Stock Market

[voxveritatisetlucis]

options

How far out do you buy them? Or do you sell puts?

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[Pain Applicant1]

How far out do you buy them? Or do you sell puts?

How far out - it all depends - but it's rare that I'll ever buy them unless I'm closing one out. I sell puts and covered calls. Sometimes, when I'm feeling frisky, lol, I'll sell naked calls with a stop at the strike price. Naked calls would be my preferred trade if it wasn't for that darn extended hour market. I don't want to end up in a situation that has the potential to be very, very dangerous.

What's your strategy?

 

[voxveritatisetlucis]

How far out - it all depends - but it's rare that I'll ever buy them unless I'm closing one out. I sell puts and covered calls. Sometimes, when I'm feeling frisky, lol, I'll sell naked calls with a stop at the strike price. Naked calls would be my preferred trade if it wasn't for that darn extended hour market. I don't want to end up in a situation that has the potential to be very, very dangerous.

What's your strategy?

I usually only buy equities. Occasionally, if I trade options, I will either sell covered calls or use spreads to limit downside. If I have conviction that something will decline (most recently QQQ and TLT), I will just sell the shares short. Options would give me more leverage but I don’t think I have the mental toughness to lose money at the velocity that comes with trading options (of course the gains are also much faster but usually I’ve been on the wrong side of options trades in the past)

 

[Pain Applicant1]

I usually only buy equities. Occasionally, if I trade options, I will either sell covered calls or use spreads to limit downside. If I have conviction that something will decline (most recently QQQ and TLT), I will just sell the shares short. Options would give me more leverage but I don’t think I have the mental toughness to lose money at the velocity that comes with trading options (of course the gains are also much faster but usually I’ve been on the wrong side of options trades in the past)

Are you sure you don't have that toughness? Short selling is definitely not for the weak. I usually love that uncomfortable excitement in your chest that risk gives you but I don't have the courage to sell short. I'm not brave enough.

I'm assuming that your option trading losses are referring to the buying side. If most of the time you lose when buying, to me that says that most of the time then the seller is walking away as the winner. I would say to the tune of at least 85%. That's why I almost always sell them.

 

[runfastnow]

DCA into index funds or good businesses that will be around for the next 30 years (i.e. MMM, MasterCard, Apple, Tractor Supply, etc.).

Have a master's in finance and worked in those circles in a different life. I know I'm not smart enough - and the large firms have more data than us little guys/gals - but a responsible covered call or straddle option every now and then rarely hurts anyone.

For those of you who are interested in leveraged index funds see below - I run somewhere between 40-60% of portfolio in a similar strategy.

Leverage for the Long Run - A Systematic Approach to Managing Risk and Magnifying Returns in Stocks

Using leverage to magnify performance is an idea that has enticed investors and traders throughout history. The critical question of when to employ leverage and

deliverypdf.ssrn.com

 

[Gauss]

What's your strategy?

Stocks = Down
Bonds = Down
Crypto = Down
Blood Alcohol Level = Up

 

[hyperalgesia]

My companies are still producing value all day. Boeing still making planes, Google still monopolizing online search, Verizon still charging by the minute. Must. Suppress. Gambling. Urge...

 

[MitchLevi]

BTC, Eth, ChainLink.

 

[drmamba]

No one can predict how high or low individual stocks or investments will go. That’s why it’s important to DCA and diversify your investments. It’s the mainstay approach of the average wealthy individual and the most straight forward, albeit less exciting, way of coming out on top more often than not.

 

[Pain Applicant1]

DCA into index funds or good businesses that will be around for the next 30 years (i.e. MMM, MasterCard, Apple, Tractor Supply, etc.).

Have a master's in finance and worked in those circles in a different life. I know I'm not smart enough - and the large firms have more data than us little guys/gals - but a responsible covered call or straddle option every now and then rarely hurts anyone.

For those of you who are interested in leveraged index funds see below - I run somewhere between 40-60% of portfolio in a similar strategy.

Leverage for the Long Run - A Systematic Approach to Managing Risk and Magnifying Returns in Stocks

Using leverage to magnify performance is an idea that has enticed investors and traders throughout history. The critical question of when to employ leverage and

deliverypdf.ssrn.com

Are big finance guys smart? Yes. Are they smarter than me? Probably. Do they know more about finance than I do? Defintiely.

