Investing General Discussion

TJT · Mar 13, 2020

Sanrith Descartes said:
Buffett has more money socked away than most countries. I just don't know what he is gonna do with it.

I read an analysis that said his years of great returns were due to leverage and loans and in the last 5 or 10 years he has underperformed the SP500. I was too lazy to research it for validity so take it for what its worth.

If you read Warren Buffetts biography the dude is a total whackjob. I truly don't believe he cares about money other than that is how you keep score.

Finance is his only interest for work or fun. His wife left him because that was literally all he talked about. On top of being worth millions and millions and still only eating at McDonalds when he had coupons.

Sanrith Descartes · Mar 14, 2020

Blazin
So I understand the individual call and put options and am teaching myself basic vertical spreads. Please tell me if my example here is correct (see attached option chain for M).

Assume I am using the midpoint for my calculations.
I sell the 10$ call for the mid of 0.63
I buy the 12$ call for the mid of 0.15
Max profit is $48 per contract
If finishes OOM, I make the max profit

If it finishes above the 12$ strike my max loss is the difference in strikes less the initial profit. So max loss is $200 - $48 or $152 per contract.

If it finishes between the strikes, my break even is the sell strike plus my net profit so $10 + 0.48 or $10.48

Forget the actual #s of if this would this be a good trade, do I have the mechanics correct?

Blazin · Mar 14, 2020

Sanrith Descartes said:
Blazin
So I understand the individual call and put options and am teaching myself basic vertical spreads. Please tell me if my example here is correct (see attached option chain for M).

Assume I am using the midpoint for my calculations.
I sell the 10$ call for the mid of 0.63
I buy the 12$ call for the mid of 0.15
Max profit is $48 per contract
If finishes OOM, I make the max profit

If it finishes above the 12$ strike my max loss is the difference in strikes less the initial profit. So max loss is $200 - $48 or $152 per contract.

If it finishes between the strikes, my break even is the sell strike plus my net profit so $10 + 0.48 or $10.48

Forget the actual #s of if this would this be a good trade, do I have the mechanics correct?

View attachment 254211

Busy right now will look at and respond this weekend

Tarrant · Mar 14, 2020

Bitcoin fell to about 4k yesterday so I bought up some of that. We will see if that was a smart idea or not.

Sanrith Descartes · Mar 15, 2020

Fed may announce commercial paper facilities Sunday - BofA

The Federal Reserve may announce measures on Sunday night aimed at bolstering liquidity in the commercial paper market, used by companies for short-term loans, analysts at Bank of America wrote.

uk.mobile.reuters.com

Sanrith Descartes · Mar 15, 2020

Tarrant said:
Bitcoin fell to about 4k yesterday so I bought up some of that. We will see if that was a smart idea or not.

I thought bitcoin was supposed to be the hedge against fiat currency manipulations? Looks like it tanked with everything not named "gold".

I think this market upheaval is showing at the end of the day, centuries of "gold as a haven" mentality isn't going away due to crypto.

Furry · Mar 15, 2020

Sanrith Descartes said:
I thought bitcoin was supposed to be the hedge against fiat currency manipulations? Looks like it tanked with everything not named "gold".

I think this market upheaval is showing at the end of the day, centuries of "gold as a haven" mentality isn't going away due to crypto.

Bit coin's value is determined by criminal agencies and is bolstered by west coast hipsters investing. Because of this is far more risky than a substantial good. While the criminal need will be constant, the investment added value is subject to large fluctuations.

It's truly an odd currency which has the potential of essentially vaporizing if the criminals decide they want to go somewhere else.

Sanrith Descartes · Mar 15, 2020

Furry said:
Bit coin's value is determined by criminal agencies and is bolstered by west coast hipsters investing. Because of this is far more risky than a substantial good. While the criminal need will be constant, the investment added value is subject to large fluctuations.

It's truly an odd currency which has the potential of essentially vaporizing if the criminals decide they want to go somewhere else.

Montero, with its encrypted ownership and transaction logs tend to be the vehicle of choice for big criminals.

Blazin · Mar 15, 2020

Sanrith Descartes said:
Blazin
So I understand the individual call and put options and am teaching myself basic vertical spreads. Please tell me if my example here is correct (see attached option chain for M).

Assume I am using the midpoint for my calculations.
I sell the 10$ call for the mid of 0.63
I buy the 12$ call for the mid of 0.15
Max profit is $48 per contract
If finishes OOM, I make the max profit

If it finishes above the 12$ strike my max loss is the difference in strikes less the initial profit. So max loss is $200 - $48 or $152 per contract.

If it finishes between the strikes, my break even is the sell strike plus my net profit so $10 + 0.48 or $10.48

Forget the actual #s of if this would this be a good trade, do I have the mechanics correct?

View attachment 254211

Your assumptions are correct you have a max potential gain of $48.00 and a max loss of $152.00. I like to look at them in graph form just helps to visualize the profit/loss

Can ignore dark blue line assuming you'll hold to EXP. Light blue shows profit and loss through the price range.

