Feeling disconnected from friends as we have different views on life
I graduated college 3 years ago and bought my first rental property recently. Ever since, I’ve felt some sort of disconnect or judged from my friends as they view landlords as “leeches” who are just making housing unaffordable. I grew up in a low income area and a lot of my friends are high school friends, so I do get where they’re coming from. I worked really hard as well as a couple of side hustles to come up with this down payment and also had to buy hours away because it was the only thing I could afford but I saw potential there. It really makes me sad because I had a vision of expanding my real estate portfolio and feel like it’ll be a big part of my life going forward. Do I just not share this info with them? Anyone else felt this way or have any advice? I plan to FIRE in 10 years at the age of 35 - I’ve been really invested in stocks and options right now and I feel like I don’t really have that in common with them as well. I did try to explain to them about the more basic stuff like ETFs, mutual funds, etc but they see it as gambling... and rather keep everything in cash. I know it’s not my place to tell them where to put their money but I just thought that we’d be able to have more in common once they see the effect of their money growing. I’ve been friends with some of them for 10 years so I know they’re really caring and supportive. Edit: ahh thanks for all the responses. I’m overwhelmed lol also, I don’t discuss the exact money part with my friends. They just know that I have a house and that I’m renting it out (I had told them this initially not knowing their reaction). I think the most recent situation was that my house had a massive leak and I was pretty stressed, missed a couple of hangouts and I felt like I couldn’t tell them the real reason I couldn’t make it without feeling weird about it - I had to make up some other excuse. Also, I’m a girl for those who keep calling me “dude” in PMs lol
[Self Accountability] 2 BIG mistakes I have made in the past year and lessons I learned from it
Edit: Thank you for all the comment guys. I legitimately read through every single one of them and comment back if I have anything to say. Pt 2 is in the comments because when I originally tried to post with it in, the post was getting deleted by the bot. 1st Mistake I was up about 40% for the year of 2019, it was awesome, it was the first full year of working as an engineer and I have put in a bit of money into my investments. It felt REALLY good to see the growth it has done. Theeeeeen came the covid drop. I sold halfway down the drop, my entire brokerage portfolio and Roth IRA for about a 50% gains loss of my ENTIRE time investing. I did this because I believed that it will drop even more, which it did for a some days, but then it went back up, and back up, and back up, and kept going back up. I kept telling myself that it was a dead cat bounce and the market will drop even further than before and it never did. I tried to time the market and got rekt. I didnt even get back into investing late last year so I lost out on a good bit of money if I had just kept everything in. Lesson: Timing the market is hard. It is SO much easier to just keep everything in and put MORE money into your positions on red days. What I am doing now to not repeat the same mistake: I got back into the game late last year and I will not touch my investments ever again. I have also set aside a 4-ish month emergency fund that I will never touch. I believe part of the reason why I sold during the covid drop was also because I didnt have an emergency fund set aside and I got emotional with my investments. Now even my portfolio drops 50% in 1 day I still have 4 months of living expenses if I lost my job so I would still be carrying out my day to day living normally 2) Getting too greedy with GME or any other hyped up stock I bought GME because I wanted to "get rich quick". I put in $5k last Wednesday thinking I wouldn't take anything less than a $10k gain for some reason. Well I was up a good $3k Thursday, Friday, and Monday, but didn't sell because I was too greedy. I closed my position being down $3.5k. Had I held longer it would have probably be more like $4k or so now. Lesson: Hyped up stock is dangerous, if you really want to gamble, use only the amount of money you are willing to lose or just bet on a sports game, it will be easier. Greed is also a dangerous game. It is euphoric to see a couple of thousand dollars of gains in a couple of days no doubt, but seeing tons people on WSB making 5 to 6 digit gains blinded me on how much a few of thousand is. I thought it was too little and got too greedy and held the stock too long. I am hating myself right now for not selling in the green when I had the chance. Definitely learned that $5k was too much for me. If I want to play another meme stock it will be a lot less than that. What I am doing now to not repeat the same mistake: Unfollowing WSB and removing it from my Reddit home screen. I have put a big majority portion of my excess cash in my checking account into an S&P ETF for now and doing research on other stocks that I should be investing in. Having excess cash in my checking account allowed me the opportunity to spend it on dumb shit and gamble it away. I need forced scarcity to stay humble and stay focused about what I spend my money on. Maybe I will expand the 4 month emergency fund to 6 month and keep $1000 or $2000 at most in my checking account for day to day spending. CONCLUSION During both the Covid drop and GME hype for a week, I literally stared at my phone screen from when I woke up to 8pm when after hours closed. I wanted to see every movement of the market/stock and it consumed me. I definitely could have used the time to do my work more efficiently or literally do anything else. This is what happens when you trade with emotion, it can and it will consume you. The positive takeaway for both is that I am relatively young in my investing life. I am glad I made these few thousand dollar mistakes now rather than 10s or 100s of thousand dollar mistakes later on in my career if my portfolio had more money. If you read this entire thing then I thank you for your time and I hope you have learned from my mistake and wont do the same stupid things I did. If you had a similar story and would like to share, I would gladly hear about it.
A thoroughly confused late starter, advice appreciated
Hello folks, I started the retirement game very late. Life was being 'life'. I am 45 at the moment. I managed to put aside ~30K in IRA over 3 years. When I started, I was not well-versed with ETFs in general (still not as much), so I invested ~11K in VTSAX and ~2K in FTIHX. ~17K are sitting uninvested. I have been thinking if there is any way that I can partially recoup lost time. The market is running high due to cheap liquidity. Sooner or later the market is going to correct. I am hesitant to put in my small dough when the market is high and lose in the long run. On the other hand, you can't time the market. I am thoroughly confused about how I should proceed. If you were in my shoes how would you proceed? Which ETFs you would go in for a short term, abt a year or long term, as in invest and forget? Highly appreciate all suggestions/advice/pointers.
Finding my investment compass again after being sucked into WSB
With all of the GME/AMC craze over at WSB, I got kind of sucked into it. They're a crazy and funny bunch, but after spending some time there, my investment compass started spinning and I started to seriously question my sanity. It's like going to a wild party, coming home and then waking up with a huge headache in the morning, not knowing what the hell happened last night. I needed to remind myself about various investment theses and I am looking to rebalance. I thought I would share these thoughts in case it might help someone else as much as it helped me to put all my thoughts down on. 20% - Canadian REITs. These got hit hard in March 2020 and their share price have not recovered much even though many of the larger REITs have good balance sheets, cash flows and rent collection. They are still massively undervalued, given that everyone is going out and buying houses and over bidding by 100k+, driving up the price of real estate in many major cities. The Canadian government wants to boost immigration, which is bullish for real estate. It's a nice time to jump in and hold for the long term. I don't use ETFs here since I have spent a lot of time analyzing many Canadian REITs. My favourites are HR.UN, IIP.UN, KMP.UN, SRU.UN, SOT.UN. 20% - ARK Innovation ETF (ARKK). Cathie Wood's investment thesis is all about investing in disruptive innovation. Through her team's open research, they actively try to find companies of the future (before they become big) to invest in. I came to the game way too late (around December 2020). I admit I was skeptical about ARK. But after listening to Cathie's interviews and videos, I started to gain a lot of respect for her investment intellect and knowledge in the space. I also feel confident ARK is also watching & assessing the macroeconomics side of things and how it affects the companies in their portfolio's and allocating appropriately, as best as they can, which is worth paying the higher price for this ETF. For now, I would only stick money into ARKK and none of the other more specialized ones. I think ARK could do well in the next few years, but I am uncertain they will keep doing well in the very long term (decades). 30% - US Total Market (e.g. VUN, XUU). Jack Bogle's thesis about being in everything and being diversified in your investments. The US total market ETFs hold over 3000 companies of all sizes and diversified in many sectors and types of businesses. If you look at the charts, the share price of this index has been rising since the US federal reserve started their QE program. They are obviously still doing it after the crash in March 2020, creating a huge amount of new money, and that is part of the reason why the US stock market has been going up fast. The US dollar is the reserve currency. The US economy is large and everyone is linked to it. Basically, it's diverse, "too big to fail", and has the backing of the fed & reserve currency. The fed will keep jumping in to prop it up (e.g. Great Recession, COVID pandemic) since retirees and pension funds can't be compromised too much by this index taking decades to recover. With their embrace of MMT (whether right or wrong), I don't see this dovish stance changing anytime soon. Why wouldn't you want to invest in this rather safe basket of equities? 10% - High risk & semi-gambling. I think it's good to allocate a small portion to more high risk type of investments that don't have much correlation with the main index. These could be precious metals, miners, crytocurrency, YOLO/momentum stocks (shrooms, cannabis, DOC.V, NUMI, AMC, GME, etc.) at no more than 2%, emerging market stocks/etfs. 20% - Cash. You always want to have some dry powder lying around in case of a massive black swan crash, or dips. The distributions from REITs can help replenish this reserve every month. I think it would also help stabilize the portfolio a bit more. Currently, I have no allocation to bonds. I am also not close to retirement (still have 25 to 30 years) Interest rates are low everywhere so I don't think bonds are worth it for now. I am also a bit skeptical about investing in the Canadian market because there is a lot of oil & gas and financials. I get that oil isn't going away soon (heck they might even do extremely well once the pandemic is over and people want to travel), but wonder if institutional investors will start to move away from such stocks sooner than we think (market being forward looking). I get that the big Canadian banks are too big to fail, but I think many of them are behind the times (resting on their laurels & not treating customers right since I don't know anyone who actually loves their big bank)... Interest rates are also very low so they're not making much from lending.
