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How to Lose Money

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Re: How to Lose Money

#121

Post by claudiawerner »

ronyfadel wrote: post #19
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.

>A Comp Sci./Eng. degree is pretty much guaranteed to get you a decently paying job.

What does this mean? "Decently" as in what? I left university last year with a master's in EE and I'm paid £26k/year before tax(!) to write C. Even for graduate jobs, that's not amazing.

Re: How to Lose Money

#122

Post by jmvoodoo »

metafunctor wrote: post #96
yreg wrote: post #80

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's unlimited opportunity loss. If you sell at say $100 and it goes to $1000 while you're in cash, you "lost" $900 vs your original position. However if you hold at $100 and buy a put for $2 that hedges you, you can still participate in the upside while limiting your downside. Also, downside risk has been historically undervalued (this may be changing though) which is why tail risk funds exist.

Re: How to Lose Money

#123

Post by xwdv »

metafunctor wrote: post #96
yreg wrote: post #80

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.

People don’t realize you have unlimited loss potential on every stock you are not holding right now, and that’s why cash is not a great position. When you sell and wait for a dip, you are basically in a short position except you’re not borrowing stock.

Re: How to Lose Money

#124

Post by metafunctor »

jmvoodoo wrote: post #122
metafunctor wrote: post #96

Earlier quoted context omitted.

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's unlimited opportunity loss. If you sell at say $100 and it goes to $1000 while you're in cash, you "lost" $900 vs your original position. However if you hold at $100 and buy a put for $2 that hedges you, you can still participate in the upside while limiting your downside. Also, downside risk has been historically undervalued (this may be changing though) which is why tail risk funds exist.

Yeah, well, pfft. Not being on the market is an opportunity loss, sure. But it's not "unlimited".

Re: How to Lose Money

#126

Post by onion2k »

ZephyrBlu wrote: post #106
onion2k wrote: post #104

Earlier quoted context omitted.

The frontpage of HN seems to be a sort of 'holy grail' for some HN readers, but you always have to remember that it's only a good thing if "HN readers" are your potential customers. If they're not then it's just a distracting spike in traffic that will do very little for your sales. And HN readers are a pretty diverse bunch (geographically, financially, and as far as interests go) so it's unlikely that many of us are…

If you're selling a product related to vim I think HN is probably one of the best places on the internet to advertise your product, don't you? In practice, I think that if you're posting to HN then HN readers are likely to be in your target audience. Because why would you be posting here if they aren't?

If you're selling a product related to vim I think HN is probably one of the best places on the internet to advertise your product, don't you?

I imagine most HN readers fall in to two groups - those who are greybeards who already know a lot about vim, and those who are much more familiar with VSCode and don't care to learn vim. If I was advertising a vim course I'd target places on the internet where junior sysadmins or Linux devs hang out long before I'd hit HN.

Re: How to Lose Money

#127

Post by mumblemumble »

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, "Here is a person who, having first traded options with great success as a professional, and then traded them with great failure as an amateur, became more convinced than anyone that options trading is best left for the pros."

It would seem that there's a reason why Bloomberg terminals, broker-dealer licenses, exchange membership, a spot in the exchange's colo, and all that good stuff are such expensive commodities.

Re: How to Lose Money

#128

Post by icu »

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 really depends on how you use them. My favourite strategy is to identify a stock I want to own, enter the market by writing a put at a price I want to own the stock at, and then if executed (and the stock price hasn't crashed), write covered calls at an inflated strike price. If the price goes down you can buy back your call and lock in your return, and write another call. I only do this on European style options to limit risk.

Assuming your stock selection criteria is sound, you can make money when the market is moving sideways or going up. When markets are down you wait it out. If your stock selection was sound, your stocks will recover when market sentiment becomes rational.

Having said this, you have to stick to the trading plan. You need to know when your trade assumptions are wrong and what to do prior to having to deal with a trade that goes against you.

That's the reason why it's "hard" and people loose money... it's not options per se, it's the personalities that trade them that are the problem.

Correlation is not causation.

Re: How to Lose Money

#129

Post by snidane »

xxs wrote: post #108
ronyfadel wrote: post #19

Earlier quoted context omitted.

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.

>Learning a 3-5 yr curriculum You don't need that to find a decent job. Most developer/programmer jobs have very little to do with comp. sci (which is math) and a lot more with practical application of few select skills.

You often need core computer science skills for the interviewing game.

Re: How to Lose Money

#130

Post by rutthenut »

mumblemumble wrote: post #127

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.

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