Khane · Mar 15, 2020

Furry said:
Bit coin's value is determined by criminal agencies and is bolstered by west coast hipsters investing. Because of this is far more risky than a substantial good. While the criminal need will be constant, the investment added value is subject to large fluctuations.

It's truly an odd currency which has the potential of essentially vaporizing if the criminals decide they want to go somewhere else.

This isn't true and it was actually Wall Street that inflated the shit out of it's pricing and is also the reason it is now linked.... to Wall Street.

Though I guess most firms and banks on Wall Street actually are criminal agencies

Blazin · Mar 15, 2020

One more thing, we are in a very volatile market so only put on trades like this using the correct orders that it fills both orders. Doing it manually could get you caught without a proper fill on one side or the other and exposing you to more risk than you want. Most people don't have the options trading authority to sell a naked call anyway since the risk is infinite. But with the shit the idiots at RH have been up to it probably bares mentioning for others.

Blazin · Mar 15, 2020

Sanrith Descartes said:
I thought bitcoin was supposed to be the hedge against fiat currency manipulations? Looks like it tanked with everything not named "gold".

I think this market upheaval is showing at the end of the day, centuries of "gold as a haven" mentality isn't going away due to crypto.

Gold dropped 10% for the week. You know the best haven? The reigning champ of safe havens: CASH. But even that becomes vulnerable to currency fluctuations and it's future return outlook is pretty damn shitty.

Sanrith Descartes · Mar 15, 2020

Blazin said:
One more thing, we are in a very volatile market so only put on trades like this using the correct orders that it fills both orders. Doing it manually could get you caught without a proper fill on one side or the other and exposing you to more risk than you want. Most people don't have the options trading authority to sell a naked call anyway since the risk is infinite. But with the shit the idiots at RH have been up to it probably bares mentioning for others.

Thanks. I am still in the learning phase of the spreads. Not looking to jump in yet with live money. Will practice with fake money in the near term. To be honest I don't know if I have the ability to sell naked. I haven't done it yet and since I have requested it I may not be able to yet. That being said. I can use the same spread concept with shares I own and then it would just be a covered call on the sell side, with my rmdownaise risk being adjusted with what my existing cost basis is on those shares.

Sanrith Descartes · Mar 15, 2020

Blazin said:
Gold dropped 10% for the week. You know the best haven? The reigning champ of safe havens: CASH. But even that becomes vulnerable to currency fluctuations and it's future return outlook is pretty damn shitty.

I'm with you on cash. I think a good portion of gold's drop was a sort of capitulation fear move where some folks said fuck it, sell it all I am stuffing cash in the mattress.

TJT · Mar 15, 2020

Sanrith Descartes said:
I'm with you on cash. I think a good portion of gold's drop was a sort of capitulation fear move where some folks said fuck it, sell it all I am stuffing cash in the mattress.

I am curious about actually learning options. Just to dabble in them... maybe. More like an academic exercise at this point but I like such nerdy shit. I am using the Etrade paper trading platform though. What are you using?

Blazin · Mar 15, 2020

With most brokerages, options permissions are broken into four levels. The first level is for the safest trade of cash secured puts and covered calls. Which for any experienced do it yourself investor can be useful tools to generate additional income on holdings or hedge into future positions that you want to take.

To someone starting out with options they should stick to that scale as they gain experience. Even if a broker gave someone level III I wouldn't recommend it until you spend time at each of the prior levels under different market conditions.

Sanrith Descartes · Mar 15, 2020

TJT said:
I am curious about actually learning options. Just to dabble in them... maybe. More like an academic exercise at this point but I like such nerdy shit. I am using the Etrade paper trading platform though. What are you using?

I have been with Fidelty forever. They have a "active trade pro" platform I really like. I manage my mom's account on Merrill but do all my research for it with the Fidelity platform.

In my experience, the basics of options are pretty "simple" and by simple I mean its math. If you understand math then the concepts of options aren't tough to grasp. The nuances and strategies are where the deep water is. That is the area I am starting to learn.

Pops · Mar 15, 2020

Sanrith Descartes · Mar 15, 2020

Blazin said:
With most brokerages, options permissions are broken into four levels. The first level is for the safest trade of cash secured puts and covered calls. Which for any experienced do it yourself investor can be useful tools and despite someones prognostications to the contrary they are not a criminal enterprise and are a useful tool to generate additional income on holdings or hedge into future positions that you want to take.

To someone starting out with options they should stick to that scale as they gain experience. Even if a broker gave someone level III I wouldn't recommend it until you spend time at each of the prior levels under different market conditions.

I have focused mainly on covered calls when applicable on the times I am sitting on value dividend stocks to generate extra income via covered calls.

Khane · Mar 15, 2020

Blazin said:
With most brokerages, options permissions are broken into four levels. The first level is for the safest trade of cash secured puts and covered calls. Which for any experienced do it yourself investor can be useful tools and despite someones prognostications to the contrary they are not a criminal enterprise and are a useful tool to generate additional income on holdings or hedge into future positions that you want to take.

Might wanna go back and take a look at that conversation. Doesn't surprise someone who sells options for a living would misrepresent my position on the matter though.

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