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How to Short the Bubbliest Firms
- sschnei8 1y agoThe market can stay irrational longer than you can stay solvent.
- DaveZale 1y agoalso you may have to pay interest on shorted shares. Better to take a Burry/Taleb approach of extreme option bets with small money.
- hypeatei 1y agoYou also have to pay dividends on the shorted shares.
- treetalker 1y agoMy understanding is that an extremely OTM put on a clear, strongly held thesis would be Burry-like, and many people would be able to do so. But Taleb's point is that (non-insiders) cannot accurately predict regarding individual securities (hence derivatives), but can identify over-/under-priced OTM options — and that, trading these systematically, one can suffer many repeated "small" losses that become outweighed by the Big One that eventually (yet unpredictably) hits, thus generating overall positive expected value. But, as I further understand Taleb, most people don't have the huge capital that enables such a strategy, and that doctors, lawyers, dentists, etc., are better off making money by plying their professional services and perhaps investing in index funds and the like.
- the__alchemist 1y agoHow do you take advantage of these options without getting screwed by the bid/ask spread? Whenever I think I see one, the spread kills it for me.
- fhrjfjfnd 1y agoBuy the options with the intention of them either hugely appreciating in value or expiring worthless. Under Taleb's system, your bet sizes should be small enough that it doesn't matter if individual options tranches expire worthless. The bid/ask spread only matters when you try to cut losses on a large bet, which is outside the scope of this strategy.
- sitzkrieg 1y agolook at strikes where higher OI is. everything will be arbd out by bots on anything that isn't thin though. i trade futures for this reason though, because they are actually centralized unlike us equities. selling calls for a credit or spreading into free long entry is a better strategy in every way though.
- DaveZale 1y agoit's not 100% real, I bought a call last week at a deep discount to the ASK. Do you remember the stock market a few decades ago? Stocks once had large bid/ask spreads. Now the hft/dark pools eat it all, with 99% profit on trades. High speed, lasers and fiber optics front-running..
- oa335 1y agoYou will end up paying that "interest" on long put positions. The advantage of options is an ability to make more granular bets.
- bequanna 1y agoSaid another way: “being too early is the same as being wrong”
- fhrjfjfnd 1y agoYour quote is something that AI mania speculators often like to reassure themselves with, but consider the fact that it took 17 years for the NASDAQ to recover from the dotcom bubble when adjusting for inflation. What's being early by a year or two when the consequences take decades to heal over?
- wmf 1y agoIf you short a bubble before it goes vertical you lose everything.
- fhrjfjfnd 1y agoSee the other posts in this thread discussing Nassim Taleb's strategy of small bets spread over time with highly asymmetric rewards. You can afford to lose it all on small bets nine times in a row, if on the tenth bet you achieve a 100x payout.
- the_gipsy 1y agoYea but where can I play that kind of game?
- pyvpx 1y agoDerivatives! more popularly known as options (“calls” and “puts”)
- CamperBob2 1y agoJust get a job as a principal in a VC firm. Upskill or gtfo
- loeg 1y ago
- 01100011 1y agoand shorting something priced in a currency is effectively going long on the currency as well. If the USD takes a dive due to, idk, increasing populism from both major parties, stocks will do quite well in nominal terms. Your shorts will burn and you'll end up far worse than just staying in cash. For most people, the best way to short is to just hold cash equivalents like short-term treasuries.
- stogot 1y agoWhat is an example of shorting something not priced in a currency?
- manquer 1y agoPositions are not necessary to be single transaction. They can be multi-step trade. For global currency risk (meaning on USD), You will have to hedge your shorts with a non currency long position which historically hold value during defaults/ runs etc. Assets like gold (ETFs/Gold bars) or real estate (REITs or physical land holdings) or rights to commodity revenue like oil, copper etc [1]. If the currency risk is not for USD, then mix of other currencies particularly USD would work well as as hedge. Currency risk is independent of shorting, i.e. it is risk in Long positions as well, current may inflate faster than your position increases in value etc. --- [1] Commodity come with additional shorter term market volatility and risks - due their own supply/demand volatility and depend performance of economy. However after assets like Gold, they will have highest correlation of returns against inflation as long the economy doesn't completely crash, because the demand for them is foundational
- loeg 1y agoI don't think GP is suggesting any particular bet isn't priced in some currency, just that you're also taking currency risk you might not be aware of.
- tsycho 1y agoShort the stock, go long the appropriate index. eg: If you think NVDA is overvalued relative to the overall tech sector, you could short NVDA, go long QQQ. And if you have a more opinionated trade in the same currency, eg: you think AAPL will be fine if the AI trade pops, you can do short NVDA, long AAPL. Finally, an even more advanced version would be to go long on something else in the same sector, but which is less overvalued in your opinion. eg: Short ORCL, long NVDA.
- the__alchemist 1y agoThought terminating cliches only terminate thoughts if you allow them to.
- bdangubic 1y agothis statement could be just replaced with TSLA :)
- rasz 1y agoNicola scam was still worth real money a good year after CEO conviction.
- matt3210 1y agoThe market is rational. If it's is not doing what you expect, then you are the irrational one.
- 3eb7988a1663 1y agoWhen pets.com is selling dog food for less than it costs, but the stock price keeps going up, that is rational?
- deleted 1y ago[deleted]
- skybrian 1y agohttps://archive.is/TJAfs https://archive.is/TJAfs It's pretty clearly not a "how to" that ordinary people can practically use. More like "How someone else might do it."
- the__alchemist 1y agoI got in on 4 of the big quantum computing stocks ~a month ago. I haven't felt this good about a short since Nikola; one of the few times I will use "money left on the table". I miss Hindenburg. Unfortunately, most of the scammiest companies (e.g. ones you hear about on HN) are not IPOed, so you can't short them using traditional methods. I'm glad the article points out some non-traditional ones, but I'm not clear on how to actually do it.
- delichon 1y agoI hope you lose a lot of money on at least one of those positions. I want to be in a timeline where quantum and AI computing grow up together.
- rimbo789 1y agoSo you want all the humans replaced then?
- delichon 1y agoI want minions.
- Nextgrid 1y agoIt's more likely you will be the minion doing menial tasks (that aren't worth automating because unskilled human labor is unbelievably cheap), while all the better-paying, intellectually-engaging jobs have all been automated away.
- osiris970 1y agoAutomation is inevitable, has happened non-stop since the industrial revolution. Imo we should never "protect jobs" when in the end they will hurt the vast majority of other people.
- jazzyjackson 1y agoWhat do you want quantum to do? I thought it's good for medicine discovery and material discovery, where you might simulate physical quantum processes, but it's quite theoretical that we actually get an outcome from that isn't there? Is there any drug/protein/molecule simulation that people are trying to do but classical hardware is too slow to bother? Qubits are neat and all I just won't be places bets.
- iloveurcelsnuf 1y ago"how to take a mom from a toddler" when nobody is around? I bet there's an entry in some dude's journal from the 1100s