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> Would you bet against volatility in the AI/GPU market over the next 12 months? The problem with betting on volatility (via options at least) is that it's alr

> Would you bet against volatility in the AI/GPU market over the next 12 months? The problem with betting on volatility (via options at least) is that it's already priced into the market, which means you pay a large premium for that bet, which in turn means that things need to make big moves for it to pay out. So it's not enough to be confident that there will be some movement in either direction—it has to be a relatively large movement for it to be profitable. So to answer your question, maybe. I don't think it's unreasonable to think that Nvidia stock won't drastically change over the next 12 months. Disclaimer: I'm long Nvidia because I'm willing to wait and see how high this ride goes.

pclmulqdq 3y ago
HFTs and hedge funds are profitable because stuff isn't actually priced in. Nvidia has a lot of historic volatility which makes the options expensive, but if you believe the fall will be as fast as the rise, put options rarely price that in.
- RussianCow 3y ago
  > HFTs and hedge funds are profitable because stuff isn't actually priced in. HFT firms and hedge funds often have data or other information that retail investors don't have access to, so that's not an apples to apples comparison. > if you believe the fall will be as fast as the rise, put options rarely price that in. That's not what "priced in" means. Unless you have information that others don't, there is no reason to believe that your bet is any more likely than anyone else's. So in that sense, it is priced in based on the probability (according to the broader market) of it actually happening.
  - pclmulqdq 3y ago
    Let me rephrase in terminology you like: If your investment thesis based on all the information you have is that the fall of Nvidia will likely be as rapid as its rise, options are rarely priced for that possibility, so you may find the price of an option attractive (in my words, the possibility of that is not priced in). The term "priced in" doesn't just apply to information - it applies to any sort of investment thesis. The common investment theses (based on a conventional understanding of public information) are usually priced in. The uncommon investment theses are not, but that doesn't mean that they are necessarily wrong (this one probably is, though). There is certainly no reason to believe that your ideas are better than anyone else's, even if you are a sophisticated hedge fund guy, but the way hedge fund people make money is basically by having contrarian ideas, which aren't priced into securities prices, and being right. Trading that (perceived) mispricing is how a hedge fund generates uncorrelated alpha.
    - RussianCow 3y ago
      That makes sense, but I guess what I'm saying is that a rapid fall is priced in, in the sense that the market doesn't find it to be very likely. So it's only mispriced if you think the odds of that happening are higher than what the market believes as a whole, and again, it's unlikely (but not impossible) that you have good reasons for believing that as a retail investor. With that said, I just want to make clear that I don't believe in the random walk theory, and I believe it's perfectly possible to be contrarian and be correct if you have information and/or insight that most other investors don't. I just don't think that the average person on HN (myself included) fits that bill, and I wouldn't hang your life savings on a whim like this unless you're comfortable treating it as what it is: gambling. :)

pclmulqdq 3y ago

HFTs and hedge funds are profitable because stuff isn't actually priced in. Nvidia has a lot of historic volatility which makes the options expensive, but if you believe the fall will be as fast as the rise, put options rarely price that in.

RussianCow 3y ago
> HFTs and hedge funds are profitable because stuff isn't actually priced in. HFT firms and hedge funds often have data or other information that retail investors don't have access to, so that's not an apples to apples comparison. > if you believe the fall will be as fast as the rise, put options rarely price that in. That's not what "priced in" means. Unless you have information that others don't, there is no reason to believe that your bet is any more likely than anyone else's. So in that sense, it is priced in based on the probability (according to the broader market) of it actually happening.
- pclmulqdq 3y ago
  Let me rephrase in terminology you like: If your investment thesis based on all the information you have is that the fall of Nvidia will likely be as rapid as its rise, options are rarely priced for that possibility, so you may find the price of an option attractive (in my words, the possibility of that is not priced in). The term "priced in" doesn't just apply to information - it applies to any sort of investment thesis. The common investment theses (based on a conventional understanding of public information) are usually priced in. The uncommon investment theses are not, but that doesn't mean that they are necessarily wrong (this one probably is, though). There is certainly no reason to believe that your ideas are better than anyone else's, even if you are a sophisticated hedge fund guy, but the way hedge fund people make money is basically by having contrarian ideas, which aren't priced into securities prices, and being right. Trading that (perceived) mispricing is how a hedge fund generates uncorrelated alpha.
  - RussianCow 3y ago
    That makes sense, but I guess what I'm saying is that a rapid fall is priced in, in the sense that the market doesn't find it to be very likely. So it's only mispriced if you think the odds of that happening are higher than what the market believes as a whole, and again, it's unlikely (but not impossible) that you have good reasons for believing that as a retail investor. With that said, I just want to make clear that I don't believe in the random walk theory, and I believe it's perfectly possible to be contrarian and be correct if you have information and/or insight that most other investors don't. I just don't think that the average person on HN (myself included) fits that bill, and I wouldn't hang your life savings on a whim like this unless you're comfortable treating it as what it is: gambling. :)