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Trading halted as U.S. stocks plummet

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Re: Trading halted as U.S. stocks plummet

#841

Post by jliptzin »

senordevnyc wrote: post #609
ouid wrote: post #572

Earlier quoted context omitted.

If the news says "China puts 760 million people on travel restrictions", you should look at the price of puts.

This. It was really just insurance. I fully expected the $1k I bought to expire worthless, and the first $230 did, but these ones I was able to exit for a nice profit. I highly suspect the expected value of options trading is negative, but it's useful as a hedge. Really wish I could spend like 10% of my salary on put options for my employer in case I get laid off, but it's forbidden apparently.

Insurance by definition is negative expected value (otherwise insurance companies wouldn't be in business). Great job hedging!

Re: Trading halted as U.S. stocks plummet

#842

Post by lutorm »

btilly wrote: post #787
dnadler wrote: post #748

Earlier quoted context omitted.

What led you to the conclusion that the market will not behave as it has historically over the long-term?

Over the long term. Let's go back 150 years and invest in a random stock market wherever you happened to live. If you lived in the USA or England, this was a great idea and worked out brilliantly. If you lived in countries like Italy, Germany and Russia, you lost everything when those stock markets were closed down in the first half of the 20th century. You can't say "historically over the long term" then project for…

If you lived in countries like Italy, Germany and Russia, you lost everything when those stock markets were closed down in the first half of the 20th century.

This may be true, but then we're talking about such large changes that investment advice sort of becomes pointless. I mean no doubt that life would have sucked in those situations, but there's no investment choice that would have saved you either.

Like, if we were sitting today contemplating WW3 breaking out in 1960, annihilating the civilized world, the market going down would have been the least of your problems.

Re: Trading halted as U.S. stocks plummet

#843

Post by kccqzy »

platz wrote: post #806
kccqzy wrote: post #770

Earlier quoted context omitted.

Inverse and short ETFs are terrible for medium to long term holdings. Because it resets each day. Here is an example of what this means: Consider a hypothetical index having a volatile week (like these days). The index was at 100 on day 1, dropped to 90 on day 2, recovered back to 100 on day 3, rose to 110 on day 4, and finished the week flat at 100. If you were invested in an ETF that tracks the index, you would nei…

You could also just buy some long put options or a long put spread. That doesn't seem to require being a pro and is a limited loss type of play.

Hardly. Options involve a lot more strategy and tactics. Instead of trying to time the market once, you now time the market at least twice: the date you enter the trade and the chosen expiration date. When the expiration date is too close, your option could very well expire worthless before it can do anything; too far, your option has too much wasted time value, not to mention what if the market has recovered.

You also need to learn a lot about options, the Greeks, the IV, and all. With VIX in the fifties, it's very well possible for a trader to lose more money through the small stream of premiums paid for options than the market itself: the market will rebound, after all, but the premium once paid is lost forever.

I do not think options are appropriate for non-professionals.

Re: Trading halted as U.S. stocks plummet

#844

Post by solveit »

perl4ever wrote: post #807
t-writescode wrote: post #805

Earlier quoted context omitted.

Every medical expense, every food expense has the result of costing more of a percentage of your remaining funds. Many costs can’t be put off.

All costs are on a spectrum of urgency. Food can be put off longer than water. A small plumbing problem can be put off longer than a large plumbing problem. A furnace problem can be put off longer if it's not cold. Replacing a car can be put off longer than fixing the brakes. There is no such thing as having all your costs due immediately with equal urgency.

On the one hand, you're absolutely right. On the other hand, if I'm putting off food or even general house/vehicle maintenance because of market conditions, my retirement has already failed from my point of view.

Re: Trading halted as U.S. stocks plummet

#845

Post by platz »

kccqzy wrote: post #843
platz wrote: post #806

Earlier quoted context omitted.

You could also just buy some long put options or a long put spread. That doesn't seem to require being a pro and is a limited loss type of play.

Hardly. Options involve a lot more strategy and tactics. Instead of trying to time the market once, you now time the market at least twice: the date you enter the trade and the chosen expiration date. When the expiration date is too close, your option could very well expire worthless before it can do anything; too far, your option has too much wasted time value, not to mention what if the market has recovered. You al…

Well, you only have to time it 1.5 times because you can always sell before expiration, although there is that upper bound. If it doesn't look like it panning out, and you called wrong, you can get out and recoup some money.