I don't think those are the issues. The problem I have with them is that no matter how much time they spend on research and analysis of a stock position and no matter how confident they are in their trade there's someone just as smart and confident who spent as much time analyzing as they did on the other side of the trade.

So I'll use the one and only advantage I have over them. I can sit and wait on the sidelines and do nothing. They can't afford to do this as no one will pay them to not do anything so they must constantly make trades.

 

[voxveritatisetlucis]

Are big finance guys smart? Yes. Are they smarter than me? Probably. Do they know more about finance than I do? Defintiely.

I don't think those are the issues. The problem I have with them is that no matter how much time they spend on research and analysis of a stock position and no matter how confident they are in their trade there's someone just as smart and confident who spent as much time analyzing as they did on the other side of the trade.

So I'll use the one and only advantage I have over them. I can sit and wait on the sidelines and do nothing. They can't afford to do this as no one will pay them to not do anything so they must constantly make trades.

The other big advantage retail investors have over professionals (especially ones who trade mark to market instruments) is time. Hedge funds often feel pressure to dump investments they believe in due to pressure from investors who want steady quarterly/annual returns.

There have been many top hedge funds that just shut down after not making money for a whole. Tiger (Julian Robertson) comes to mind.

 

[Pain Applicant1]

The other big advantage retail investors have over professionals (especially ones who trade mark to market instruments) is time. Hedge funds often feel pressure to dump investments they believe in due to pressure from investors who want steady quarterly/annual returns.

There have been many top hedge funds that just shut down after not making money for a whole. Tiger (Julian Robertson) comes to mind.

Yes, yes, and yes! They must constantly perform and perform well.

I don't think retail recognizes this but because of what you and I have mentioned we have the advantage over the institutional guys.

They call us dumb money which is fine, I'll take it as long as the cards remain in our favor over smart money.

 

[voxveritatisetlucis]

Yes, yes, and yes! They must constantly perform and perform well.

I don't think retail recognizes this but because of what you and I have mentioned we have the advantage over the institutional guys.

They call us dumb money which is fine, I'll take it as long as the cards remain in our favor over smart money.

Yes this is all definitely true. The most successful hedge funds and prop trading firms over time actually tend to be market makers (Citadel, Akuna etc.) since they can profit on both sides.

 

[runfastnow]

Are big finance guys smart? Yes. Are they smarter than me? Probably. Do they know more about finance than I do? Defintiely.

I don't think those are the issues. The problem I have with them is that no matter how much time they spend on research and analysis of a stock position and no matter how confident they are in their trade there's someone just as smart and confident who spent as much time analyzing as they did on the other side of the trade.

So I'll use the one and only advantage I have over them. I can sit and wait on the sidelines and do nothing. They can't afford to do this as no one will pay them to not do anything so they must constantly make trades.

Of course - many advantages to the individual investor compared to institutions if you can remain emotionally detached from the big downturns. Institutions can't easily DCA (or some equivalent) into good positions over long periods of time unless it is a passive fund of some sort.

I was speaking more to the sentiment in the thread at the time of trading options, etc. - the individual investor (especially one actively practicing medicine) will struggle to overcome the lack of available data and time to crunch it compared to the big institutions.

If you're invested in a fund that does "stuff" just to do "stuff" chasing quarterly performance you probably have your money in the wrong place if you're planning for retirement or on a generational wealth timeline.

 

[Pain Applicant1]

emotionally detached

I personally think this is the trick, although very difficult to achieve.

 

[deleted131481]

DCA into index funds or good businesses that will be around for the next 30 years (i.e. MMM, MasterCard, Apple, Tractor Supply, etc.).

Have a master's in finance and worked in those circles in a different life. I know I'm not smart enough - and the large firms have more data than us little guys/gals - but a responsible covered call or straddle option every now and then rarely hurts anyone.

For those of you who are interested in leveraged index funds see below - I run somewhere between 40-60% of portfolio in a similar strategy.

Leverage for the Long Run - A Systematic Approach to Managing Risk and Magnifying Returns in Stocks

Using leverage to magnify performance is an idea that has enticed investors and traders throughout history. The critical question of when to employ leverage and

deliverypdf.ssrn.com

How long have you been doing the leveraged ETFs? I saw this article on Bogleheads.

