” financial journalism. I wish these types of articles would surface more at the times people need to hear them instead of after a bubble bursts. It’s easy to take a stance when the mood has turned, but I don’t remember these articles surfacing much during the last height of stock speculation last year. I have no data to ba…

The articles appear, but they don't draw the audiences until the problem is apparent.

I remember in 2017 being told by a Wall Street analyst, "It's been ages since anyone's traded in an environment with actually-rising interest rates, be careful." The rise in rates came later than we both though, but I've thought about their comment often over the last year or so.

The knowledge is there, but the appetite isn't always.

Re: No, You Aren’t Going to Get Rich by Options Trading

#117

Post by advisedwang »

seiferteric wrote: post #91
Archelaos wrote: post #59

A warning about index funds, that were mentioned a couple of times in different threads here. If the investemnt bank issuing the index fund goes bankrupt, you lose your money - see Lehman Brothers. You can mitigate the risk by buying from different issuers. However, the bankruptcy risks might still be too closely related; in other words: there is the risk of a domino effect of bankruptcies of investment banks in a fu…

I have never heard this, is it really true? Most people have their 401k's/ira's in index/mutual funds so it would be pretty devastating if like vanguard or fidelity went under and everyone lost their money... to the point where I don't think the government would allow it to happen, but maybe that's just wishful thinking?

I took a look at a random prospectus to see what was disclosed (For ITOT). It does have some risk that sort of sound like this:

> Authorized Participant Concentration Risk...To the extent that Authorized Participants exit the business or are unable to proceed with creation or redemption orders with respect to the Fund and no other Authorized Participant is able to step forward to create or redeem, Fund shares may be more likely to trade at a premium or discount to Net asset value and possibly face trading halts or delisting.

Re: No, You Aren’t Going to Get Rich by Options Trading

#118

Post by d23 »

lijogdfljk wrote: post #110
highwaylights wrote: post #29

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…

Recommend any reading to learn index funds?

I read "The Simple Path to Wealth." But honestly, the TL;DR is pick a low-cost broker (like Vanguard) and put your money into something broad, such as VTI for the United States stock market. You could also mix in a world index and bonds, but the expected return on both are lower. All about your own risk tolerance.

Re: No, You Aren’t Going to Get Rich by Options Trading

#119

Post by pmoriarty »

jawns wrote: post #9
MuffinFlavored wrote: post #2

> My position, to be clear, is not a patronizing one that posits people can’t do as they please with their money, but rather that a game of Russian roulette wouldn’t be so thrilling if you found out it was a full clip. Might I suggest to the author posting some evidence/data that shows retail options traders getting burned? Burned in the sense of having no returns to speak of. Obviously, they're getting burned on bad…

> I could be wrong but wouldn't simple logic dictate that... most people stop doing something that loses them money? Have you ever been to a casino? Everyone knows that the house always wins in the aggregate , but everyone hopes that they're one of the lucky individuals who will beat the odds and win as an individual . I would guess, in the case of options trading, that it's not the same people being burned over and…

"Have you ever been to a casino? Everyone knows that the house always wins in the aggregate, but everyone hopes that they're one of the lucky individuals who will beat the odds and win as an individual."

The lottery is another good example. How many people bought tickets in the recent $2 billion lottery, knowing full well their odds of winning were close to zero?

Re: No, You Aren’t Going to Get Rich by Options Trading

#120

Post by djoldman »

docandrew wrote: post #109

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?

Yes, by definition one option trade for puts or calls with extrinsic value is zero-sum as with no other trades, the final settlement price zeros out the extrinsic value.

Many options trades are done in combination with other products, however, which allows for non-zero sum.

Post reply on HN