Also on my blog with better formatting, cute footnotes and inlined images. Note that not much here is new material, mostly rehashing existing points.
Disclaimer
This article started out as research for my betting against Bitcoin on the stock market. This isn't financial advice. As a matter of fact, I encourage all readers you to not buy or short crypto, through any market or derivative. Use your money for productive uses. Here's a TL;DR:
The current parabolic price increase in Bitcoin is a bubble that has started popping.
A stablecoin called Tether is either one of the largest frauds or money laundering operation in history, and is providing most of the liquidity in the cryptocurrency ecosystem.
Proof of concept: No argument here, but now that the market cap of cryptocurrencies is closing in on a $700B, this seems moot.
Cheap Payment Network: Nonsense, since BTC transactions are currently >$10 and this worsens the more people use it.
Anonymous Darknet Currency: I'd have said "no argument here", but apparently it's surprisingly easy to trace BTC nowadays. However, crypto ecosystem as a whole seems to do a decent job at laundering money as we'll see later.
Reserve Currency for Crypto: Since a reserve currency should be useful as a means of exchange, and I wrote several thousand words on how BTC is not that, my position is pretty clear. Also, the fact that a cryptocurrency indexed to the US dollar has trounced BTC as the main means of exchange in the crypto ecosystem speaks for itself.
Programmable Shared Database: You know what's programmable, shared and a database? The database we use at work. Just learn to implement access control lists on your SQL server.
Uncorrelated Financial Asset: Given BTC crashed just like the rest of the market when COVID showed up, this doesn't hold up
The stupidest version of the "uncorrelated asset" argument I hear is "Bitcoin is a great hedge for inflation!" You know what's a good "hedge for inflation"? Literally anything. The definition of inflation is "the price of money". If the price of money goes down (inflation) then everything else has a positive return by comparison. People who say "bitcoin is a good hedge for inflation" shouldn't be trusted to manage their own money, let alone give financial advice to anyone.
Censorship Resistant e-Gold: This is a roundabout way of saying "BTC is a store of value"! Which, again, can only be said by people who've never read the definition of "store of value" in a textbook.
I already went into detail into this, but BTC is a terrible store of value because it's volatile. Assets that can lose 20% of value overnight don't "store value". BTC is a "vehicle for speculation". The only way price is sustained for BTC is that you can find some other idiot to sell it to. Just as a reminder, 50% of Gold is used for things that aren't speculation, like Jewelry, so you'll never have to worry finding a seller there. Here are some real uses for bitcoin:
Gambling is fun. You buy BTC, the price might go up! Or down! This is exciting.
Hackers, money launderers and other criminals certainly find cryptocurrencies useful.
Reminder: BTC is an ecological scourge The current cost to mine a BTC is around $8000 in electricity. This electricity mostly comes from subsidized coal in China. And given the current amount of BTC generated each day, we're using about equivalent to the electricity from all of Belgium, largely in coal, to keep this going. I don't mind wasting time on intellectual curiosities, but destroying our planet for glorified gambling is not something I'm happy about. I want cryptocurrencies to go away entirely on this basis, philosophically.
Current BTC prices are a bubble
Before we go into tether, reminder that at the time of writing, the plot of BTC price against the S&P500 looks like this BTC price has increased by ~800% since March. Still, no one uses it for anything useful since the last bubble in 2017, or the other one before that in 2013. This is another bubble however you put it. BTC is not "new technology" 10 years the internet became popular, Google and Amazon already existed. We're 8 years after the popular emergence of deep learning and it has already revolutionized machine translation, computer vision and natural language processing in general. You could argue that deep learning and the internet existed before their emergence, but so did cryptocurrencies. Look up b-money and hashcash for instance. Bitcoin has existed since 2008 and emerged in popularity around the same time as deep learning did, yet we're still to find actual uses for it except speculation and criminal uses. It's a solution waiting for a problem. Institutional investors are also idiots The narrative this time is that "institutional investors" are buying into BTC. This doesn't mean it's not a bubble. Many of the institutions were buying through Grayscale Bitcoin Trust. Rather, many of them were chasing the premium over net asset value that hovered around 20%. Basically, lock money in GBTC for 6 months, cash out and collect the premium as profit. Of course, this little Ponzi couldn't last forever and the premium seems to be evaporating now. Similarly, totally-not-a-bitcoin-ETF-wearing-a-software-company-skinsuit Microstrategy (MSTR) trades at a massive premium over fundamentals. There will always be traders chasing bonuses from numbers going up, regardless what is making the number going up. The same "institutional investors" were buying obviously terrible CDOs in the run-up to 2008.
Tether is lunacy
Tether is a cryptocurrency whose exchange rate is supposed to be pegged to the US Dollar. Initially this was done by having 1-to-1 US Dollar reserves for each tether issued. Then they got scammed by their money launderer, losing some $800M, which made them insolvent. Anyway, now tether maintains their reserves are whatever they want them to be and they haven't gotten audited since 2017. You know, normal stuff. There's a problem to backing your USD-pegged security with something that isn't US Dollars. Namely, if the price of the thing you're backing your US Dollars against goes down, you're now insolvent. If you were backing $10B in tether with $10B of bitcoin, then the bitcoin drops by half, you're insolvent by $5B. And then this spotlessly clean company they somehow added $20B to their balance sheet in the second half of 2020 Reminder: one side of that balance sheet is currently floating around the cryptocurrency ecosystem. Cryptocurrency traders own it as an asset and sell it to others. The other half of the balance sheet is whatever tether wants. There are only two possibilities that explain tether's growth:
It could also be a happy mix of both. One particularly interesting date is 30/8/2020, where tether added $3B to its balance sheet overnight. This is interesting because it predates the subsequent movement in bitcoin price and large movements in other cryptocurrencies. The story from tether and tether's bank's CEO is that this money largely comes from foreign nationals through an OTC desk which implies the transaction goes as following:
That OTC desk converts the money to USD and sends it to tether's correspondent US bank. The OTC desk gives tether to the foreign national.
Wait tether has a correspondent US bank?
Oh, I forgot to mention, no bank wants tether as a customer because they obviously break KYC/AML compliance. So tether first boughtinvested in a bank called Noble which then lost its relationship with Wells-Fargo when they realized tether were lying to them about AML. Poor tether lost its legal access to USD. Tether has been banking in the Bahamas with a bank called Deltec since. First they had a money launderer called Crypto Capital Corp to send funds to customers, who stole the $800M from them and subsequently went to jail. But worry not! Tether found a way to get banked in USD afterwards. Curious coincidence, an executive at Deltec was randomly blogging about buying small US community banks in 2018. You know, that thing money launderers do. So tether's story is that in 2020, they took in roughly twenty billion USD of shady foreign money into the small community US bank their deltec bankers bought. These transactions are necessarily breaking KYC/AML. The foreign parties to those transactions wouldn't take such a rickety route to convert billions into cryptocurrencies if they weren't laughed out of the room in serious banks. But of course, Deltec will say it did KYC on tether. Really solid KYC, clearly, since they're the last bank on earth taking tether's business. Tether says they do KYC on their customers (the large OTC desks). And I'm sure the OTC desks would be shocked, shocked if the cash money they get in Russia and China turns out to be dirty. So everyone can pass the buck of responsibility down the road and claim "We do KYC on our customers". Sure you do, tether. If you did such great KYC, you wouldn't have such problems finding banking relationships. I mean when even HSBC is not doing business with you you're apparently more obviously moving criminal money than fucking drug cartels. And, according to tether's people, this money is what's backing tether's reserves. Money that will get frozen the instant a prosecutor even looks at it. Reminder: the above is the charitable, positive case for tether. The less charitable case is that they took crayons and added zeros to their balance sheet, and that there's a couple billions waiting to burn a hole in the crypto ecosystem. Anyway, the $25B garbage fire that is tether will make a great book/netflix series at some point and their hilariously stupid CTO going on podcasts while flinching on questions about how BTC ended up on their balance sheet will be a fun part of it. But I'm not here to write a book, I'm here to make money by shorting all of this. For my purposes, even in the positive case tether is a ticking time bomb waiting to burn a hole in the crypto ecosystem, because...