I tried just a few weeks with UPRO as a relatively minor part of my portfolio. I had specific thresholds when to buy and when to sell.

However, after those few weeks I realized I don't have the stomach for it. I was checking my phone too often, being distracted with my kids, etc. This was true during a dip and even when it was going up like yesterday.

I have about 15% in SPY covered calls. This I have been able to stomach without stress for the last 2 years. I just looked today and my return is basically equivalent to market return. My thought with this was to have some strategy that could do well in an extended flat market, not outperform market average.

 

[runfastnow]

How long have you been doing the leveraged ETFs? I saw this article on Bogleheads.

I tried just a few weeks with UPRO as a relatively minor part of my portfolio. I had specific thresholds when to buy and when to sell.

However, after those few weeks I realized I don't have the stomach for it. I was checking my phone too often, being distracted with my kids, etc. This was true during a dip and even when it was going up like yesterday.

I have about 15% in SPY covered calls. This I have been able to stomach without stress for the last 2 years. I just looked today and my return is basically equivalent to market return. My thought with this was to have some strategy that could do well in an extended flat market, not outperform market average.

Took their model and back tested to find a more accurate on/off switch than basic 200 day MA - been following that plan for about 5 years now. Percentage of my portfolio in the leverage ETF (UPRO, TQQQ) rotation bounces between 40-60% with entire IRA in the strategy + some in taxable account to minimize taxes from sales. Other portion of portfolio is mostly tech stocks and a few core holdings (MMM, Apple, Tractor Supply, Nike, etc.) with maybe 3-5% in bonds/cash. The last 15 months have been painful, but I'm worried about where I'll be in 2050 not 2025. There are certainly some unpleasant days, but have to grow a detached/cold heart when it comes to portfolio management.

The last 15 months have been rough on the way down holding my individual holdings (sold minimally out of real hardcore losers for some extra tax harvesting) while rotating out of leverage ETFs but leading into that had some monster years leading into recent bear market - 2018 35.0%, 2019 42.7%, 2020 58.4%, 2021 18.6%, 2022 (TBD - but probably down in 30s%). Sharpe around 1.3 and alpha (formal finance calculation version) around 6% because my beta is typically close to two.

2021 cap gains increased my taxes more than I'd prefer - but the raw gains have more than made up for the taxes for now.

 

[clubdeac]

I think my total net assets are down 12% for the year however I've leverage myself now about 25% cash with the remaining 75% in a 60/40 stock/bond mix. Once @Pain Applicant1 gives the green light, I'm going to start dumping that cash into the market

 

[lobelsteve]

Still in Fidelity Go index funds. 0.35% fees. It is down just like the market. I don’t check it. I can feel it and hear it in the news and on the wind.

 

[voxveritatisetlucis]

Still in Fidelity Go index funds. 0.35% fees. It is down just like the market. I don’t check it. I can feel it and hear it in the news and on the wind.

I’m curious why not vanguard? The fees on their similar products are sometimes 30+ basis points lower with more liquidity. VTI has net feeds for .03

It may not seem like a lot but .003 of 1 million is 3000

 

[Baron Samedi]

I’m curious why not vanguard? The fees on their similar products are sometimes 30+ basis points lower with more liquidity. VTI has net feeds for .03

It may not seem like a lot but .003 of 1 million is 3000

Fidelity Go is their robo-advisor, so not really comprable to VTI.

 

[Gauss]

Fidelity Go is their robo-advisor, so not really comprable to VTI.

fzrox ?

 

[Baron Samedi]

fzrox ?

Non-transferable fund. Wouldn't use, personally.

 

[Pain Applicant1]

I think my total net assets are down 12% for the year however I've leverage myself now about 25% cash with the remaining 75% in a 60/40 stock/bond mix. Once @Pain Applicant1 gives the green light, I'm going to start dumping that cash into the market

Lol! I think and hope you're joking. Any gains I've made can be attributed to 99% luck. I still haven't figured out what the remaining 1% is. I've made some decent trades over the past few years and I'm sure I'll keep making them. That is until I make bad trades and keep making those.

