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Comment by fdgsdfogijq | Hacker News Reader

How have people not caught onto this yet?

When the Fed prints money, its a guaranteed bet that assets go up. The rich use their wealth and huge amounts of leverage via financial instruments to generate massive returns. This has been going on for a long time. Literally all you need to do is throw your whole bank account into call options. Working a 200k-300k a year job is almost a waste of time with how much money they are printing. This is how the wealthy see it, your small paycheck (yes 300k a year is small) is a joke within the context of financial leverage.

Just to reiterate, you are better off risking everything in financial markets and sitting at home watching those assets very closely than you are working.

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This has been depressingly true for my small manufacturing business. Manufacturing revenue is respectable and profitable, but our free money from trading with surplus cash has us absolutely swimming in money.

Of course, it’s really easy for us to borrow money at negative cost. We’re basically making stuff because it’s fun.

Call options are a bad move to participate in equity upside, unless you are working on single stocks. There's little upside convexity at the index level. This is doubly true for someone who doesn't know how options work. You can easily end up out of the money with your entire option punt and lose everything even though equities go up (just not enough for your bet). Furthermore, the last couple of years the underlying indices realized better risk adjusted returns than almost any option strategy could hope for. If you want leverage, you can just buy the futures.

Probably you are correct. But that illustrates my point even more, I have made absurd amounts of cash by believing in the power of QE and the FED. Its not rocket science, its just accept that the fear mongering of "you are too dumb to use leverage" is false. But I will say, I have had huge returns on QQQ calls. Its working just fine for me to buy LEAPs 10-20% out of the money.

You can certainly make a lot of money on options, but the behavior may be non-obvious to someone who doesn't have experience with them. If you buy a 10% OOM call and the market stays flat, you end up losing the entire investment even though the underlying hasn't moved. Do you know how does that 10% relate to the current implied or realized volatilities, are you actually buying the optimal strikes or have just gotten lucky? If this was just a fraction of your portfolio, then it's no harm done, but if you repeatedly punt your entire portfolio into OOM options, you are running a serious tail risk of being completely wiped out even if the market goes up!

Options absolutely are rocket science. The actual pricing is anything but obvious and requires undergraduate level math. More advanced models require graduate level math and focused study. Yes, making money on stocks is easier than ever, but please for the love of God at least use something like levered ETFs or futures and don't bet the entire farm. The bubble is going to pop. Inflation is picking up, and the moment central banks step off the gas pedal (which they will have to), there's going to be a de-leveraging. Retail will almost always end up holding the bag one way or another.

You can generally get 2-3x leverage with futures or ETFs as well and they are a linear instrument with obvious payoff characteristics. Informed players absolutely know and track the amount of flows that these super leveraged retail traders are injecting. Make no mistake, you are being monitored and trades are being done in anticipation of the flows you'll generate. And once the bubble pops and you are forced to liquidate, you are going to be liquidating at a really bad price.

Again, I understand the risks. I about 15xed my starting principal from bottom in march 2020. My approach is to put all of my eggs in one basket and then watch the basket closely. While your post is rational, I can only say that OOM call buying continues to work out extremely well. And thats the point, it goes against every reasonable investing rule, but works extremely well. In some ways it is the truly rational decision to combat wage debasement (precipitated by asset inflation and fed money printing). The typical profile of what is too risky (OOM call buying), simply no longer applies when there is a FED backstop. People need to understand this, as surely many wealthy people and traders in NYC do.

During the last FED meeting, when they double downed on transitory inflation, it was a heavily dovish outlook. Right then and there I went all in, and made a massive profit. The markets continue to hang on their every word, theres no reason to overthink it, when the FED speaks dovishly, believe them and buy calls.

What specifically are you buying?

Can you elaborate on how one can use call options to make a 200K/year job a 'waste of time'?

The fed keeps printing money and inflating assets. You can generate 200k a year much easier by "risking" it in the markets. You are wasting your life for a pittance that can be made easily in the markets. This is how rich people think, its only the lower classes that somehow think they are being paid a fair wage

The wage of the average professional worker cannot be made "easily" in the markets by someone with the wealth of the average professional worker.

There are a lot of people trying to spread the idea that making tons of money off of the stock market is "easy." My guess is that this is in part encouraged by the market makers. Lots of dumb people who think they can get rich off of options make for good arbitrage opportunities.

