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What do you mean by “high capital requirements in place” for hedging a portfolio? Do you know what options are? They can be used for hedging, and the bid/ask is

What do you mean by “high capital requirements in place” for hedging a portfolio? Do you know what options are? They can be used for hedging, and the bid/ask is the same for an institution or an individual. You or I could’ve followed the 50 cent VIX call trader and made several thousand percent, all for 50 bucks a contract. Hedges cost a percentage of a portfolio, it doesn’t matter whether it’s 100,000 or 1,000,000,000 dollars, if the overall composition is the same, the hedge will cost the same percentage of the portfolio. You and I can trade mark-to-market assets too, CME micro futures have pretty cheap margin requirements. It sounds like you have a lot of theoretical knowledge, but don’t actually have a practical knowledge of trading/investing. All of the stuff you complain about not existing actually exists. Sure, you and I aren’t going to be able to put on a hedge like Ackman did, but only because the notional value of the derivatives used is so high. Use the tools available to the average investor, there are plenty.

whoisjohnkid 7y ago
Wow thanks for the response really appreciate it. I’m actually dabbling in trading atm, very familiar with bid ask spread and would def consider myself a practitioner, and not an economist/only thinking of things from a theoretical point of view. I have a trading bot that trades crypto at the moment. Anywho, what I was trying to convey in my initial post is that regulations make it tough for the little guy; especially on the stock market side. My knowledge on options is definitely lacking, plan on learning more about that eventually, but when I referenced “insurance” I was def alluding to options / inversely correlated positions. Any who what I mean by large capital requirements is to safely trade equities and crypto you typically want to trade based on a position sizing algorithm. Which reduces your position size based on the risk you’re exposed to. In crypto the capital requirements are very low in the sense that you can buy a fraction of a share for as little as a few cents or even less in some places. In stocks fractional shares are now becoming more and more accessible to people. But the problem there is you can’t actively trade a single stock unless you register as a active trader with the IRS. Also in most places fractional shares are $1. I would like to see this be even lower to truly allow anyone to run sophisticated strategies without needing a lot of capital. $50 might not be a lot to me or you but it’s def a lot to others. Just wish system was designed in a way where you could trade sophisticated strategies with as little as $5 or heck 50 cents.

whoisjohnkid 7y ago

Wow thanks for the response really appreciate it. I’m actually dabbling in trading atm, very familiar with bid ask spread and would def consider myself a practitioner, and not an economist/only thinking of things from a theoretical point of view. I have a trading bot that trades crypto at the moment. Anywho, what I was trying to convey in my initial post is that regulations make it tough for the little guy; especially on the stock market side. My knowledge on options is definitely lacking, plan on learning more about that eventually, but when I referenced “insurance” I was def alluding to options / inversely correlated positions. Any who what I mean by large capital requirements is to safely trade equities and crypto you typically want to trade based on a position sizing algorithm. Which reduces your position size based on the risk you’re exposed to. In crypto the capital requirements are very low in the sense that you can buy a fraction of a share for as little as a few cents or even less in some places. In stocks fractional shares are now becoming more and more accessible to people. But the problem there is you can’t actively trade a single stock unless you register as a active trader with the IRS. Also in most places fractional shares are $1. I would like to see this be even lower to truly allow anyone to run sophisticated strategies without needing a lot of capital. $50 might not be a lot to me or you but it’s def a lot to others. Just wish system was designed in a way where you could trade sophisticated strategies with as little as $5 or heck 50 cents.