KYC and AML are coming for cryptocurrencies
If you listen to "crypto news", all incoming crypto regulation is just great, because that means crypto is becoming legit. However, companies investing in crypto are very angry about them. This is because crypto transactions break the FinCEN travel rule, where KYC information should "travel" along transactions, to prevent money laundering obfuscation schemes. Of course, according to the crypto industry this is "stifling innovation". A more reasonable take is that by being leaving the crypto industry outside normal financial regulations, we're enabling a "race to the bottom". As we saw with shadow banks in the 2000-2007 era this leads to "creative banking". I don't want my bankers to be creative, I want them to be solvent.
Tether's effect on the crypto ecosystem
When tether implodes, it's taking most of the crypto industry along for a fun ride. Tether can implode in one of a few ways:
A BTC price crash triggers it. If
Regulators decide they've had enough of AML avoidance and regulate them.
The NYAG investigation, which is waiting for an update in a few weeks, finds something and shuts them out.
Let's assume tether falls to $0 for simplicity. The analysis is the same directionally if tether significantly "breaks the buck". This doesn't happen instantly, but it happens quickly. The peg breaks, and most people holding tether will try to sell it for other crypto (BTC, ETH, etc.). This puts downward pressure on the price of tether, incentivizing even more people to "pass the buck". Automated inter-exchange arbitrage bots might try to exploit emerging gaps in bid-ask spreads, only to end up with worthless tether instead, as their operators rush to pull the plug. Then, we have a small village of cryptocurrency enthusiasts being out some $24B. With the trading bots turned off and the trading lubricant (a dollar pegged asset) gone, the bid-ask spreads blow up. You get a predictable flight to safety -- that is, to real money. This puts downward pressure on BTC. While all of this is happening, there are all sorts of fun second-order effects happen. A lot of DeFi derivative products are priced in cryptocurrencies, so having normally stable prices shuffle around (eg. USDC price moving above $1 in a flight to safety) triggers a tsunami of margin calls. Some exchanges might insolvent (they're the ones redeeming tether for USD after all).
If BTC price drops below $8000, fun things happen
Currently, the price to mine a BTC is roughly $8000. Most of the mining comes from huge mining farms using subsidized coal in China, and mining costs more the more hardware there is to mine it. Since the price of BTC hasn't substantially dropped below cost to mine we're in for a fun experiment if the price drops below this threshold. Most of these farms should turn off so that the price to mine comes back to breakeven in a case of prisoner's dilemma. But if too much hardware turns off, this leaves mining hardware idle and the door becomes wide open to a 51% attack. It's not clear at what price below breakeven cost to mine a 51% attack becomes a serious threat, but once this threshold is crossed, we're in the "irreparable harm to BTC" risk zone. And for a person like me, who just wants to see crypto disappear forever this is very exciting. Maybe those mining farms could be replaced with nice forests soaking up all the carbon they emitted for posterity. One can hope.
How do I bet against all of this?
Microstrategy (MSTR) is, at this point, a bitcoin ETF wearing the skinsuit of a dying software company. Michael Saylor, MSTR's CEO, is quite the character. I wrote a lot about his lack understanding of what a currency is, but it's on another level to look at the early stages of a bubble pop and decide this is a good time to buy $10M more of the stuff, as seen here However, this bubble is tame by Michael's standards. Look at the historical stock of his company What's happening on the left is that Saylor pumped the numbers with accounting fraud then the SEC took issue with the fake numbers. The stock dropped 90% practically overnight. Their accountants, PWC, paid $51M in fines. Saylor and friends paid fines, partly with company stock. You could also short GBTC, but when Mr. Saylor provides you with an options market instead, why not use it? Shorting on crypto exchanges that might become insolvent in the very event you want to happen with this bet is a bad idea, on the other hand.
Mike can't cash out
The bitcoin market is illiquid and leveraged when it comes to real money coming in and leaving the ecosystem. Buys in the $10M-$100M seemingly move the price of BTC by upwards of $1000 in the last weeks. This means hundreds of millions of real money means tens of billions in movement in BTC market capitalization. Now imagine what cashing $1.1B of BTC into real money would mean for the price. And this is purely in market terms, before the PR damage from bitcoin's demigod abandoning ship would have second-order effects. Saylor has painted himself into a corner. Even if he wanted to cash out, he can't.
MSTR fundamentals: Why it should be valued below $10
In early 2020, MSTR was a slowly dying business. The EBITDA has been rapidly evaporating in the last 5 years At that point, MSTR a stock price of $115 meaning a market cap of $1.1B. This included some $560M of cash they were sitting on. I presume the remaining $550M was an implicit sales premium for the inevitable private equity firm investors expected was going to relieve them of this stock and make the business profitable again. Of course, they didn't sell. Instead, they took the $560m they were sitting on and bought $400m of BTC at prices $11k and $13k in late summer 2020. Then, in early December, they took on $600m of debt to buy BTC with at $23k. They also bought $10m more in January at a price of $30.5k. At this point, we can mostly value MSTR like a trust.
Price the underlying software business as being worth $600M, as the market did before the bitcoin nonsense. If BTC went to $0, this is what we'd value it at, and the MSTR stock should be around $65.
But wait! MSTR took on $650M in debt in December. Their actual value with a BTC priced at $0 should be much, much lower than $65 depending on how you value the debt. You could make an argument it should be in the single digits.
They hold 70,784 BTC. At current prices ($32,000) this is worth roughly $2.2B. With the current market cap of MSTR ($577 stock price), this means MSTR is currently priced at an eye watering $3B premium over fundamental value.
GBTC's 20% premium-to-NAV is a joke compared to the MSTR premium.
If you recently joined this group because of the current GME craze, welcome! I know that everything happening right now is really exciting and makes you want to jump on the bandwagon, but please be careful. Let me start by saying what we are seeing right now is NOT NORMAL. Like at all. Like this is never gonna happen again. I think it's very concerning how many people are investing large sums of money into these stocks without knowing a single thing about investing. That is not investing. That is gambling. If you are okay putting a small portion of your net worth on GME, then by all means go for it. But you have to treat that money as if you have already lost it all. People are gonna get hurt by their wild optimism. ADVICE: Instead of dumping money into GME, start educating yourselves on the market and build good investing habits. Look into ETFs, mutual funds, growth stocks (start with VTI, VOO, SPY, QQQ, ARKK etc). Be consistent. Educating yourselves now will be way more helpful for your future than blindly investing in companies because Reddit said so. All in all I think its a good thing that the GME situation has more gotten people interested in investing, but I really worry that people will get in trouble by not learning the basics and jumping in the deep end with money they can't afford to lose. Please be smart. Good luck everyone!
I've noticed a lot of new people in here asking some obvious questions to those of us who have been around for a while. So to generate new and better discussion I want to answer some of these frequently asked questions.
1. Where can I find information about these companies I hope you haven't bought any of these names before you did research and before you even know where to start looking. First place you should go to is Google and type in " investor relations". If this is too much you can shorten it to " IR". It should be the first link in every case and if it's not then that's already a red flag. Read about the companies products, how they operate. Read their MD&A, read their financial statements from the last few years. Maybe look at product reviews or review the products yourselves. Watch interviews with the CEO. Find out what makes this company unique, operationally effective and worth buying for consumers. You should quickly figure out that APHA is NOT a cannabis company, but a consumer packaged good company. They own Cannabis, Alcohol, and Pharma businesses (plus hemp after the TLRY merger). Doing your DD should take time. Don't be in a rush to buy the stock because it's run up 100% in the past few weeks. If you look at the chart, 2 years ago these companies rocketed upwards to ATHs, you could have waited another year or so and bought lower. Are we taking off to the moon and never coming back? Probably not.
2. Where can I buy these companies? Are they on Robinhood? First, ditch Robinhood a get a broker that won't go under in the next few years. Pay a trading fee if you need to but just buy enough stock to make the tade worth it. Don't buy $20 of Apha on investorline or you're immediately taking a 50% haircut with a $9.95 trading fee. Second, you can buy these companies on most/all legit trading platforms. I won't name them all but all of the big Canadian banks self-directed platforms have them. I'm not American so I can't speak for them but I've heard good things about Fidelity and Vanguard. Oh, did you also mean what exchanges can I buy them on? Big Canadian names are on the major exchanges like TSX and Nasdaq. Smaller names are on the CSE and OTC markets. US names can't list on the big exchanges because your government decided cannabis was bad like 50 yrs ago so those are only on the OTC and CSE markets. MSOs is a fund on the NYSE (I think) that hold some sort of swaps on the US names but I personally just buy the names myself. Again, do you own DD, even if you're buying a fund.
