Derivatives are the key to the rabbit hole

[Javier]

First, I would say is not the same a riskless trade than making millions. To make money is espected to be somone on the opposite side.
If you spect to win a 30% move, is not likely someone loose all that money, or maybe you the one who win and the other world loose to give you the money.
On the other hand, is different than in stock who someone owns (in example thinks of the APPL CEO, who owns a huge volume), well in that case if he sells to the market and investors willing to buy, probably he will make huge amount of money. Risk free + amount of money.

 

[ktm]

Yes, it's very doable. With options, and the right types of positions, ratios and risk mgmt parameters.

 

[cdcaveman]

i heard the word "hole" and had to look

 

[lawrence-lugar]

I've been a market addict since 2006. Never in too deep, and luckily the market is a healthy addiction once GREED has been eliminated even via unpleasant means if the Universe deems necessary.

It's recently become apparent to me that the more you learn about derivatives and leverage, the closer you get to the event horizon of all speculator ambition.

The markets are the modern-day gladiator pits. A common man can arrive in desperation and fight to his death day after day and emerge a Champion/God amongst men and win his freedom and elevated social status for his family for generations to come.

A philosophical inquiry aimed at my fellow (Elite) traders and speculators

So, what exactly are you asking...?
But I like your way of looking beyond the horizon.

I think I agree with what you're saying about options -- but not in the sense that a "risk-free" trade exists.

 

[BrandNewTrader]

My thesis is that combining the inherent leverage in SPAN and Portfolio margin with the leverage built into options and futures contracts allows one to financially engineer "guaranteed" profit trades. This is what I mean by risk-free. Whether the market trends up, down or sideways during the duration of your trade, you always make money. This is as close to "risk-free" as you can get outside of institutions sitting at the Fed's rebate window.

It's been heavy on my mind the past few weeks and I had to throw it out there, mainly because current events are bringing this leverage into focus. The tide is on the verge of no longer rising and becoming very choppy, which will cause some blowouts. If we have 2008 redux, or on steroids, market structure could change drastically for us little guys. Once the margins are doubled and tripled then there goes our chance to sit in a cockpit everyday and play fantasy numbers games. Possible returns will be much more muted for smaller players (Guys playing with less than a few hundred k). So, the clock is ticking...

 

[lawrence-lugar]

My thesis is that combining the inherent leverage in SPAN and Portfolio margin with the leverage built into options and futures contracts allows one to financially engineer "guaranteed" profit trades.

...So, are you saying you yourself have done this successfully in a real account for sometime?
If so, then congrats -- continue to milk this money machine.

 

[BrandNewTrader]

Not exa

...So, are you saying you yourself have done this successfully in a real account for sometime?
If so, then congrats -- continue to milk this money machine.

Not exactly. Haven't had enough time to really milk the market as i would like, which is why im getting nervous. If overnight margins get hiked my edge disappears, so i would definitely like some more time.

 

[VTS]

I use risk-free in the context of having a system of rules and triggers than when followed results in a guaranteed profit within a calculable standard of deviation. You sleep late? Power and UPS fail and algo goes down? Drink and trade? These are all risks that can only be eliminated with common sense and self control. Let's be practical here VTS (Virtual Trading System?)

Regardless of how you're defining it, it doesn't exist. Sure there are ways to increase your chances of making money in the long run, but there's nothing remotely "risk free" about it. All we have are probabilities.

You're confusing results with process. There are people who have demonstrated results that imply risk free trading, but even the best results in the world are part of a process that is most certainly not risk free.

So like I said I agree with you that option trading increases the probabilities to the highest level possible, but even option trading is subject to the laws of probability.

and VTS = Volatility Trading Strategies

 

[newwurldmn]

Searching for "risk free profit" is like searching for the fountain of youth.

My thesis is that combining the inherent leverage in SPAN and Portfolio margin with the leverage built into options and futures contracts allows one to financially engineer "guaranteed" profit trades. This is what I mean by risk-free. Whether the market trends up, down or sideways during the duration of your trade, you always make money. This is as close to "risk-free" as you can get outside of institutions sitting at the Fed's rebate window.

It's been heavy on my mind the past few weeks and I had to throw it out there, mainly because current events are bringing this leverage into focus. The tide is on the verge of no longer rising and becoming very choppy, which will cause some blowouts. If we have 2008 redux, or on steroids, market structure could change drastically for us little guys. Once the margins are doubled and tripled then there goes our chance to sit in a cockpit everyday and play fantasy numbers games. Possible returns will be much more muted for smaller players (Guys playing with less than a few hundred k). So, the clock is ticking...

Leverage doesn't create alpha. It only enhances the returns (both good and bad)

 

[BrandNewTrader]

Searching for "risk free profit" is like searching for the fountain of youth.


Leverage doesn't create alpha. It only enhances the returns (both good and bad)

The fountain of youth does exist. When the body is fed the foods it was designed to consume, and not the foods we humans eat because we can due to agronomist technologies, it rejuvenates and heals itself. But this is very bad for the pharma business and the medical (butchers) profession, who treat sickness rather than cure it, so you won't be getting much pressure to go raw and cut out poisons.

The same can be said for the market. Look at the huge amount of infrastructure that exists outside of risk-taking. Look at an investment bank for example. The actual assets of the bank and its clients are directly managed by a small group of risk-takers/managers. Goldman Sachs has thousands of employees but less than 10% of them are the ones decided when, what and how much to buy and sell. The rest of them are middlemen, customer support, internal support, admin and middle upper exec management. This is just one bank. So when you look at the ecosystem of the market and you consider that over 90% of people involved in the market don't give a flying fuck about taking risk. They are investor relations, prime brokerage, financial journalist, blah blah... Why is buy and hold so prevalent? Because there wouldn't be a mutual or pension fund business without it. No huge brokerage business without it, etc. So we the stuntmen on the ground in the thick of the shit can indeed find gems and pearls invisible to others because THEY DO NOT POSSESS THE EYES TO SEE.

Consider niche markets, like CDS trading, or even the new weather and climate derivatives that they are trying to get off the ground. How many people are actually executing trades in these markets? Not very many. There are probably alot of opportunities laying around waiting to make someone rich, but there aren't enough eyeballs fleshing them out.

To me, market efficiency is another theoretical concept that has distorted our general perception of how markets work. Markets are always in disequilibrium, for if they were totally efficient then participants wouldn't make or lose more than their proportionate share of the "pie". But we do everyday.