How to join a professional trader hub?

[drmark27]

All of the above applies, of course. The main reason why selling vol is different from providing insurance is the lack of barriers to entry. It's very hard to open an insurance company but it's pretty easy to open a TastyTrade account.

For all practical purposes, I think all these points (BigShort's included) are moot. Many parallels exist between option contracts and insurance contracts and I don't think there's any problem using familiarity with insurance to better understand options.

This is also not to say you can't go bust doing either one. One of the bigger objections I have is when I hear people calling it an ATM machine.

 

[ironchef]

There is an important exception to that rule - going to work for someone, i.e. "an apprenticeship". Most people who make money in the market have learned this way and then extended what they learned via their own experience.

Wish I can go work for you.

 

[sle]

For all practical purposes, I think all these points (BigShort's included) are moot.

Wanna address them one by one? I do not perceive them as moot at all, FWIW.

Many parallels exist between option contracts and insurance contracts

There is a massive difference between actuarial risks and systematic risks, even if you don't get into the actual mechanics.

 

[drmark27]

Wanna address them one by one? I do not perceive them as moot at all, FWIW.

Sure... maybe I'll learn something.

 

[S-Trader]

if one aks for fees, then he's not profitable.

the same applies to any signal services, educational services, trading system providers etc etc etc.

*Solely* to point out just one example that disproves that, and definitely not an endorsement of Ross Cameron or his service:

From the "Is this real?" thread in the General Topics/Wall St. News forum here:

Since Ross is a client of Lightspeed, there is not much in details I'm allowed to say. I can tell you he is a client and his P/L that he posts for his account is real.

I don't even understand why you'd make such a broadbrush statement. And I can think of a number of logical reasons why someone would charge for their mentoring or service, even if they're a profitable trader. Or am I misunderstanding your post?

 

[zdave83]

if one is profitable, he can easily extract more from the market and won't need any 'mentor fees';
if one aks for fees, then he's not profitable.

One possible exception would the the pump-and-dump guys who make recommendations on obscure securities, after having front-run them with their own trades. Then sell before the "target" price or announced sell signal. In those cases, they extract more from the market because they are "mentors".

 

[sle]

Wish I can go work for you.

No you don't I am a difficult person to deal with

 

[sle]

Sure... maybe I'll learn something.

Let's see.

@TheBigShort s main argument is that most of the insurance contracts underwrite highly idiosyncratic events, such as fires, deaths or car accidents. The sheer diversity of their pools mitigates their risks and they can further mitigate it by laying it off to reinsurer companies (who, in turn, have even more diversified books). On this other hand, a stock option is a combination of the company risk with the market risk. Market risk is systemic in it's nature and it's impossible to diversify away. In fact, one can argue that company-specific risks are efficiently priced while the market risk is rich by nature (e.g. that's why dispersion works).

My argument is that insurance price is dictated by a cartel of providers and that naturally creates pricing that's favorable to them. An options market has steady two-sided professional flow so by and large it's going to be efficiently priced. Of course, there are some pockets of inefficiencies, there are forms of risk aversion specific to various players and, finally, there are regulatory pressures, but all of these are secondary to the market flows.

Last but not least is mark to market. An insurance provider is not required to post more capital as the risk of his positions increases. In fact, their standard approach is to keep no more than the regulatory reserves and invest the balance into all sorts of risky assets. An option seller has to be comfortable with the MtM fluctuations, even if the actual event is extremely unlikely.

 

[S-Trader]

One possible exception would the the pump-and-dump guys who make recommendations on obscure securities, after having front-run them with their own trades. Then sell before the "target" price or announced sell signal. In those cases, they extract more from the market because they are "mentors".

If you're referring to Ross, I've seen people who've at least claimed that they verified his entries/exits by comparing his recordings and matching them up to T&S. It's not an exercise that I care to do personally -- again, I don't have a dog in that fight either way -- but that seems like one possible way to verify that.

Maybe the accusation that "sticks" more, and would be harder to prove/disprove is that he's benefiting from his subs' volume, given that novice traders especially will often blind-follow, hesitate and chase -- even when counseled not to. And so the accusation goes, the subs will help push/hold the stock up and also provide more liquidity for him to sell into.

There are also some non-momo-type traders with trading services out there who I'm personally pretty confident are legit profitable... but it's hard to prove that to everyone's satisfaction, and you end up fighting a battle that you don't have any real stake in to begin with, while also looking like a "shill" -- so why bother? And who knows... short of being able to see their trade platforms live and their actual trade statements -- maybe I'm being fooled?

 

[zdave83]

If you're referring to Ross ......

I wasn't referring to anyone in particular ... but interesting comments.