3. This stock went up x% in the last y time, should I buy it or wait for a dip? This ties into point 1 above, so if you've done your DD you should know if the company is worth what it is priced at. The market does wacky shit all the time (see Gamestop, morgage crisis, great depression) so it'll go up and down, but generally follow along the trajectory of the company profits. If the profits increase by 5x in 10 years, the stock price will do the same. If you're asking for predictions in the short term consult a fortune teller, roll dice or find one of those pets that pick stocks.
4. What stocks should I buy? How do you feel about x company? See 1, then 3. I can't tell you what companies are good in the space better than your own research. Especially since you don't know what my plans are. Maybe a poster says buy "Apha" but they're only holding until the TLRY merger closes. They'll never tell you when they're selling so if it drops you'll be scratching your head. Do a bunch of research on the main players, then some smaller guys and figure out what you can stomach. Maybe a cannabis ETF is right for you or maybe 1 or 2 strong picks or maybe you like gambling with penny stocks. Just do your own DD. Popular names and good places to start are:
Canadian names: APHA/TLRY, CGC/WEED, ACB, CRON
US names: CURA, TRUL, CL, GTII
5. Should I buy leaps or warrents or calls or puts? Also what are derivatives? If you have to ask, no. I'm also not going to explain because I don't know either.
6. I bought Gamestop at all time highs and I sold and lost 90%, is cannabis good? No, kindly take your paper hands and go back to WSB. We don't want investors in this space who sell at the first 10% drop after an 100% run, or after a 50% drop from ATHs, or after a short report from some short selling parasites. We hold because this is a once in a lifetime opportunity of a product moving from the illicit market to the legal market. There is no need to build up demand, merely move the consumer from buying from their dealer to our dealer. This will take time, regulatory changes, perception changes and most importantly, your patience.
7. Any small companies you can reccomend? Being a small company in this space comes with distinct disadvantages. Price compression in Canada will kill small/medium sized growers since they can't achieve postive margins without scale. Add in some mould on even 1 harvest and the losses have destroyed your business. On the US side, regulations are weird and vary across different states. Califonia is a dumpster fire, Florida requires you to be vertically integrated, and other states have limited licences for retail and grows. Think about how hard it would be to get a foothold in Florida as a small business. Think about how valuable a licence is in limited licence states. Maybe your small player is looking for licences and gets NONE. That's devastating. Curaleaf misses 1 licence? Not great, but they have other applications in multiple states. If you're buying a small company or penny stock, know the risks and do extra DD. THERE HAVE BEEN COMPANIES THAT ARE FRAUDULENT IN THIS INDUSTRY. COMPANIES HAVE GONE BANKRUPT IN THIS INDUSTRY. Canntrust was legit but had fake walls with more plants behind them. Ignite was run by Dan Bilzerian. YOUR PICKS ARE NOT IMMUNE FROM GOING BANKRUPT. Let me repeat the most important point: THERE HAVE BEEN COMPANIES THAT ARE FRAUDULENT IN THIS SPACE.
8. I wanna buy because of US legalization! When will Cannabis be legalized in the US? Asking for a specific date is dumb and assuming that it's going to pass is dumber. Yes, Democrats control all 3 branches of government and yes, they are more cannabis friendly than Republicans and yes, some Republican states also recently legalized cannabis. THIS DOES NOT MEAN LEGALIZATION WILL PASS THIS YEAR, OR EVEN UNDER THIS CONGRESS OR PRESIDENT. Some Republicans in the house voted for cannabis regulation under Trump and some Democrats voted against it. We have no idea how the senate will vote and it doesn't take many votes to torpedo any legislation. If you know the US Cannabis space right now you'll know that descheduling and getting access to lower tax rates, access to capital and ability to cross state lines are some of the most important regulatory changes that need to happen. Look up the 208e280e tax code. Seriously do it. Full legalization is nice but also unlikely.
If I've missed any questions post them below. and I'll add them.
TL:DR: Do your own DD. Start here:
Canadian names: APHA/TLRY, CGC/WEED, ACB, CRON
US names: CURA, TRUL, CL, GTII
EDIT: Adding in some resources for those who want more. These are my own resources I use/used to get started. If you have resources to share please do so but don't self promote you ding dongs.
Resources New to Investing:
Most people think Warren Buffet is the GOAT but Peter Lynch is also a GOAT in his own right and a better speaker.
People also think you need to read through all of "The Intelligent Investor" before you can start investing but that's bs. Read "One up on Wallstreet" by Peter Lynch. It's like 300 pages shorter and more fun. Then read Intelligent Investor if you want but if you get 20 pages in and fall asleep or feel stupid then I told you so.
Martin Shkreli is an asshat but he knows the finance side of valuing companies. His finance lessons are awesome if you stand him for a few hours at a time. Follow along with your own companies.
Cannabis Resources:
The sidebar has great resources. Stateside cannabis investors(EDIT: Currently down) is awesome for the US side.
The OCS releases a quarterly report you should read for Canada. Hell, go to OCS.ca and see what products are available and prices. Go to the BC page, the quebec page etc...
Statscan has a cannabis hub. It's updated super rarely and it might be archived but it's good to look at to start.
Greeting Theta Gang boys and girls, I hope you're well and not bankrupt after last week. I'm just now recovering mentally myself. I saw a few WSB converts and some newbies asking for tips, so here you go. V2 of my Options guide. I hope it helps. I spent a huge amount of time learning about options and tried to distill my knowledge down into a helpful guide. This should especially be useful for newbies and growing options traders. While I feel I’m a successful trader, I'm not a guru and my advice is not meant to be gospel, but this will hopefully be a good starting point, teach you a lot, and make you a better trader. I plan to keep typing up more info from my notebook, expanding this guide, and posting it every couple months. Any feedback or additions are appreciated Per requests, I added details of good and bad trades I made. Some painful lessons learned are now included. I also tried to organize this better as it got longer. Here's what I tell options beginners: I would strongly recommend buying a beginner's options book and read it cover to cover. That helped me a lot. I like this beginner book: https://www.amazon.com/dp/B00GWSXX8U/ref=cm_sw_r_cp_apa_OxNDFb2GK9YW7 Helpful websites:
Tasty Trade (TT) and Ally Invest have helpful articles and videos.
ITM: In the money; strike is below stock value. Signif
ATM: At the money; strike is just at or above the stock value, often very highly traded. Can be very effective with moderate - long term expiry.
NTM: Near the money; strike is above the stock value, but fairly close. Slightly unofficial term.
OTM: Out of the money; price is at least a few strikes from the current stock price. I would say 10-30% over stock price.
Very OTM: Not a real definition, this is essentially a lottery ticket. Cheap, but almost certain to expire worthless unless there is explosive movement.
Understand delta in general and how delta changes with ITM and OTM options.
IV, IV crush, and how IV affects pricing. In general, you want to sell when IV is high and buy when the IV is low. Increasing IV is good for held calls/puts. IV drop or crush is generally good for sellers.
Selling options can be quite beneficial. Once you have a good general understanding, lookup thetagang . Kamikaze Cash has good youtube videos on most theta strategies (linked above). I personally believe selling options (especially cash secured) is much safer and can consistently make you profits. Θ Gang 4 life.
FOMO and how to avoid chasing a dangerous trend. DO NOT CHASE FROM FOMO!
What intrinsic and extrinsic value are. Know how they are affected by being exercised/assigned and how theta affects them.
Understand that some of WSB recommendations are straight up high-risk gambling and factor in the information accordingly. Be careful with Meme stocks and the survivorship bias on YOLO plays. However, I love the sub and think it’s hilarious. It has a lot of valuable information / DD if you are comfortable with the “colorful” language. It’s also great if you like rocket ship emojis.
Basics / Mechanics
Understand the 4 "main" option types. Buying or selling a call and buying or selling a put. Spreads and more complex multi-legged option strategies are based off these in some way (see below)
You can sell calls with 100 shares of stock or if you own an underlying longer term option; see LEAPS and PMCCs later. Selling calls naked is incredibly risky and often requires Level 4 (very advanced) permissions and usually a lot of capital. I will literally never sell calls naked since I don't want to ruin my life and end up living in a dumpster eating saltine crackers.
