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I call those BP oil spill trades. Starts with a surprise events that is seemingly catastrophic. If real consequences require special government action -- the co

by MrLeap 9y ago

I call those BP oil spill trades. Starts with a surprise events that is seemingly catastrophic. If real consequences require special government action -- the consequences will be underwhelming and easily mitigable. If you believe there's no ethical consumption under capitalism, there's no problem profiting off this effect! See: BP oil spill, HSBC money laundering scandal, Wells Fargo fraudulent account scandal, Equifax data leak, United Airlines beating up a passenger... I know I'm forgetting some. I'm pretty sure you could beat the yearly S&P's performance in a single trade for any of those events. Apple having to delay a new iphone release would have a more significant long term effect on that company's stock price than workers at foxxconn facilities killing themselves

mikestew 9y ago
If you believe there's no ethical consumption under capitalism, there's no problem profiting off this effect! Yeah, I don't know where I stand on it quite yet. I mean, I won't outright buy Exxon shares to hold long-term. Is it hypocritical to make a short-term trade using options? Yeah, probably. But it's not like that money goes straight into Equifax's pockets, it just adds a minuscule amount of liquidity to a market for abstractions of EFX. Meh, I've got bigger ethical fish to fry right now. As aside, to add to your list: the private prison company whose stock went down last year when the Feds said they were going to curtail using private prisons. A few seconds of reading confirmed that it's states that make the most use of private prisons, not the Feds. Made bank on that one, can't say I feel good about it. But I also can't articulate exactly why I shouldn't feel good about it other than, "private prisons, yucky!" I'm pretty sure you could beat the yearly S&P's performance in a single trade for any of those events. Of the three that come to mind that I've personally traded recently, that is most certainly true (the in-the-money EFX calls I have are up about 300%). Problem is, such scandals need to happen more frequently in order to make a trading strategy out of it. About once or twice a year is as frequently as I see such opportunities come up. One could have made a year's SV salary on EFX calls with a $50K investment, but because it's options that $50K could very easily be worth $0 in just a month or two.

by MrLeap 9y ago

mikestew 9y ago

If you believe there's no ethical consumption under capitalism, there's no problem profiting off this effect! Yeah, I don't know where I stand on it quite yet. I mean, I won't outright buy Exxon shares to hold long-term. Is it hypocritical to make a short-term trade using options? Yeah, probably. But it's not like that money goes straight into Equifax's pockets, it just adds a minuscule amount of liquidity to a market for abstractions of EFX. Meh, I've got bigger ethical fish to fry right now. As aside, to add to your list: the private prison company whose stock went down last year when the Feds said they were going to curtail using private prisons. A few seconds of reading confirmed that it's states that make the most use of private prisons, not the Feds. Made bank on that one, can't say I feel good about it. But I also can't articulate exactly why I shouldn't feel good about it other than, "private prisons, yucky!" I'm pretty sure you could beat the yearly S&P's performance in a single trade for any of those events. Of the three that come to mind that I've personally traded recently, that is most certainly true (the in-the-money EFX calls I have are up about 300%). Problem is, such scandals need to happen more frequently in order to make a trading strategy out of it. About once or twice a year is as frequently as I see such opportunities come up. One could have made a year's SV salary on EFX calls with a $50K investment, but because it's options that $50K could very easily be worth $0 in just a month or two.