3 ms·
,,Sadly, this employee had to sell up his green gold to pay for losses when his broker “margined his account with another stock that fell 90%'' It wasn't just
by xiphias2 3y ago
,,Sadly, this employee had to sell up his green gold to pay for losses when his broker “margined his account with another stock that fell 90%''
It wasn't just pure luck for the person who didn't use margin trading, like the other.
For any stock where the log price is moving in one direction with Brown motion, margin trading is just stupid, as it moves the log value of the asset held to minus infinity.
- zaik 3y ago> log price is moving in one direction with Brown motion Isn't the point of Brownian motion to move in both directions with equal probability? Why would it move to minus infinity?
- penteract 3y agoI'd read "moving in one direction with Brown motion" to mean Brownian motion plus a linear term. If margin trading causes you to lose the asset, its value goes to zero, hence log of that could be said to be negative infinity. (I'm not endorsing or disputing the conclusion of the comment).
- junar 3y agoIt also often violates a company's insider trading policy to hold company stock in a margin account. "We don't hold NVIDIA securities in a margin account or pledge NVIDIA securities." https://images.nvidia.com/aem-dam/en-zz/Solutions/about-us/NVIDIA-Code-of-Conduct-External.pdf https://images.nvidia.com/aem-dam/en-zz/Solutions/about-us/N...