Picking up pennies in front of a steamroller: a short tale

[bbt80]

I have a "anti-risk taking approach"

Tale closing: Just to clarify a little more about what "anti-risk approach" means in this context:

Last week I happened to watch a video of some guy talking about "barbell strategy" and googled it. That's more or less what "anti-risk" means to me, but in general. The important thing is that it fits my personality:

• have a job that pays well, is stable and gives a lot of free time
• money invested with "low risks" (in my own definition/metric of risk) with interest rates that barely compensates for inflation
• leverage my free time

Now I'm the guy buying naked out of the money "Life LLC" calls. In Brazil we call these "dust" when they are deep otm, because they cost less than a penny (small like a tiny particle of dust, got it?).

That's it for this thread.

Bruno

 

[Pkay]

Trading is actually quite easy if you can identify a trend, be patient and don’t over leverage.

The problem is everyone thinks you need to trade every day.

Yes, more more thinking this as well. How you identify the trend? Thanks.

 

[SunTrader]

New book The Rise of Carry (The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis) by Tim Lee, Jamie Lee & Kevin Coldiron ... has a thing or two to say about shorting volatility.

 

[longandshort]

The important lesson you should derive from your experience is that as a retail investor, you cannot trade like the casino-- just like you cannot play cards or gamble like the casino at the casino. In order to "trade" like the casino, you need to be a casino, and in markets that means you need to be a market maker in a security(s), where your business becomes all about flow and risk management.

If you want to take levered bets, then you need to build a portfolio of ideas that has the delta/gamma parameters you want (e.g. high convexity per trade). But using options to express a view is not the same as options trading, which is not selling cash-secured puts or whatever strategy is touted.

Trading is about capturing alpha in a product, asset class, or security. If you're trading options, then the source of errors will generally come from implied volatility (more markov less mean-reverting), and the way to capture that alpha is to have your own view of IV, and then hedge out the rest. You want to isolate the thing you think will make you money, cancel out as much/all of all of the other noises, and then lever up based upon conviction.

If you learn how to do this and can replicate this on multiple ideas within your portfolio, then you are actually learning the "trading" skill. Practice doesn't make perfect -- perfect practice makes perfect.

 

[.sigma]

New book The Rise of Carry (The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis) by Tim Lee, Jamie Lee & Kevin Coldiron ... has a thing or two to say about shorting volatility.

highly recommend this book! Great read.

 

[.sigma]

Now I'm the guy buying naked out of the money "Life LLC" calls. In Brazil we call these "dust" when they are deep otm, because they cost less than a penny (small like a tiny particle of dust, got it?).

taleb was the one who I heard first propose the barbell strat.

and speaking of nassim, the quote in your post above reminds me of a quote in Dynamic Hedging

“Life is long gamma”

 

[bbt80]

taleb was the one who I heard first propose the barbell strat.

and speaking of nassim, the quote in your post above reminds me of a quote in Dynamic Hedging

“Life is long gamma”

When I was young enough to think I knew it all, I was sure that risk was like a dial button I have to adjust to optimize my results (in life). Dr. Markovitz idea (mean-variance analysis) was even simpler, so imagined I deserved a Nobel too .

This Nobel here was swing trading stocks while the risk-free interest rates were fixed almost at 30% and the main stock index was higher than 80% (in 2003) . To make things worse, I was a young military officer in Rio. Dumb risk taker.

A wise guy said once people overestimate what the financial markets can do for them. I changed jobs too.

 

[SunTrader]

After a few too many Caipirinhas everyone is a risk taker. LOL