Puts can be sold/written cash covered (cash secured), which means you have the cash in your account to buy 100 shares. Your broker will put this money on hold until the trade is closed. Puts can be sold "naked" using Margin and Level 3 (with most brokers). Your broker will hold a percentage of cost of 100 shares (often 30-40%, 100% on meme stocks) allowing you to sell more puts. This increases your available capital/power as well as increasing risk.
General Tips and Ideas:
Don't EVER leave (short) spreads open on expiration day, close them. (more details below)
Start off trading very small. Slowly build up over weeks / months. You need to get accustomed to a fifty dollar swing a day, then a few hundred, then a few thousand. You need to ensure you don't get emotional (see below). I started trading options with 5k, then 25k, 50k, and later over 100k. I added my own funds over time and used my gains to build my account. Don’t go all in immediately, that’s dangerous and unwise.
Especially as you build up the amount of money you have invested, keep it diversified among several stocks.
Don't go all in on one thing, ever. Be able to take a hit from one stock and not mortally wound your portfolio.
A company may be doing great, then there's a major product issue out of nowhere. If you are overexposed in one stock this can really hurt you.
I had to roll options I sold that were about to expire completely worthless because FDX's CEO changed and the stock took a hard dip.
Don't trade emotionally. If you realize you are emotionally trading for vengeance, you should probably exit the trade and cool off for several days with that stock. Same if you get caught up in a wave of hysteria.
Have a plan for every trade, ideally with entries / exits that are specific values, ranges, or a set condition. This helps remove emotions. This is super important for strong movements and high volatility (see later).
Use an options profit calculator from your broker or an online one before entering a "new" trade, especially a complex multi legged trade: https://www.optionsprofitcalculator.com/
“Rolling” an option: Closing your existing option and opening a similar one at different strike and/or expiration.
Rolling a call “Up” would be selling a call you own and buying a cheaper call at a higher strike.
Rolling a put “Down and out” closes your original one and buying or selling one at a lower strike at a longer expiry.
Better broker interfaces have a literal “Roll” button. I know E-trade does. You can manually do it by selecting relevant contract legs.
If you have a losing trade, re-evaluate it. If your initial assumption is definitely incorrect, close it. Don't stay in losing trades forever and lose the entire value of the option over stubbornness. If you re-evaluate and you think your assumption was right, hold, potentially consider adding another cheaper option (or buy another call / put). Rolling out sold options can help here.
Don't try to day trade, especially with options. It's statistically unlikely to be profitable. Day-trading with options introduces extra liquidity risks and is dangerous, especially with spreads.
Try not to over-trade, you'll likely mis-time the market over time. When I get emotional I over trade, then lose additional money on wash sales. If you scale your entries into positions it should help alleviate your desire to exit positions when they turn badly against you. Whenever I buy calls I do it at larger increments after W almost made me loss my hair; luckily it eventually came back.
NEVER enter a position on a stock you have no idea about, especially when you read about it online or heard about it from some rando.
At market open options contracts are often volatile and inflated. Buying during this time can be more expensive. Options are usually cheaper mid-day, I read somewhere 2-3PM is cheapest. I’ve had success around 12-1PM EST after prices settle.
Try wheeling on cheaper stocks once you get all fundamentals down.
When selling puts if you are very bullish consider "doubling down"; note this is higher risk. Use the credit from your put sale to buy shares or a cheap call. This can be roughly inversed with puts, except I wouldn't ever recommend shorting shares.
Learn from your mistakes. You can’t go back in time and beating yourself up (to a point) is useless. Make a physical &/or mental note of it so you don’t do it again. If you don’t learn from it, then beat yourself up so you won’t do it again.
If you have friends that like to trade, I find it helpful to discuss strategies and planned plays. I talk openly with my close friends about my current holdings and planned trades, it helps keep me accountable. If I get a wide-eyed look, I might be doing something excessively risky or stupid. I’ve over-leveraged myself in calls twice and I knew I shouldn’t have done it both times. When I tell my friends what I did and I’m embarrassed, it exemplifies the face that I shouldn’t have done it in the first place. You will also get ideas for new strategies or plays from them. It’s good to stay versatile and use multiple strategies when appropriate. Beware of group think/echo chambers.
I recommend NEVER telling someone what to buy/sell and when. I’ll tell people MY plays or what I like and why, but I will not encourage them to emulate what I do. Depending on the audience, I’ll tell them my exact positions along with my exit and entrance strategy. With closer friends I’ll offer my thoughts on their trades (if asked). If my friend is doing something really risky (one of my friends does some scary stuff) I may ask them if they want my advice, and provide it, especially if they overlooked a risk/event. I will not encourage someone to execute/enter a trade since it has a high potential for hurt feelings or animosity all around.
Don’t fall in love with a stock. Just because something made you money before and you have high confidence in it doesn’t mean it will keep performing. I joke that FDX betrayed me when it started dipping and losing me money. I was over-confident of its bounce-back and sold too many puts too quickly. I’m in several losing trades because of it. However, I will keep good stocks in my rostetracking list or try different strategies or re-enter trades when they change their behavior.
As you start to both buy and sell options and get more experience in general, you'll start seeing the two sides to every trade. You will likely start adjusting your strategies or trying new trades out because of this. Things will likely click one day. Most/all the greeks and options concepts will become almost second nature. For me this was when I could build an Iron Condor from scratch, which was a watershed moment involving a good understanding of many strategies.
Understand Liquidity and volume.
Trading in low volume, low open interest contracts results in wide bid/ask spreads and difficulty having your contracts filled. Look at all the data for a contract, not just the strike and price.
Monthly Expiration dates typically have better liquidity.
Multi-legged trades (Common examples are 2-legged vertical spreads or 4-legged iron condors) have more difficulty being filled, especially on bad brokers like Robin Hood. Having very liquid options for all legs is extremely helpful in obtaining timely and well-priced fills, which maximize your potential profits.
Time in market vs timing the market:
It is extremely difficult to time the market perfectly. If you wait for the perfect opportunity forever, history has proven you will miss out on gains. Keeping all your money out of the market has proven to be ineffective. Now if there is something serious happening with a stock/the market (like say a new pandemic), don’t go all in. I recommend entering incrementally at dips. If the stock has huge upside potential it may never go down, so it might make sense to partially enter at the current price.
IMIO selling puts is a great strategy to get into a stock you like, or at least make money off it. I think buying stock in lots of 100 is usually for suckers. Selling an ATM or ITM put (assuming the math works out) on a stock you were going to buy and hold is ALMOST free money.
I recommend keeping some cash available regardless. If you have a very large account or expect a downturn, hedging with indexes like QQQ, SPY, or VIX or calls/puts may be wise.
Every trade can't be a winner. You will take some losses, you must get used to it. I don’t like having a realized loss of 1K or more on any trade. However, this will happen, especially with larger accounts.
As long as you win more often and beat the S&P that year I consider it okay. I’m kind of aggressive, so I consider 20%+ annually good. 30%+ annually is great. 40%+ and I’m dancing. After trading options I am almost baffled by my old belief that 5% annual returns (mostly from dividend ETFs) was “good”. That’s nothing to me now since I’m willing to take risks. Note: While lots of people danced in 2020, realize that’s an insane Bull Run year and is atypical.
Adhere to your own risk tolerance and never over-extend yourself, especially with margin use. Don’t make huge gambles leaving you uncomfortable. Only gamble with money you are willing to lose.
My personal strategy is to make safer gains for the year and then enter slightly riskier strategies using those gains. I can be slightly-moderately more aggressive and compound my gains. For me I often sell puts to make money, then when I see a big opportunity I’ll sell a put and buy an OTM or moderately ITM call.
Understand it’s not safe to try and get rich overnight. However, once you hit big “steps” things may start to snowball. You can enter more positions and take more risks if you choose to.
For me this when I hit 50k, then 100k. I was able to balance low and moderate risk positions to more significantly grow my account. I’ll even do a high risk thing now and again because my gains can absorb it (assuming I have them).
I can’t wait to get to 250K, then 500K. I know it’ll take quite a long time, but I am confident I’ll eventually be able to have 500K and (hopefully) 1M in my non-401k trading account with gains and additions from my job. I can only imagine how “dangerous” I will be with that kind of capital.
If you missed "the next big thing" like AAPL, TSLA, or the time machine I’m building in my basement. Don't get upset, learn from it. Adapt and become a better trader for next time.
Figure out why a company was so promising, before they mooned. Determine how you would have traded differently in hindsight. Apply those lessons to the next company you believe has long term growth prospects.