I haven't figured it out just yet but no matter how confident, charismatic, educated, knowledgeable, well-read, or whatever someone else may be, neither have they.

 

[Pain Applicant1]

My companies are still producing value all day. Boeing still making planes, Google still monopolizing online search, Verizon still charging by the minute. Must. Suppress. Gambling. Urge...

As foolish as I may sound I don't think this has anything to do with the stock market. I know it should and perhaps initially it did, but now there is no correlation.

They may produce value and widgets but this has no correlation with how the stock does for you. You don't see any of the profit they make. You're not salaried or bonused by them. If they return something to you in the form of a dividend it just gets taken out of the stock price so any gain you made would be exactly the same as if you sold that many shares. It's a zero-sum game.

The entire market is just based on the greater fool theory.

 

[mid|ine]

As foolish as I may sound I don't think this has anything to do with the stock market. I know it should and perhaps initially it did, but now there is no correlation.

They may produce value and widgets but this has no correlation with how the stock does for you. You don't see any of the profit they make. You're not salaried or bonused by them. If they return something to you in the form of a dividend it just gets taken out of the stock price so any gain you made would be exactly the same as if you sold that many shares. It's a zero-sum game.

The entire market is just based on the greater fool theory.

This is my entire fear of the market summed up and rings too true to me

 

[hyperalgesia]

As foolish as I may sound I don't think this has anything to do with the stock market. I know it should and perhaps initially it did, but now there is no correlation.

They may produce value and widgets but this has no correlation with how the stock does for you. You don't see any of the profit they make. You're not salaried or bonused by them. If they return something to you in the form of a dividend it just gets taken out of the stock price so any gain you made would be exactly the same as if you sold that many shares. It's a zero-sum game.

The entire market is just based on the greater fool theory.

The base layer of the stock market is value. The next layer on top of that is speculation of value, also known as growth. On top of that is speculation of speculation. That top layer is the one that captures your attention. It's the exciting one that dominates the day to day, hour to hour stock price fluctuations and news cycle. It is of no interest to long term investors but is all important for those with short term horizons.

A long term investment strategy doesn't return in the short term and neither does a short term strategy work in the long term. The important thing is to pick the one you're good at, recognize your weaknesses, and capitalize.

Don't buy stocks based on pure speculation for long term investment, like MNMD and WKHS. And don't buy long term investments like BA and expect a quick return.

 

[Gauss]

The entire market is just based on the greater fool theory.

now do crypto

 

[Gauss]

This is my entire fear of the market summed up and rings too true to me

Many people will tell you that we should simply implement obvious policy measures to address clearly solvable problems, but I say no. This is not the way of nature. We must sacrifice a goat to the rain gods and they will provide. We may even need to sacrifice multiple goats.
Some people want you to believe that sacrificing goats has no relationship with the economy. They want you to believe in lies. But if you read the old holy texts you will see many goats sacrificed and no mention of the need for monetary policy. Coincidence? It is not.

 

[Pain Applicant1]

The base layer of the stock market is value. The next layer on top of that is speculation of value, also known as growth. On top of that is speculation of speculation. That top layer is the one that captures your attention. It's the exciting one that dominates the day to day, hour to hour stock price fluctuations and news cycle. It is of no interest to long term investors but is all important for those with short term horizons.

A long term investment strategy doesn't return in the short term and neither does a short term strategy work in the long term. The important thing is to pick the one you're good at, recognize your weaknesses, and capitalize.

Don't buy stocks based on pure speculation for long term investment, like MNMD and WKHS. And don't buy long term investments like BA and expect a quick return.

Are you sure about that strategy? According to that data set collected by Research Affiliates I mentioned above, the approach you're recommending was the one outperformed by the "monkeys." It was the small, risky, spec, nascent companies like WKHS and MNMD that were the reasons the "monkeys" beat the market cap-based companies. While the majority of these companies go bust, the few that make it more than make up for it. Check out what Research Affiliates did and let me know what you think if you get a chance.

I don't think the market is that straightforward anymore and that's the reason the so-called experts get mediocre returns, and that's before the fees. There are far too many variables to just say stick with blue-chip, high market cap companies, and a small percentage of small risky companies.

 

[hyperalgesia]

I haven't watched the whole thing, but this is a fun look at the Gamestop/Robinhood adventure.