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This wisdom was clearly conceived before the advent of widespread, liquid options markets. Purchasing options requires no leverage and thus bears no risk of bec
by jkhdigital 7y ago
This wisdom was clearly conceived before the advent of widespread, liquid options markets. Purchasing options requires no leverage and thus bears no risk of becoming "insolvent". Of course, trading against stubbornly irrational markets via options can be quite expensive so there is a substantial price to pay for capping one's downside risk.
- odyssey7 7y agoOptions are priced by the same market forces that a speculator attempts to time. You can always lose the price you pay for the options, although you can avoid insolvency by not buying more than you can afford to lose.
- thaumasiotes 7y ago> Purchasing options requires no leverage and thus bears no risk of becoming "insolvent". Of course, trading against stubbornly irrational markets via options can be quite expensive I didn't realize it was impossible to become insolvent just by spending money.