5 ms·

Your employment situation is uncertain, you give away most of your income, you have minimal savings _and_ you speculate in the stock market? You, sir, are made

Your employment situation is uncertain, you give away most of your income, you have minimal savings _and_ you speculate in the stock market? You, sir, are made of sterner stuff than I.

jovial_cavalier 7y ago
If you expect volatility to increase, which I think is very reasonable, then buying options is a very safe bet, and if you only put in a reasonable amount, it merely serves as insurance against getting laid off. If the market gets bad enough for him to have to be laid off, his presumption is that the puts will be valuable enough to get him along for a little while. If it doesn't, then he probably loses money on the puts, but he's still employed, so it doesn't make much difference. edit: I'm an engineer, not an economist, so this is probably wrong, but I think it's the line of thinking that songzme is on too.
- evanpw 7y ago
  > If you expect volatility to increase If you have high confidence that volatility will increase more than the market expects it to. > buying options is a very safe bet There is no world in which buying options in a volatile single stock is a very safe bet Unless OP actually works at CMG (in which case they're probably forbidden from buying puts), this is gambling, not hedging.
  - jovial_cavalier 7y ago
    >There is no world in which buying options in a volatile single stock is a very safe bet I agree. I didn't pick up that CMG was Chipotle (that's what comes up when I search CMG). Do you think if the underlying was something diversified, this would be a safe strategy? > this is gambling, not hedging. My understanding of it is that in times of high volatility, options go up. If OP expects ^VIX to go up in the future, which I think is very safe to assume at this point, then won't the value of a diversified option go up? Again, maybe I'm confused... I don't really trade anything, so I don't have skin in the game. I just talk about the markets a lot with my friend who is into Quant Finance.
    - nostrademons 7y ago
      > My understanding of it is that in times of high volatility, options go up. If OP expects ^VIX to go up in the future, which I think is very safe to assume at this point, then won't the value of a diversified option go up? Only if it's not already priced in. The price of options should reflect the market's expectation of what the VIX will do in the future. If everybody else thinks that things are going to get more volatile in the near future, then prices for options go up now, they don't wait for things to actually get more volatile. So when you're deciding whether buying options is a good deal, you not only have to decide whether or not you think that things will be more volatile in the future, you also have to decide whether other people already know that things will be more volatile in the future. It's pretty dangerous to do this unless you're a statistician with an algorithm that can take all emotion out of the decision. As a (non-sociopathic) human, your natural impulses will be subconsciously influenced by the emotions of the people around you, so when you have a gut feeling that things are gonna get rocky in the near future, it's probably because everyone else already had a gut feeling that things are gonna get rocky in the near future.
      - evanpw 7y ago
        More precisely, you can back out an implied forecast of future volatility from options prices, and the VIX index is actually computed from the prices of options on the S&P 500 index; it's not just trailing realized volatility.
- deleted 7y ago
  [deleted]
jagannathtech 7y ago
That is just a polite way of saying 'idiot'
droithomme 7y ago
The Plummet Protection Team has been working every day buying huge numbers of call options on stocks in order to signal a turnaround. It has failed every day and they have now spent hundreds of billions. If you understand which calls they are making and at what times they make them, then you can buy the corresponding put and make a lot of money. That he increased his investment by a factor of 9 in a week or so shows how much money we are talking about. If the fed stops doing these daily calls though you can get holding the bag. Also in the event of a total collapse you can end up never being able to redeem your gains. Elite traders know this game and are happily taking the billions that the fed is shoveling to them. For the public, we'll see the elite doing well and able to afford the inflated cost of goods that results from pursuing this policy over an extended time period when it has repeatedly been shown to be a failing strategy since there are actual fundamental problems with the market right now, such as supply chain issues, likely loss of large numbers of staff, and upcoming mass unemployment and a global Depression.
- im3w1l 7y ago
  Fascinating! Do you have a source for this?
  - aussiegreenie 7y ago
    "The "Plunge Protection Team" (PPT) is a colloquial name given to the Working Group on Financial Markets" If the PPT has not be working during multiple +7% falls on the Dow, they are not doing their job. President Ronald Reagan created the body in March 1988 after the 1987 crash. The PPT has been "stabilising" (aka rigging) the stock market for nearly 40 years. How they operate and how much money they make is open to speculation. But it is widely believed that they purchase large-cap thinly traded stocks in the past few minutes before the close to minimise closing losses. TL: DR - The PPT exists to minimise volatility during difficult times and they are doing their job.
    - im3w1l 7y ago
      I'm specifically interested in the claim that they have spent hundreds of billions on call options.
morgengold 7y ago
+ he tries to save his system failure with market timed put options. Luckily he was right 1 week ago. But it was luck only.
- deleted 7y ago
  [deleted]
vijucat 7y ago
_And_ he uses JavaScript to the extent that he can teach people JavaScript (as per his HN profile). Clearly, he is used to dealing with danger.

