4 ms·

> The real argument... I would agree with this except for one huge fact that has existed for close to 100 years - poor investors can put their money into optio

by MR4D 5y ago

> The real argument... I would agree with this except for one huge fact that has existed for close to 100 years - poor investors can put their money into options and blow up in a day, but can't put it into private equity. I'm not ascribing any good or bad intent to the regulators here, but this is so big of a hole that I can't believe this has anything to do with destitution. For what it's worth, I've seen an actual person do this first hand (options trading), and destroyed their life as a result.

JumpCrisscross 5y ago
> poor investors can put their money into options and blow up in a day, but can't put it into private equity Cost of diligence. One can theoretically fully diligence an option and its underlying stock’s issuer with public information. One cannot do that in private investments. Private investing requires expensive legal work; it also requires the ability to enforce one’s rights in court. Investing $10 or 20k pretty much guarantees one isn’t doing the former and can’t do the latter; that’s a recipe for disaster. As a former options market maker who is now in private equity, I (a) agree that options should be more roped off from retail investors and (b) minimally dabble in private equity and don’t touch options in my PA. The only responsible buyers of options buy them expecting to lose money. They’re the lossy leg of the trade, the insurance. When hedge funds want to go long or short they use cash positions or leveraged swaps. Not options.
- splitstud 5y ago
  There are plenty of opportunities every day to responsibly buy a put or call because it happens to be the best price you can get for entry to execute on an investing thesis. Your background notwithstanding, there is nothing mystical or sinister about options as a vehicle when the price is right.

4 ms·

> The real argument... I would agree with this except for one huge fact that has existed for close to 100 years - poor investors can put their money into optio

by MR4D 5y ago

JumpCrisscross 5y ago
> poor investors can put their money into options and blow up in a day, but can't put it into private equity Cost of diligence. One can theoretically fully diligence an option and its underlying stock’s issuer with public information. One cannot do that in private investments. Private investing requires expensive legal work; it also requires the ability to enforce one’s rights in court. Investing $10 or 20k pretty much guarantees one isn’t doing the former and can’t do the latter; that’s a recipe for disaster. As a former options market maker who is now in private equity, I (a) agree that options should be more roped off from retail investors and (b) minimally dabble in private equity and don’t touch options in my PA. The only responsible buyers of options buy them expecting to lose money. They’re the lossy leg of the trade, the insurance. When hedge funds want to go long or short they use cash positions or leveraged swaps. Not options.
- splitstud 5y ago
  There are plenty of opportunities every day to responsibly buy a put or call because it happens to be the best price you can get for entry to execute on an investing thesis. Your background notwithstanding, there is nothing mystical or sinister about options as a vehicle when the price is right.