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In gambling you know the odds.
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OT: Stock trading
- Thread starter tentoes4rings
- Start date
HuskyHawk
The triumphant return of the Blues Brothers.
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I had a grad level class at UConn on valuing Options and Futures. Lots of calculus. Back then you could predict the prices accurately and it was mostly about arbitrage opportunities to keep the market honest. All the math is gone. Rational behavior is gone. Just rampant speculation. You try relying on those valuations now and you'll get killed.
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I feel like considering those fees and what the robo-advisors do, you might as well just index into VTI. Even make it extra easy and use a target date fund.
Has a robo-advisor ever consistently beat the total market? Not that I've heard of.
Unless I'm looking at the wrong info, the target date funds underperform an S&P Index fund, VTI, etc.
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Not surprising. Even the TDFs for 30+ years out keep a bit in bonds or cash. It's the big reason why I don't use TDFs for my retirement. I'm 30 years out--no reason for me to have anything but equities.
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Anyone who is actively buying and holding stocks now is taking a huge risk. Talk about gambling.
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Why?
Because the market has basically gone straight up since 2009, even the Covid years were very mild in terms of selling. The VIX is at an all time low. When the balloon pops I don’t want to be anywhere near Wall Street, or at least balance your long holdings with some shorts or buy shares in a bear market fund, or buy gold, silver, palladium etc.
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You may be right......or you may be dead wrong.
Color me a Bogle fan of a long-term investment perspective and avoiding the fools gold that is market timing.
HuskyHawk
The triumphant return of the Blues Brothers.
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Good grief man. Metals suck, although Palladium is at least useful. There are commodities that may be smart, but precious metals haven't been a good hedge in decades. Equities have held up in part because everything else is even worse.
I'm more worried about a huge credit event looming. Credit card debt is massive right now and with interest rates, it's just not sustainable. People are borrowing at credit card rates to buy food and pay utilities. Home market is screwed, people buying at high prices, with 7% mortgages and almost nothing down. They are going to default in a massive wave. My neighbor's house went "under agreement" on the first open house day. That was a month and 3 more "under agreements" ago. Meanwhile, anybody with a cheap mortgage can't afford to move, so supply drops dramatically.
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Lol, the stock market has basically gone straight and to the right since 1940. Look at the numbers. Yes there are short downturns, but you can draw a line straight up and to the right. Plot that against the inflation adjusted value of the dollar and tell me how you plan to keep up with rising costs if you don’t invest in stocks.
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Of course it’s gone straight to the right unless you’re living in a time machine. Lol. Time does move forward last I checked.
Seriously, you don’t have to invest in stocks, with interest rates rising now would be a good time to invest in bonds or treasuries, also precious metals. I’ve been buying gold and palladium for a couple years now, have recently started buying silver. Or just find some bloated over bought stocks and sell them short.
The stock market has basically gone straight up since 2009, something got to give sooner or later. A correction or bear market is coming.
That’s precisely why now’s the time to buy them. With interest rates going up bonds and treasuries are attractive. Or like I told the other dumb dumb just find over bought stocks and sell them short. You do know how Joseph P Kennedy made the family fortune? It wasn’t bootlegging either.
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Options are not complicated, they’re actually quite simple. Both “put” and “call” options are contracts that give the trader the option to either sell his holdings at a price above the current market price (a put), or to purchase shares at a price that’s quite a bit under the current market price.
HuskyHawk
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What part of my MBA level finance class at UConn on them made you think I didn’t know that? Valuing them is not simple.
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You answered "what is an option?," not "how to trade options."
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HuskyHawk
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One would think the short squeeze on GameStop would illustrate this point. Intrinsic valuation metrics would have produced a radically different result than what we saw. The markets are no longer rational and have gotten less rational over time since online trading opened them to the masses (which was a good thing). Joe investor isn't calculating the present value of future earnings and dividends then adjusting for risk. He is saying, "Coke seems like a solid company with decent dividends" or "I bet this company will do well as we make more EV batteries". Or for GameStop, that enough small investors working collectively can artificially inflate any asset as long as they don't fear the losses. No model can predict that.
I used options as simple leverage back in the late 90s and 00s, because I lacked the funds to buy shares. I once knew how to build complicated spreads that guaranteed a return, but those required massive capital for relatively small ROI. Big players with supercomputers own that space. They still work as leverage, and for short positions, but I no longer need to accept the additional risk that comes with that. If others do, go for it.
Actually valuing them is quite simple, they are just a reflection of the underlying stock price and all you need is an understanding of simple technical analysis and resistance and support levels to predict the short term trends. If you’re holding calls on Stock ABC and the price of the stock goes up a lot on heavy volume then that option is like gold.
HuskyHawk
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That is simply "leverage". That's the most simplistic view of them as a leveraged proxy for the underlying stock. Stock drops and your call can be worth zero, which is why it carries greater risk than holding the shares.
But that's not how professional traders look at them. There are millions of little micro adjustments in those option prices that don't always track the stock. The goal is to exploit those. Used to be people with calculators doing that math, but now I'm sure sophisticated programs do all of it.
Yes, the risk is greater but so are the rewards. Then again if you’re long the stock and think it might drop buy some puts then you could still sell it at a good price or you could just sell the put option at its fair market value. What’s key here is the ability to read a short term chart and recognize selling pressure or buying pressure. I’m old style and it still works.
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"Of course it’s gone straight to the right unless you’re living in a time machine. Lol. Time does move forward last I checked."
Obviously he mistyped and didn't put in UP and to the right, don't be daft.
Joseph P Kennedy? Gold and silver... I don't think we can rule out the possibility that you are 120 years old.
Good luck to you in your trading.
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Options can be used for hedging, speculation, or incremental revenue, depending on your strategy. That's the beauty. It's a way of managing risk. It requires a bit of homework to learn the different strategies, but there are free tools, webinars and videos today, that didn't exist 10 years ago. I own a bunch of stock for the dividends or LT holdings, but most of my 1099 profits is from options trading. I make more from this than my job I love.