Your employment situation is uncertain, you give away most of your income, you have minimal savings _and_ you speculate in the stock market? You, sir, are made of sterner stuff than I.

jovial_cavalier 7y ago

If you expect volatility to increase, which I think is very reasonable, then buying options is a very safe bet, and if you only put in a reasonable amount, it merely serves as insurance against getting laid off. If the market gets bad enough for him to have to be laid off, his presumption is that the puts will be valuable enough to get him along for a little while. If it doesn't, then he probably loses money on the puts, but he's still employed, so it doesn't make much difference. edit: I'm an engineer, not an economist, so this is probably wrong, but I think it's the line of thinking that songzme is on too.

evanpw 7y ago
> If you expect volatility to increase If you have high confidence that volatility will increase more than the market expects it to. > buying options is a very safe bet There is no world in which buying options in a volatile single stock is a very safe bet Unless OP actually works at CMG (in which case they're probably forbidden from buying puts), this is gambling, not hedging.
- jovial_cavalier 7y ago
  >There is no world in which buying options in a volatile single stock is a very safe bet I agree. I didn't pick up that CMG was Chipotle (that's what comes up when I search CMG). Do you think if the underlying was something diversified, this would be a safe strategy? > this is gambling, not hedging. My understanding of it is that in times of high volatility, options go up. If OP expects ^VIX to go up in the future, which I think is very safe to assume at this point, then won't the value of a diversified option go up? Again, maybe I'm confused... I don't really trade anything, so I don't have skin in the game. I just talk about the markets a lot with my friend who is into Quant Finance.
  - nostrademons 7y ago
    > My understanding of it is that in times of high volatility, options go up. If OP expects ^VIX to go up in the future, which I think is very safe to assume at this point, then won't the value of a diversified option go up? Only if it's not already priced in. The price of options should reflect the market's expectation of what the VIX will do in the future. If everybody else thinks that things are going to get more volatile in the near future, then prices for options go up now, they don't wait for things to actually get more volatile. So when you're deciding whether buying options is a good deal, you not only have to decide whether or not you think that things will be more volatile in the future, you also have to decide whether other people already know that things will be more volatile in the future. It's pretty dangerous to do this unless you're a statistician with an algorithm that can take all emotion out of the decision. As a (non-sociopathic) human, your natural impulses will be subconsciously influenced by the emotions of the people around you, so when you have a gut feeling that things are gonna get rocky in the near future, it's probably because everyone else already had a gut feeling that things are gonna get rocky in the near future.
    - evanpw 7y ago
      More precisely, you can back out an implied forecast of future volatility from options prices, and the VIX index is actually computed from the prices of options on the S&P 500 index; it's not just trailing realized volatility.
deleted 7y ago
[deleted]

jagannathtech 7y ago

That is just a polite way of saying 'idiot'

droithomme 7y ago

The Plummet Protection Team has been working every day buying huge numbers of call options on stocks in order to signal a turnaround. It has failed every day and they have now spent hundreds of billions. If you understand which calls they are making and at what times they make them, then you can buy the corresponding put and make a lot of money. That he increased his investment by a factor of 9 in a week or so shows how much money we are talking about. If the fed stops doing these daily calls though you can get holding the bag. Also in the event of a total collapse you can end up never being able to redeem your gains. Elite traders know this game and are happily taking the billions that the fed is shoveling to them. For the public, we'll see the elite doing well and able to afford the inflated cost of goods that results from pursuing this policy over an extended time period when it has repeatedly been shown to be a failing strategy since there are actual fundamental problems with the market right now, such as supply chain issues, likely loss of large numbers of staff, and upcoming mass unemployment and a global Depression.

im3w1l 7y ago
Fascinating! Do you have a source for this?
- aussiegreenie 7y ago
  "The "Plunge Protection Team" (PPT) is a colloquial name given to the Working Group on Financial Markets" If the PPT has not be working during multiple +7% falls on the Dow, they are not doing their job. President Ronald Reagan created the body in March 1988 after the 1987 crash. The PPT has been "stabilising" (aka rigging) the stock market for nearly 40 years. How they operate and how much money they make is open to speculation. But it is widely believed that they purchase large-cap thinly traded stocks in the past few minutes before the close to minimise closing losses. TL: DR - The PPT exists to minimise volatility during difficult times and they are doing their job.
  - im3w1l 7y ago
    I'm specifically interested in the claim that they have spent hundreds of billions on call options.

morgengold 7y ago

+ he tries to save his system failure with market timed put options. Luckily he was right 1 week ago. But it was luck only.

deleted 7y ago
[deleted]

vijucat 7y ago

_And_ he uses JavaScript to the extent that he can teach people JavaScript (as per his HN profile). Clearly, he is used to dealing with danger.