For me that's putting in 1-2.5k towards shares and/or buying LEAPS on it. Depending on my bullishness I may buy “cheap”, fairly far OTM calls. The far OTM options are sort of lottery tickets. If I'm right the (relatively) low cost will have explosive profits; if I'm wrong, they didn't cost that much so it's a calculated loss I’m willing to accept. For more serious bets I’ll buy ITM LEAPS to run PMCCs on. I also like to buy 1-2K in my 401k for very long-term plays.
The stock market hates uncertainty, it seems to crave the status quo. A shakeup can potential tank a stock, even if it's nothing. With shares you can wait it out, but this can be problematic for options. If you see volatile/uncertain times ahead (politics, disease, manufacturing, earnings, etc.), you might want to reduce your overall portfolio risks or hedge.
Profit Retention / Loss Mitigation
If selling options, it is a viable strategy to close early after a large gain with many DTE left until expiry. See TT videos / strategies on this.
Don't hold options through earnings unless you literally want to gamble. I like playing on earnings run ups, but that can be risky.
If you hold options through earnings, IV crush will happen immediately afterwards, devaluing the option. However, if the option is profitable enough, IV crush won’t matter, which will still make money for a call buyer. A sold put sufficiently far OTM will benefit from IV crush, even if the stock dips after slightly bad or lukewarm earnings.
Don't throw good money after bad. Don't gamble on a recovery if your assumption appears to be wrong or the market is flat out tanking. If you are wrong and still believe in the company, wait twice as long as your original plan (wait for your 2nd entry point vs 1st) before adding to your position.
Consider using stop losses to lock-in profits on rides up or sometimes use them to prevent losses. Note, stops can be easily triggered in volatile options. Now when I'm up a lot on calls (especially around earnings or large momentum run-ups) I always set stop losses. I have been burned too many times. In December 2020 I didn't set a SL on several thousand dollars of FDX calls I was already up on and I "lost" ~$5K of unrealized gains. If you're up big, don't get too greedy.
A possible strategy if a stock is on a tear and you have multiple options open: Close some positions (I prefer to do this incrementally if the stock has momentum), but leave 1+ open in case the stock goes into outer space/the floor. Next, set a stop loss with a little buffer below its current movement / range so it doesn't get hit unless the stock falls hard. Finally, watch the stock closely and if it keeps rising, keep moving the stop loss up in little bits incrementally. This will let you keep more profits on a hot streak, but give some protection and secure more gains. It will also help eliminate FOMO if a stock exceeds your expectations.
Have rules when to roll out, down & out, or up & out. I like TT’s roll at break even or at 1x loss and to always roll for a credit (or for me a very minor cost). Obviously these rules need some monitoring. Know your stocks, the news, and technicals so you don’t jump the gun.
If you roll early for a credit and you’re right, it’s not the end of the world. You’ll just need to hold longer, which will obviously tie up capital. Sometimes it’s better to tie up some money (especially if you aren’t paying interest) than eating a huge loss.
Rolling too late can be worse though. I currently have a very underwater FDX put I sold that is over 2x loss, rolling it does almost nothing unless you want to pay a debit or extend it extremely far out.
On huge options gains, I strongly you recommend taking profits by rolling up/down or incrementally sell your contracts at several different prices (this is why having multiple contracts is nice).
Rolling up involves selling your initial call, then using a fraction of your proceeds to buy a cheaper, further OTM call with the same expiry; puts are inverse this. When rolling up I like to ensure the new option’s cost is 15-40% of my realized gains. I’ll buy a more or less expensive new optoin based on my convication to the stock and predicted movements. You can also roll up and out to get a further expiry and strike.
This is monumentally important if you are playing with incredibly high rising stocks or during a short squeeze.
Sad story time: I completely screwed up when I forgot to roll up, twice, during the GME gamma/short squeeze. I didn’t take my own advice; I didn’t have a real exit or transition plan and I got emotional. It all happened so fast and I was at work; the insanity of the run up and subsequent gamma squeeze caught me off guard. I should’ve clocked out and thought through the situation for 15-30 minutes to form an impromptu plan, then executed trade(s). My moderate risk tolerance coupled with my desire to take profits took over. When the stock partially cratered after a run up, I sold to retain gains. In the heat of the moment I thought the squeeze was squoze and it was going to plummet into the ground and I wasn’t being rational.
On 1x 4K call I would’ve made an additional 15-25K if I rolled up to a cheaper contract with some of my profits.
I know I missed out on significantly more with a 2nd call I had. Depending when I rolled it, it would likely have been an additional 25-50k in profits.
I talked about learning from your mistakes above. This mistake is branded into my brain due to the massive gains I missed out onby not rolling up. I’m furious with myself as I write this 1 week after the GME gamma squeeze, I’m a planner and I didn’t plan. If anything I own is significantly up ever again, I’m rolling up (or at least setting a stop loss). If necessary, I’ll roll up a trade multiple times to keep extracting profits.
Learn from my mistake so you don’t miss out on gains too. I strongly recommend rolling up when you are up big on a call / roll down when you are up big on a put. This enables you to take profits, stay in the game, and keep extracting more gains.
If you trade a lot of options, talk to your broker about a discount. I was getting the standard $.50/contract with E-Trade, but I traded over 300 contracts a quarter and was able to get the fee reduced by over $.10 by just asking. I am now doing more spreads and condors, so once my volume gets very high, I’ll ask again.
If you have a broker that isn’t great and you want to switch, leverage your current trading fees to the new broker. Tell them you’ll move over $### thousand if they beat your current options trading fee per contract.
Trade Planning & Position Management Tips
As you gain experience, start monitoring what kind of Delta, OTM, DTE, etc. you are most profitable with. Use it in your future trades. You'll often see the tasty trade 30-45DTE .3 Delta strategy for selling.
Before entering a trade, look at rough technicals like resistances and supports to consider your relevant strikes as well as entry/exit points. Look at upcoming earnings & dividend dates as well as stock/market news.
Consider staggering strikes and expirations for safety and diversity; it’s nice to avoid assignment on 3 puts at once because you used the same strike for all 3.
Incrementally enter positions on large rises/falls. One of my favor strategies is to buy dips after over reactions. By doing this slowly in large price "steps" it helps combat FOMO and helps you avoid getting slaughtered.
This will also help you avoid "chasing a falling knife". It also ties into having a plan.
I set alerts at several predetermined prices and I REALLY try not to enter new trades unless I hit my preset points. It makes me less emotional and usually more effective.
Don't buy far expiration options with poor liquidity for shorter term plays. I bought 1x GME 1-year+ LEAPS call before the 2021 short squeeze. That was stupid, I should've bought 2-3x 60-120 day calls to have better liquidity. I also paper-handed it and missed out on my lambo.
If selling options, consider rolling (for a credit) to avoid assignment when it makes sense / meets your plan. Rolling closer to expiration can be a valid strategy to get theta on your side. On the flip side, if the stock moons or plummets it could've been better to roll before it got crazy deep ITM. See rolling “rules” above.
Covered Calls:
If a stock has a large movement range, I think it can be worthwhile to wait to open a CC after the last one is closed/expires. I have been more successful waiting for another opportunity vs. opening one immediately on the Monday after the second the last one expires.
Consider selling covered calls at all time highs/peaks. If you sell a CC and the stock dips significantly, and you think it’s temporary, you can buy to close your CC for a quick profit, then reopen it later.
If you own Meme stocks, selling covered calls runs the risk of missing out on large gains. On these stocks I typically only sell them further OTM than I normally would or not at all. If I do sell CC on a Meme stock I try to ensure I have 25-100 other shares that won’t be called away.
-Advanced Beginner- Spreads
Spreads (with 2 legs) are neat because they manipulate how delta and theta act. It caps your gains and losses, but you can profit with less stock movement. Try several spreads on a P/L calculator to see for yourself.
Spreads usually require margin trading.
Spreads allow you to define max losses (assuming you close before expiration day) and use less capital.
Experienced traders will open many spreads at identical/similar strikes to heavily profit off movement. Spreads can make you/lose you a lot of money if you are right.
For example. I could make a $200 premium off a $500 risk trade, max loss would be $300. This is much more effective capital utilization than a naked or cash secured put, however it does not have the same downside protection or “wheel” potential as a sold put. Higher risk, higher reward.
Vertical Debit spreads: I think of these like mini calls/puts. I personally don’t use them unless calls are outrageously expensive or the break even is absurdly high, but there’s nothing wrong with them. A call debit spread will lower your breakeven and overall cost vs just a call. You can do clever things like making a positive theta call spread if you’re creative. I like doing this since I hate losing money to theta.
Vertical Credit spreads:
Very good theta strategy to define downside/upside risks.
A put credit spread is bullish and allows you to bet on upward movement with less capital and defined losses.
