4 ms·

Not a perpetual motion machine, but a motion machine, sure. The GP was correct, Matt clearly says it can create some upward momentum, albeit not an unlimited a

by tybit 7y ago

Not a perpetual motion machine, but a motion machine, sure. The GP was correct, Matt clearly says it can create some upward momentum, albeit not an unlimited amount.

thaumasiotes 7y ago
No, he says it exaggerates the ups and downs, so you get higher highs and lower lows. That is not "creating upward momentum" in an ordinary sense. Also, it takes some guts to defend the idea "this perpetuates an upward movement" by quoting someone explicitly saying it doesn't. A finite upward boost and an infinite upward boost are different things, as explicitly noted in the quote you just pulled and in your comment on it.
- greenie_beans 7y ago
  Oof, yeah, I misspoke. I was responding to the parent comment which said that r/wsb can’t move markets when, 30 minutes prior, I had read something (Matt Levine’s take on it) with a claim to the contrary. Thank you random HN commenter for pointing out my flaw in the “perpetual upward” comment. Levine’s take still claims that r/wsb can technically move the market, no? Or should I go back and re-read? Maybe I interpreted differently. But I don’t know for sure, because I don’t study such things and hardly know options or markets. Neither does like 98% of the folks on this post based on their comments here (yourself included!)
  - thaumasiotes 7y ago
    As I read it, the stock price is basically modeled as a "true value" + noise. You can't observe the true value, but you can estimate it by characterizing the noise. The effect of buying the stock with leverage instead of out of pocket (which is what call options let you do) is that the noise is amplified. The "true value" component doesn't change. Thus, when the noise is increasing the price, the price is higher than it otherwise would have been, and when the noise is decreasing the price, the price is lower than it otherwise would have been. Imagine the difference between P(x) = v(x) + cos n and P(x) = v(x) + 2 cos n. Can technically move the market? Sure, but everything that happens in the market is technically moving the market. The main effect (as discussed in the Matt Levine pieces) is to increase the volatility of the stocks in question.

by tybit 7y ago

Not a perpetual motion machine, but a motion machine, sure. The GP was correct, Matt clearly says it can create some upward momentum, albeit not an unlimited amount.

thaumasiotes 7y ago

No, he says it exaggerates the ups and downs, so you get higher highs and lower lows. That is not "creating upward momentum" in an ordinary sense. Also, it takes some guts to defend the idea "this perpetuates an upward movement" by quoting someone explicitly saying it doesn't. A finite upward boost and an infinite upward boost are different things, as explicitly noted in the quote you just pulled and in your comment on it.

greenie_beans 7y ago
Oof, yeah, I misspoke. I was responding to the parent comment which said that r/wsb can’t move markets when, 30 minutes prior, I had read something (Matt Levine’s take on it) with a claim to the contrary. Thank you random HN commenter for pointing out my flaw in the “perpetual upward” comment. Levine’s take still claims that r/wsb can technically move the market, no? Or should I go back and re-read? Maybe I interpreted differently. But I don’t know for sure, because I don’t study such things and hardly know options or markets. Neither does like 98% of the folks on this post based on their comments here (yourself included!)
- thaumasiotes 7y ago
  As I read it, the stock price is basically modeled as a "true value" + noise. You can't observe the true value, but you can estimate it by characterizing the noise. The effect of buying the stock with leverage instead of out of pocket (which is what call options let you do) is that the noise is amplified. The "true value" component doesn't change. Thus, when the noise is increasing the price, the price is higher than it otherwise would have been, and when the noise is decreasing the price, the price is lower than it otherwise would have been. Imagine the difference between P(x) = v(x) + cos n and P(x) = v(x) + 2 cos n. Can technically move the market? Sure, but everything that happens in the market is technically moving the market. The main effect (as discussed in the Matt Levine pieces) is to increase the volatility of the stocks in question.