I dunno about that. Even if you could make consistent gains, most people probably don't have the disposition to trade options long term. It's extraordinarily stressful and definitely a ticket to an early grave. A 200k IT job is a lot easier lol

Borrow the maximum you can and invest it. There's very little interest to pay on loans right now and has been for about 13 years now. In the meantime assets have skyrocketed in value. Unless there's a change in policy and a crash is allowed it won't change. Put all the money into old fashion shares and housing. No need to risk it on options or anything like that.

Hindsight shows the stock market has more than doubled in 10years and interest has been at <3% for even small players in that time. Those who borrowed after the 2008 crash needn't work today. Now this is of course hindsight. But the conditions that allowed this to continue for 13 years are still ongoing which is a cause for alarm.

> Borrow the maximum you can and invest it

> Unless there's a change in policy and a crash is allowed it won't change.

And if a crash is allowed, declare bankruptcy, unable to get a mortgage in the foreseeable future and go back to work (with the same income, if you can), right?

I acknowledge the risk and the hindsight. My belief is that with so many playing this game and a precedent of too big to fail any hint at a correction will be met with even more QE to counteract it at this point.

It's a gamble on policy and could go wrong but it does have some thought put into it.

I believe he's referring to the widely recognized truism where money printer go brrrrr and stonks only go up.

Throwing your whole bank account into call options would be an extremely risky thing to do. But that doesn’t invalidate your point that capital accumulation of wealthy people generally far outweighs any amount of money they would make from their labor. It doesn’t have to be call options though, with enough wealth even interest from T-bills would dwarf a $300k salary.

You are still missing the point. With QE, the call options are far less risky than they look. It has been this way for over a decade. People somehow cant get it into their heads, when the fed prints money, assets go up. Capitalists are having an all you can eat buffet while everyone else thinks the only thing they can do is put 3k into the SPY every month. Its a joke

Yes, in "normal times" of the past decade, when you invest in call options, you are basically being compensated for discounting the risk of a crash at any particular moment.

But there's no free lunch - the risk you are taking is being priced in, but sometimes the actually risky thing does happen.

This line you keep repeating about "only the lower classes" xyz while the "true rich" have some deep wisdom is belied by the fact that rich people become not-so-rich trading options every day.

It's straight out of the "this one trick they don't want you to know about" advertising playbook.

I don’t think I am missing the point. If you had gone all in on call options in Feb 2020 you’d have lost 100% of your money (depending on expiration)

When the tide turns you'll get fucked fast following this strategy

Why buy call options? Why not just buy and hold equities?

I bought AMD Jan 2023 $90 options for $13 earlier in the year when AMD was trading ~$80. So the breakeven price is $103 by Jan 2023 which I found not very risky looking at the accelerating EPS growth.

Look how much I'm up by buying close to the money options instead of buying shares at $80: https://i.imgur.com/vYHl1LY.png

Yeah, that's kind of my thought here too. It honestly feels like the only reliable way to make huge stacks of money with calls/puts is knowing stuff that ought to qualify you as an "inside trader".

Why settle for 20% returns when you can get 500% returns? Only the lower classes are so risk averse. The rich understand that QE essentially strips risk from the markets

You can do the same with levered ETFs or futures, if you want to be levered to the hilt, at least do it with instruments where you don't run the risk of ending up losing everything even if the equities go up.

Because call options are a form of financial leverage, which is how the rich are getting much richer as the fed prints money

Call options are a rubbish way to do this, please don't spread this misinformation. If you want leverage, just buy the futures.

If you are thinking about punting your entire income into options on single stocks, and don't know what you are doing, just stop right there. You can easily lose everything even in a bull market.

Dont disagree with what you said, but why does the system work like that? It happened when we went off the gold standard. The banks now operate in imaginary terms. The reality is that since it's now imaginary, taxation doesnt exist. It can't exist, in fact the government must now give you money/services in excess of the taxation.

If you aren't rich, you have a net negative taxation. The only people who pay taxes are the people who dont pay taxes, they can pass on the taxation cost to others. It's also why there will be a constant anti-taxation pressure. Why the rich will always be getting a tax cut. The not-rich already dont pay taxes or at least receive more than they pay. The only people who can receive cuts are the rich.

The problem is that to avoid taxation, you put your investments into inflationary immune things. Real-estate, markets, bitcoin. Inflation is what pays for everything. Nobody is paying or even balancing budgets anymore. The only limit there will be inflation keeping the percentages in check. Jeff Bezos or Elon Musk arent billionaires, they simply have significant debt holding inflationary immune.

Yep. Source: I'm long TQQQ.

Same. It is hilarious that it is more of an index like investment at this point.

SOXL since April 2020 based on pretty much the same thesis. Imagine how much fun I'm having.

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