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Comment by soVeryTired | Hacker News Reader

You should only do that if you believe the crunch is coming in three months or so.

Unless you can time the crunch exactly, put options are a mug's game. They bleed value over time (negative theta in industry parliance).

If you really want to protect yourself, just plan your finances as if your high income was temporary rather than permanent.

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> plan your finances as if your high income was temporary rather than permanent.

This is the best advice I've heard all week. I wish someone had told me this when I was 21 (even though I wouldn't have listened)

I’m not sure what it means

It means if you make more than an average income in your area, spend as much as you would if you had an average income and save and invest the rest.

That makes sense! Thanks!

Yup, it's easy to spot a bubble but it's not easy to be able to tell how big it's going to get or when it's going to pop. You can be out by years and by magnitudes, which isn't useful for being able to profit from it. It's better to just plan for the worst and treat your exposure to the upside like a gamble.

Can't you get options whose expiry is a year or two out (LEAPs), or is the time premium not worth it?

I never traded long-dated options when I was in finance, but anything with longer than a three-month maturity was crazy expensive in terms of the spread you'd pay. These are not liquid instruments.

It's been a while since I've done the maths, but I'm pretty sure it'd be cheaper to buy shorter dated puts and roll them over on expiry. Which would still be very expensive.

I used to do options in the end 90s and back then long term options were crazy expensive. You need a lot of capital for such a strategy.

Did you profit from that strategy?

I lost money. Which would make a successful startup these days :)

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