Zero-risk trading
- Thread starter UMU
- Start date
Quote from UMU:
Let's say I buy 1000 shares of XYZ for $10/share.
At the same time I buy 10 married put contracts for $20 each, totalling $200.
The put option will protect the shares against losses.
Now, is there a way to also protect ("insure") the $200 amount paid
for the options against losses?
Or am I asking for too much?
For the vast majority who are not able to jump into arb opportunities for the tiny time periods they are vailable, there is no such thing as zero risk trading - unless you agree to zero profits.
The system is too efficient to allow for that. Anyone who tells you different is not being honest. Think about this: If the very wealthy could make a small profit on huge sums, with zero possibility of loss, wouldn't they do it? How about those who are too financially insecure to risk a loss. Wouldn't they all do it? Risk free trading is not available.
But, you can establish trades with very low risk. Just don't expect huge rewards for those investments.
Mark
http://blog.mdwoptions.com/options_for_rookies/
Not true.
PS: Sharks understand the meaning of going deep. A superficial play will not feed them. Think like sharks, and understand your options deeply. Seek options education at a higher level.
Quote from UMU:
Or am I asking for too much?
You know the answer.
Don't allow the ramblings of an obvious know-nothing turn you away from the truth. If risk-free, profitable trading were available, the most sophisticated traders would be fighting over the free pennies - dwindling the returns even further.
Remember how the hedge funds had an edge - and then too many such funds were fighting to make the same trades? Edges were reduced, more risk was taken, and...
If risk-free trades were available, all hedgies would be fighting over them.
Common sense tells you that.
Mark
You are assuming in your argument that those traders know how it works. They cannot do it, maybe because they do not know. So you are basing your conclusions on speculation, which might be right but also might be wrong. If you think what you are thinking is true, then give a formal proof.
There are no secrets in life, just things we do not know about.
Let me give a concrete example of what people think vs. what things are. Go check many books or internet sites written by some who say they are the best of breed. Check what they write about straddles. You will likely find a statement, like "A straddle is delta neutral (has a zero delta)". It may have never occured to them that it is not true in general. They may even wage war if a person were to point out the opposite.
What do you think of delta neutrality and straddles for instance?
I know this post is getting a little old, but I can't resist...
Riskfree, you have got to be one of the most entertaining posters to watch on this board...top 5 or better. Honest to God it makes me grin just to read your incoherent rambling sometimes. And by the time I finally get through all the BS about providing "proofs" (ever thought of a career as a geometry teacher?) or these quasi-Zen, Shaolin temple, mystic monk quotes you throw out and I realize that you're talking about yet another secret system you've stumbled on that no one else in history has been smart enough to find...well...it's hard to describe how hilarious that is. You have just enough knowledge to be incredibly dangerous to new traders but also amusing in the way a small child makes you laugh and feel sorry for them at the same time.
At your leisure (because I know it does take time and effort to think up cryptic statements about sharks), you might try investing a few minutes to pit your sizable intellect against this classic:
http://en.wikipedia.org/wiki/Perpetual_motion
But seriously, every court needs a jester...don't ever change!!
Riskfree, you have got to be one of the most entertaining posters to watch on this board...top 5 or better. Honest to God it makes me grin just to read your incoherent rambling sometimes. And by the time I finally get through all the BS about providing "proofs" (ever thought of a career as a geometry teacher?) or these quasi-Zen, Shaolin temple, mystic monk quotes you throw out and I realize that you're talking about yet another secret system you've stumbled on that no one else in history has been smart enough to find...well...it's hard to describe how hilarious that is. You have just enough knowledge to be incredibly dangerous to new traders but also amusing in the way a small child makes you laugh and feel sorry for them at the same time.
At your leisure (because I know it does take time and effort to think up cryptic statements about sharks), you might try investing a few minutes to pit your sizable intellect against this classic:
http://en.wikipedia.org/wiki/Perpetual_motion
But seriously, every court needs a jester...don't ever change!!
And before you even ask...I CAN provide a formal proof that you're a moron. Don't make me embarass you by calling your bluff on that.