71–80 of 352 posts
how to do such betting ?
if you're remotely serious about 'trying' this stuff out, do it in paper trades first. The options world is full of the corpses of dead portfolios.
Former options market maker here. Please don’t buy options as a retail investor. (Maybe write to generate income.)
I'm not sure the bet is as big as it seems from the headline. When you buy options, you pay a fixed premium to get the right to buy/sell a very large value of shares, called the notional. But the notional is not what you are losing if it goes wrong, you lose the premium. The premium can be quite a small number compared to the notional.
Earlier quoted context omitted.
> Both Palantir and Nvidia have high IVs The relevant Greeks are delta, gamma and vega. If your bet pays off, the price of the stock will decrease. Delta predicts how your option will increase in value with that; gamma if that relationship will accelerate or buffer. Vega, meanwhile, informs that the price suddenly crashing is volatility, which increases the value of your options. Succinctly, if you are betting on a c…
I am not saying he won’t make money. But it won’t be commensurate with the risk he took on.
Former options market maker here. We have insufficient data to conclude that.
I also happen to have experience unwinding correlation books after their originators shat the bed. Predicting a crisis is hard. Predicting correlations in a crisis for esoteric assets is almost impossible.
Burry wanted to bet on specific overvalued stocks. Not a general market crash. For that, puts are probably the best tool if the expectation is a sharp correction followed by, in all likelihood, a Trump put.
Earlier quoted context omitted.
Overall for the common person I'd agree, but I assume we're all more or less hackers here and for us, I'd say "If you have to ask, ask and learn, then do it". If everyone followed your advice no one would ever do anything, as we all begin somewhere, something that should OK. Of course, don't do million dollar trades when you begin, but we shouldn't push back on people wanting to learn, feels very backwards compared t…
thank you for being nice
That, and because snarky answers get more imaginary internet points than helpful ones.
The market will correct before mid-terms next year. This is almost a certainty. By how much and when exactly - now, that's where the shorting profits are. PS. Burry infamously made several more bets after the "big short", bets that misfired. That is, his record is far from being 100% right.
The powers that be have too much invested in the market continuing to move up, you are basically betting that Trump, a bunch of billionaires and the FED are going to let the market crash to curb inflation and income inequality. That feels like a bad bet to me.
I'm not sure the bet is as big as it seems from the headline. When you buy options, you pay a fixed premium to get the right to buy/sell a very large value of shares, called the notional. But the notional is not what you are losing if it goes wrong, you lose the premium. The premium can be quite a small number compared to the notional.
They are only selling puts...that's a half-hearted short. They have the resources to borrow shares and bag the whole amount without a time constraint...why not do that?
Earlier quoted context omitted.
With a put, you can only lose what the put is worth. With shorting, you can in theory have infinite loses.
Yea; true. My thought when evaluating these was "I am confident the price will drop significantly within the next 6-18 months. But if I screw up the timing, or it drops to 1/3 the value instead of 1/2 etc, I lose money or break even. While I'm reasonably confident the normal short will pay off, since I don't have to nail the amount or timing.
In any case for a normal investor, just remember - "The market can stay irrational longer than you can remain solvent".
As my friend likes to say, Michael Burry has predicted 20 of the last 1 crashes. I saw some apocryphal analysis that showed you'd be beating the S&P 500 (and by a decent margin) if you bought every time he predicted a market crash since the recession.
He’s making calls that things should crash but somehow, here we are.