A call credit spread is a bearish strategy that allows you to bet on downward movement. These are very cool since they allow you to sell calls without selling naked calls, which can ruin you financially. I see selling these as better than buying puts since it’s so much easier to be profitable; to be redundant, Θ rocks.
I repeat this on purpose: Don't EVER leave short spreads open on expiration day, close them. If you don't close, they better be VERY far from the strike on a non-volatile stock. In after hours a stock can jump/dip below your strike and be exercised without the other leg to protect you. This can lead to massive, life ruining losses. This is not an exaggeration, google this and be scared. It happened to a fair number of people with TSLA. Video explanation: https://www.youtube.com/watch?v=rtVFj9nRRDo&t=315s
Short Straddle:
Trading Mechanics, Taxes, Market Manipulation
Learn about wash sale rules. They suck and are very easy to activate with options. This will eliminate your ability to write off losses. Over trading can easily cause wash sales. https://www.investopedia.com/terms/w/washsalerule.asp
Short attacks:
Learn to recognize these sketchy attacks by hedges/firms. They manipulate the market, it’s been documented countless times. A common one is rapid short selling, which pushes the price down.
Some people say short ladder attacks don't exist. I've seen some very strange stock nosedives off low volume, so I tend to think they do.
If you plan well enough and the market doesn’t give up on the stock you may be able to use it as a great opportunity to buy the dip.
Cramer explains how he intentionally manipulated the market when he ran a hedge fund years ago. Multiple links to the video are below since this video gets pulled often, Cramer / The street never wanted this to go public.
Due to this video I don’t fully trust Cramer. His show can give you stock ideas to buy (or inverse), but you never know where his true loyalties lie.
Plan for taxes if you are up big. You may need to over withhold or contribute to taxes quarterly depending on your situation. https://www.irs.gov/taxtopics/tc306
-Intermediate / Advanced Strategies (work in progress)- You’ll notice many of these strategies inverse one another. Options Strategy Finder This website is great for learning about new strategies, you’ll see many links to it below. https://www.theoptionsguide.com/option-trading-strategies.aspx Short Strangle / Straddle
Both of these strategies profit from little price movement. I recommend using a P/L calculator to determine BE, profit, etc.
A straddle sells (or buys) two options at the same expiry and strike.
A strangle sells (or buys) two options at same expiry with different strikes.
Both these strategies involved selling a Call and a Put for a credit. Straddle uses ATM legs, strangle uses OTM legs.
Limited max profits and unlimited risk. Due to the unlimited risk, I am not a fan. However, many people like these a lot.
These strategies profit from neutral or mostly neutral stock movement. They receive a credit to open and benefit from theta decay. If your stock is range bound, these may be a good choice.
These are both 4 "legged" trades, so you will have 4 trading fees to enter or exit the trade. A lower cost or zero cost broker shines here. However, “bad” free brokers will give you poor fills, which may not be worth the discount.
Condors and butterflies have "wings" which are your purchased puts and calls. The wider the wing the higher the max profit/risk. The condor body can be riskier and skinny with a narrow high profit range or wider for a much greater chance of success with lower payout.
An iron condor is built by combining a put credit spread and a call credit spread with the same expiry.
An iron condor can be thought of as a modified short strangle with limited risk, and therefore a bit less profit. I prefer defined limited risk.
The butterfly is similar except instead of a plateau it has a sharp peak. My personal mental note is that a condor looks more like a strangle with wings, while a butterfly looks like a straddle with wings.
Pay attention to earnings dates when you open these, I have forgotten to check before and it led to bad trades.
The debit version of an Iron Condor. You expect the price to stay inside your defined range. This strategy profits from neutral or mostly neutral stock movement. I’ve never tried this, Iron Condors make more sense to me.
Inverse of an Iron Condor. You expect the price to go OUTSIDE your defined range. These are useful when you expect significant price movement. Credit to open.
Limited risk / limited reward.
Can be harder to set up. I want to try these, haven’t yet.
Inverse of an Iron Condor. You expect the price to go OUTSIDE your defined range. These are useful when you expect significant price movement. Debit to open.
LEAP Options are options that are long term with many DTE, often over a year until expiration. LEAP calls are great for long term growth plays (downtrends with LEAP puts) or simply when you really like a company and can't afford 100 shares. LEAPs (or any "longer term" option) enables you to sell a PMCC or PMCP (below)
PMCC / PMCP
PMCC or PMCP are poor man's covered call (or poor man's covered puts). They are diagonal options often used with purchased LEAPs. You sell a shorter DTE call/put with a further OTM strike than your purchased call/put. For PMCC/PMCPs it is often recommended to recoup your extrinsic value as soon as possible, some recommend with your first call CC or put sale, to ensure you are positive if the option is assigned early. These have a lot of moving parts and strategies. If you buy a barely ITM call/put and sell a nearby strike call/put you run the risk of the purchased option getting "blown by" on large stock movement and ending up with a very negative losing trade. Keeping your purchased LEAP deeper ITM should protect you. Check your initial PMCC using an options calculation to make sure you don't screw up.
I'm currently tinkering with these myself. So far I like .7-.9 delta call LEAPS with 30-45 DTE calls on my CC. The goal is to hold the LEAP long term, potentially until expiration, and constantly sell calls/puts on it that expire worthless. Typically the call/put is rolled up and out or down and out if it's going to be assigned, unless you don't want your LEAP anymore.
Some people look at these many sold CC or puts as profits, I look at them as lowering my cost basis until it's zero (or even negative). I have a page in my notebook I write each CC on my NIO LEAP (I Meme stock sometimes). I find it satisfying to slowly see the cost of the original option disappear. When I originally wrote this I had ~2 years left on it and it's 9-10% paid for; that doesn't even count the actual gains the LEAP has.
TT states this is considered an IV play, which I partially agree with. You want to buy these during low IV times since an IV drop will hurt your LEAP value. I look at them more as a way to sell calls/puts on a high IV company with a lot of price movement and potential upside/downside.
Good brokers will allow you to set these up, some will require a desktop to do it. This lets you link one action to another. In programming think of it like an if-then. You’ll tie a buy/sell to another buy/sell
Setting trailing stops on options is very chaotic since their price movement can be drastic due to volatility. I prefer to set my trailing stop to a stock.
What I like to do is set a trailing stop on a stock (or just link it to a stock price drop) and have it sell 1 share I own. Then it immediately executes a market order to sell my call. I’ve had good luck doing this with incredibly volatile plays were stop losses aren’t effective. I’ll often have an order saved and ready saved for when a strong run up starts. When my price alerts start blowing up my phone, I’ll immediately hit execute to turn it on.
Disclaimer: I’m not a financial adviser, I'm actually an engineer. I’m not telling you to invest in a specific stock/option or even use a specific strategy. I’ve outlined and more extensively elaborated on what I personally like. You should test several strategies and find what works best for you. I'm just a guy who trades (mainly options) part-time for financial gain and fun. I don't claim to be some investing savant.
Hi - I save 400$ every pay check for my kids to give as a gift when they get way older (4&6 now). I’m looking for a solid high risk mutual or etf to continue to add into for the next 15-20 years. Any recommendations are appreciated.
I'm 40 and have 12k that I'm about to free up. Would you go mutual fund or ARK fund? What are some good mutual funds? What are other ARK funds to look at besides ARKK?
Dear Member, Hello fellow degenerate gambler! May I introduce you to the Pretty Decent Crew's newsletter for the trading week ending on February 12th? We hope that this email finds you well and not dead from the Meme Stonk War of 2021. Compared to the last few weeks, we have a relatively boring week coming up. Our primary goal is to move our assets into areas that will produce steady gains. I have two focuses with this.
Use the current situation to optimize gains through high risk and volatile stocks that could shoot us in the foot.
Acquire holdings that will let us cash in on the technological transition over the coming years
I know, it was intended to be two, but let's be real. We are definitely going to hold out buying power for options on the Disney earnings report!
My first thoughts here are that our situation doesn't allow for high quality options trading given that there are huge transitions occurring within the retail investor. We have a horde of idiots moving on from GME, AMC, BB, and NOK. They have no idea what to do other than go back on the Palantir train. With these things in mind, we're going to make a couple safer plays this week and minimize new options. Worth noting, but not detailed this week is a movement of long holding funds into ARK related ETFs (including PRNT). After reading through ARK's Big Idea's 2021, I truly believe their ETFs are going to obliterate the S&P over the coming 6-12 months. This is heavily dependent upon how much innovation occurs and is facilitated by the government. If the current trend continues, they're going to average well over 20% this year due to the needs of companies moving into new sectors of technology. I don't know which will be the most notable; so, I've chosen to hold all of their assets.
