4 ms·
One thing that piqued my interest is stock market trading. I'm not referring to buying and holding - that's called investing and you're already doing that. I'm
by mattbrewsbytes 5y ago
One thing that piqued my interest is stock market trading. I'm not referring to buying and holding - that's called investing and you're already doing that. I'm referring to more complex trading scenarios that use options contracts as hedging, typically around a companies earnings report date. Usually you need about that amount of money ($25k+) to get started because you will be on a margin account. You would need to do significant research to understand the mechanics, how to setup trades, etc. to minimize risk. From what I understand it doesn't have to be a full-time all day, every day type of hours. And it doesn't matter if it is a bull or bear market, stocks are always moving somewhere.
An example could be to take a position using options contracts around a companies earnings release thinking the stock will go up (because you've researched it, not guessing) and hedging so losses are minimal in case you're wrong. This might mean a company is say at $90/share and you think it will go up to $105 so you get options contracts for $105 and contracts at $85 in case it falls. I've only skimmed the surface of how this works since I have limited knowledge but that is the gist of it. There is a lot more detail involved with put vs call contracts and buying vs selling them and how the options greeks impact pricing, etc. There are tools out there that let you understand better the risk at different stock prices/options using statistical models.
Obviously if you don't have interest or don't fully understand how these work you could turn your 50k to 0k rather quickly.
- 2-718-281-828 5y ago> Obviously if you don't have interest or don't fully understand how these work you could turn your 50k to 0k rather quickly. Exactly. I also grew up with a firm belief in market efficiency and no free lunch. So, I have immense trouble believing someone like me with only basic knowledge about markets, not much money and no insider info would do well with options and futures.
- mattbrewsbytes 5y agoAdding to my thoughts above, if I was not employed and had a lot of time, I would educate myself on how options and futures work and start learning the tools people use to determine risk factors. I believe this is what "trading desk" wall street professionals do, with much larger amounts. Once I grasped the details then I'd paper trade some things to keep learning before starting with small amounts. There is a fair amount of freely available info on how this works and I have a hunch that there is some math involved, which possibly means programming :), to determine lower risk trade positions that could be profitable. You'd have to factor in taxes into these equations since they would be considered short trades (< 1 year).
- 2-718-281-828 5y agoI just have trouble believing that I could pull that off as a private low-end investor. There shouldn't be any financial opportunities waiting for somebody like me at a market involving much more experienced folks plus HFT companies, banks etc. But I agree, it's and interesting idea. Being a news addict the idea of leveraging this into informed decisions sounds great. But I guess it's not for me.
- victor106 5y agowhat is a good resource to learn options. Lot of books have the theory and I seem to get it but any resource that has a more practical approach using some form of paper money would be great
- mattbrewsbytes 5y agoI would start with "Options trading for beginners" by a school teacher [0]. He does have all the usual youtube monetization stuff going on if that bothers you. There are other youtube videos as well if you search for options trading. At least this helped explain some of the vocabulary and how things work. [0] https://www.youtube.com/watch?v=wDFj310VJlM https://www.youtube.com/watch?v=wDFj310VJlM