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Everybody will tell you what you are doing is stupid without knowing the details...I had an idea which may also be stupid, but again, seems to be working recent

Everybody will tell you what you are doing is stupid without knowing the details...I had an idea which may also be stupid, but again, seems to be working recently and seems like simulated super high interest (but not not not investing advice). Thinking about crypto as "digital gold" gave me the idea. What if you deposit your cash in a regular brokerage account and every week sell an equal amount (that is, one contract for every 100 shares you can afford to buy) of at-the-money puts on GLD? This is literally digital gold. If the probability of gold going to zero (or GLD) is essentially nothing, and inflation is inevitably going to pick up, then this feels plausibly "risk free". The worst that can happen is you are assigned some shares, which you can sell or sell calls on. In any case, people are apparently willing to pay a surprising amount for short term volatility on it. Even better, you can buy the cheapest longest dated out-of-the-money put to lay off some risk at minimal cost. You may be able to do this on Robinhood, I haven't tried. Just an idea...of course analyzing how this could hide large risks would be interesting.

uncomputation 5y ago
Am I missing something? If GLD drops and your initial put was ATM and the buyer exercises, then you lose.
- perl4ever 5y ago
  That can happen occasionally. But the idea is that you limit the amount so as to only lose as much as if you owned shares of it in the first place, and therefore any losses are sustainable, temporary, and not frequent. Given the conviction it has to go up in the medium term. Can you really imagine selling insurance against gold cratering in the near term being disastrous, barring leverage which can always ruin you? I think it's probably important, for managing risk, to have the self control to only hold as many short contracts as you have cash for assignment, and also not to get greedy when the price moves in your favor, but wait until the end of the week to swap them for a different strike. The downside scenario is gold dropping 50%, or 100%, which just seems implausible, maybe more implausible than in living memory.

uncomputation 5y ago

Am I missing something? If GLD drops and your initial put was ATM and the buyer exercises, then you lose.

perl4ever 5y ago
That can happen occasionally. But the idea is that you limit the amount so as to only lose as much as if you owned shares of it in the first place, and therefore any losses are sustainable, temporary, and not frequent. Given the conviction it has to go up in the medium term. Can you really imagine selling insurance against gold cratering in the near term being disastrous, barring leverage which can always ruin you? I think it's probably important, for managing risk, to have the self control to only hold as many short contracts as you have cash for assignment, and also not to get greedy when the price moves in your favor, but wait until the end of the week to swap them for a different strike. The downside scenario is gold dropping 50%, or 100%, which just seems implausible, maybe more implausible than in living memory.