Deutsche gonna Deutsche.
Recruitment tables should just have a banner that reads 'we've already spent your bonus on legal fees, here's some chocolate'
Recruitment tables should just have a banner that reads 'we've already spent your bonus on legal fees, here's some chocolate'
Now 50% loss means wipe out. But given the size of the portfolio, there is also the concentration risk. A single private-credit firm going bust shouldn't take out a bank. But that seems–seems!–to be what I'm seeing.
If DB stock increases 50% before it crashes, would you be forced to sell at the top and lose all your money?
The advice is good in a kind of stopped clock sense.
I do remember smart friends getting interested in options at different times in the last thirty years because they make higher returns. Then they have a period where make lower returns, or have a real problem. I don't think its worth the attention and the trading cost for most people, even people who understand what a short is. You can't argue with a person who has been doing really well with them for five years but it always seems like people stop.
Short positions are also bad, because there’s an ongoing cost to carrying a short position, and that cost is likely to cannibalize your expected gains.
Lots of good reasons around to avoid short positions and options like they’re the plague. I don’t like the “unlimited downside” reason because it’s solvable.
To people who are making lots of money in stocks or options… my question is always, “do you have high returns, or do you just have high volatility?” Because it’s easy to look at high short-term returns and believe that you’ve somehow beaten the market, when you’re really just holding a high volatility position that got lucky.
Volatility. Never trade options if you don’t understand volatility.
The easy way is to buy puts. Maybe your next question is, “who is selling puts?” And that’s a good question, but you don’t really care, because you can buy your puts on the open market and when you do that, you get protection from credit risk.
There are other reasons why this isn’t a good idea but “unlimited downside” is not one of them.
If you are an equity index holder anyway, simply by not holding any exposure in an otherwise "market" portfolio is a "short" relative to benchmark.
ie if I "buy" the SP500 constituents according to weight but with TSLA zero'd out my portfolio is essentially the same as long SP500 and short weigtht*TSLA.
How can you invest in SP500 minus TSLA without racking up exorbitant fees?
Unless such a fund already exists, you’d be managing it yourself and pretty much wiping out any gains any time you rebalanced.
Various options…
1. Direct indexing (requires minimum amount of assets),
2. Certain actively-managed ETFs like GGRW, which is not exactly SP500 minus TSLA but it’s not too far off
3. Buying passively-managed ETFs in sectors that don’t include TSLA,
4. TSLQ, maybe. You get fees and other problems. I wouldn’t.
Direct indexing costs more than ETFs in terms of fees, but there’s apparently some kind of tax loss harvesting that you can do with direct indexing to offset the fees, and some people say you can come out ahead. I don’t understand how tax loss harvesting works at a satisfactory level (I’ve read articles and watched videos, but I think I would need to take an accounting class and really sit down with a spreadsheet before I could say that I understand how direct indexing and tax loss harvesting work together.)
There are reasons for not trading options, but the main reason is “you know less about price movement than you think you do”.
There is no risk-free way to trade. You can place a market order and guarantee execution, bearing the risk that you get a bad price. You can place a limit order, and guarantee price, bearing the risk that your trade doesn’t execute.
It sounds like you’re starting with the assumption that you don’t know whether the options are undervalued or overvalued, and if you start with that assumption, yes, the correct answer is don’t buy or sell the option (barring some other reason to buy or sell). Duh. But the reason the market “knows something you don’t” is because it’s full of people doing research. Sometimes, the person doing the research is you, and you have an idea of where the price will go. That’s what an edge is. When you have an edge, you can make money, but maybe not very much and not very reliably.
Where it gets ridiculous is when people speculate with SPY options or dumb shit like that. The reason why speculating with SPY is so ridiculous is because it’s just so unlikely that you could get an edge with SPY. But in general? Yes, it’s possible to get an edge.
You earlier said that there’s no point in bidding anything but “current market price”, and that’s what I was responding to. Limit orders can execute at current market price but they can also execute at some future market price. It’s ok to place limit orders, they just have different risks from market orders.
> can be part of a combination strategy
You may hold a short position as part of a net neutral or net long position with extreme caution.
That's silly.
You can build pretty much any kind of shareprice-to-payoff function with enough options and other instruments. And that's one dimension (a line) more than just a single number. You can get arbitrarily more complicated, if you want to.
This is not financial advice, it is gambling advice.