You'd have to approach it more like swing trading than buy-and-hold type strategy, unless you're aiming for something like next year.

Presumably you are in fact bearish going into the trade. If not, you probably shouldn't have traded the strategy in the first place.

Re: Trading halted as U.S. stocks plummet

#846

Post by fogetti »

kelnos wrote: post #803
vortico wrote: post #29

Slightly unrelated, but why does the stock market close each night? If trading was open 24/7, we wouldn't have large spikes like this every morning. We'd only have them when certain news is announced.

Aside from people needing to sleep (back when computers didn't do our trading for us), there's also the matter of information flow: the reason quarterly earnings announcements happen after market close is to avoid giving slightly-faster people an edge. If you could read and digest an earnings announcement faster than all your peers, you could make trades based on the new information before the price has moved. While…

But this idea is completely invalidated by the fact that many foreign companies (European and Chinese) are listed in U.S. exchanges, which means that the investors can only make informed decisions about the their investment if they are awake 24 hours/day

Re: Trading halted as U.S. stocks plummet

#847

Post by solveit »

peisistratos wrote: post #771
carc wrote: post #749

Earlier quoted context omitted.

Lots of bold, unsubstantiated claims. I think every time there is a big peak, or a big valley, some percentage of people are always peddling "but this is different"

> I think every time there is a big peak, or a big valley, some percentage of people are always peddling "but this is different" When stocks crashed in 1929, it was different. In the US we got the New Deal, which still exists in some form. In Germany we got fascism and then a divided Germany for decades. The 1929 crash had effects felt to this day. The DJIA did not recover its 1929 level (not inflation adjusted) unti…

Sure game-changing big changes exist. But when someone says "this is different", it's almost certainly not different. Both of those statements are true and I see no reason to think we're not in the latter case right now.

Re: Trading halted as U.S. stocks plummet

#848

Post by selestify »

totalZero wrote: post #701
cryptoz wrote: post #683

Earlier quoted context omitted.

I just googled that to inform myself. > The efficient market hypothesis in financial economics that states that asset prices reflect all available information https://en.wikipedia.org/wiki/Efficient-market_hypothesis The efficient market hypothesis seems easily disproven with a number of modern examples. Climate change for example - there is significant information available, but markets act as though the information…

There is also a matter of weighting. Some facts are known but viewed as uncorrelated or unimportant to the stock price. Facts may be obvious, but wrongly discarded as irrelevant. I think of markets as a real-time implementation of information theory. There are certain facts that exist, and they are not all known although they may be discoverable. As they become known, or are considered more heavily, those facts bleed…

That’s a fascinating explanation. Did you come up with it by yourself?

Re: Trading halted as U.S. stocks plummet

#849

Post by sdinsn »

uptown wrote: post #48
zuminator wrote: post #13

Earlier quoted context omitted.

This is official policy, but not "common practice." According to CNBC: "These circuit breakers have never been triggered in their current form during regular trading hours." https://www.cnbc.com/2020/03/09/sp-500-futures-are-frozen-af...

The current circuit breaker rules went into effect in early 2013. There were different rules in-place prior to that date.

And under all rules, the last time it happened was 1997, so it's still signficant

Re: Trading halted as U.S. stocks plummet

#850

Post by xiphias2 »

coliveira wrote: post #833
Reedx wrote: post #778

Earlier quoted context omitted.

To help adopt a sober approach, it's worth watching this interview with Warren Buffett who shares his thinking re: market and Coronavirus. https://www.youtube.com/watch?v=JvEas_zZ4fM&t=21s One of the points he makes is that you should think about stocks as businesses. Instead of "I bought a stock" think "I bought a business". That puts you in a better frame of mind and perspective for the long term. i.e., You don't b…

Two things make Warren different: (1) he is a professional money manager, which means that he is investing other peoples money. (2) because of (1), he never needed the money he is investing. It is much easier to have long time frames when you're investing money that is not yours.

Actually the thinking still holds: it’s better to have some cash besides your business if you would really need it that soon, or be prepared to take out money from your business when it’s cash strapped (I’m doing the 2nd actually, but I’m OK with it, and am prepared for it emotionally).
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