DIS (The Mouse)
It's time to bet the house on The Mouse. With earnings coming up after hours Thursday 2/11, they're going to continue their pop they've been showing over the previous week. It's VERY tough to tell where they're going to end the week, but this is a prime opportunity to do some quality percentage gains on OTM calls. If you're looking at high premiums, make sure you're careful to play the higher traffic options so that you don't get burned. I'll personally recommend steering clear of the $200 number unless you're willing to risk it all. Disney clearing the $200 mark this week would be massive. The lower premium makes it enticing, but it won't happen unless their subscriber numbers are through the roof. For me, I'm shooting for $190 in hopes of getting a quality OTM to ITM transition and then dumping it at open on Friday.
CVS (You know you want to do it...)
WIth earnings coming up 2/16, they're expected to crush the estimated earnings. The problem here is of course: "are the earnings already priced in?" You know what? Maybe they are, maybe they aren't. CVS fluctuated over $2.50 in price over the last week alone ($71.50 - $74.00). I'm going to dig deep and hit the $75C for 2/19 in hopes of a solid outcome on earnings. Will this happen? I'm going to say yes, BUT I wouldn't expect it to hold. Both Walgreens and CVS stock have been more volatile than usual given the hopes they receive approval as vaccine distribution locations. I'm going to hold the calls in hopes of a solid pop and then dump them all when there are high hopes of a solid close on 2/19.
MARA + RIOT
I'm going to double down on these two because of the general adaptation occurring throughout large corporations. There is no reason to think this will die off. The limited supply of Voldemort and "the halvening" that occurred in the last year will also contribute to a continued rise in Voldemort demand.
According to ARK, if companies move ONLY 1% of their free cash into Voldemort, it will rise by $40,000. Now this is a long stretch, but if they moved to 10% of free cash into Voldemort, it would jump by $400,000. This seems unrealistic right now, but 1% is absolutely possible. Multiple companies including Square have already adopted this concept with great success.
MARA is successfully moving up this week towards new ATHs. Voldemort will likely continue to rise over the coming year. The play here is obviously not short term returns. The play is holding a company that will be worth 2-3x in the coming years.
RIOT is now right back on track with its three month moving average. The volatility here is inevitable given the movements in Voldemort and associated Voldemort infrastructure.
CCIV
CCIV crushed last week and I'm going to double down on this too because Lucid and CCIV refuse to acknowledge or deny the rumors of their mergeacquisition. If I were a gambling man (I am), I would hold a small stake of CCIV shares as I hold deep OTM calls with a heavy Theta. At a $50 strike, you will pay 10% extra for the 8/20 calls over the May calls. May could be a tight race to guarantee the acquisition is occurring. August gives us a strong theta and will allow it to grow.
Sincerely, Lehman Brothers' Risk Management Department p.s. Mouse is in the house.
The GME bubble has popped. If you came here because of GME, and plan to continue investing, read on...
As I write this, GME is in freefall. It just halted at $130, and has continued to fall and is sitting at around $110-120. If you came to this subreddit because of all the hype that the GME bubble created, there are two paths you can go now. You can actually learn what it means to invest, or you can head on out. If GME was the only thing that kept you interested in this subreddit, you're in the wrong place. GME was a risky investment at best for those that bought it prior to the pandemic, and pure gambling for anyone that bought it in the last month. This subreddit has always been about investing. Over the last week or two, I feel like that this core principle has been lost. A lot of it I want to believe was due to newcomers joining the subreddit. It's great to have new members. But I think a lot of the new members, and even existing members, forgot what investing is all about it. It's about doing research, and taking an educated risk, and holding onto that risk, hoping it will pay you back for more than you put in. It sounds similar to investing in GME if you look at it at face value. But there are many differences. For instance, you don't invest in something that you know is worth less than it is selling for. GME was propped up so high that it shouldn't even have registered on your radar as a potential investment. Investment is about knowing that something is selling at a discount, compared to what it will be worth in the future. We knew and know that GME was/probably still is on the verge of bankruptcy. In other words, we know that it's future value is looking grim. There are plenty of companies out there that have a bright future. Additionally, there are many great ETF's and index funds that hold a quality basket of companies. That's what this subreddit is about. Perhaps there are companies that look promising, but you have questions about. Again, that is what this subreddit about. For the newcomers, realize that over the next month or two, this subreddit will see far less activity than it has over the last month. In fact, I imagine the same will be true for /investing and even our good old friends at /wallstreetbets that started this whole thing. The sheeple will leave, and that means that you'll be able to see the forest through the trees. Learn what true investing is. Over the years I've made a lot of money because of this subreddit. More than I ever would have from GME, even if I bought in at $20. Hell, even this year someone mentioned the Very Good Food IPO-- NOTE: please don't take this as a suggestion or pump, rather just an example. It all started out as an innocent question from a redditor. Something like "Has anyone invested in the Very good IPO? What do you think about this company?". Boom. I read that post, did my own research throughout the day, very next morning I invested, and it worked out. I'm up in the 100 percentiles all because of a question a random redditor asked on this subreddit. Sometimes it doesn't work out though, and that's fine too. The important part is that you do your OWN research, and make your decisions with a strategy in mind. It makes it a lot easier to accept your losses when you have done research. Going this route, the more you invest with this strategy the quicker you realize mistakes. If you make poor investments, you tend to have more confidence when it comes to pulling out if the investment goes South. I feel like I might be ranting. I guess circling back to the whole point of this. If you came here because of GME, or you're generally new to the game, I encourage you to stick around and learn true investing. Even if you lost money from this whole GME thing, look at the bright side, you've been burnt from the start and now you'll never make an amateur mistake like this again (fingers crossed). So, for those sticking around-- Welcome. For those leaving, don't let the door hit you on the way out.
Why WSB is now running the entire equity market - Investment Professional here
I am someone who has spent over a decade in finance, first in a hedge fund and then in private equity If you want to understand what it is going on. You have to understand that the largest driving force in the background in which you are operating in is the shift from active managers to passive managers. The vanguard crowd has been winning for more than a decade and now we are at a point where nearly all new money entering the market comes in the form of passive ETFs and index funds. And here is where the fun begins. millennials and new investors have a extreme preference for passive management while baby boomers largely invested in active managers. So in the past few years, all new money entering the market is passive and all old money leaving the market is active. Hedge fund and mutual fund managers are shedding AUM while the likes of vanguard and ETFs have been gaining AUM. So why does this matter? Well, the old operating model of securities analysis was predicated on value judgements. If a stock falls 20%, your money manager tasks a analyst to runs a DCF/comps analysis, and tells you it is undervalued by 10% based on the latest assessment, and that the fund should buy some shares. The old buy low sell high with a dash of analysis added in. That was how things use to run anyways. But in the world of passive investing, price becomes the only judgement as to whether it should be added or subtracted, there is no analysis of valuation metrics, fundamentals of the business or even if it is a fraud or not. There are no analysts digging into the company, calling up suppliers, doing channel checks. It is just pure automation, stock goes up, it gets reweighted high, buy. Stock goes down, it gets reweighted down, sell. The market has become dumber over time. And the people who do the work do not get paid for it, because more and more of the market is passive. So undervalued things remain undervalued, and overvalued things get more overvalued. There are essentially three players left in this market, of which only two are active investors. You have the passive money, which now drives 90%+ of the market. You have the small remaining active investor base, who have been shedding AUM and are desperate to hold on to their jobs and are forced to actually follow indexes to avoid getting fired, and what their doing which is arbitraging value, no longer pays off. Then you have people like WSB and stocktwits, where people chase momentum in everything from large tech to chinese frauds. What you are seeing today is the two remaining active groups fighting to control the flows of the passive money (who simply follows whichever side has more momentum). This is why we are in a world where TESLA can go up valuation by 10x despite revenue only increase by 15%. We are in a world where large cap gets larger. We are in a world where a bunch of degenerates gambling on FDs, which then drives gamma covering by market makers will create an escalating feedback loop in which passive money piles in, making it into a self fulfilling prophecy. So thank the Bogleheads, you have the keys to the Asylum. You are now running the trillion dollar global equity markets. The memes are now real and you are now the captain of Wall Street. Edit: to all the morons who keep saying I am wrong because passive is not 90% of the market. Yes it’s more like 60-65(Active) 35-40 (Passive) right now. But what drives price action is the marginal buyer and seller. The total market doesn’t matter worth shit. Grandma with her 20 shares of Ford she plans to gift to Timmy 10 years down the line doesn’t move market price today. 90%+ of the marginal Flow of money today is passive and that sets the price.
My tips of reaching peace-of-mind eternal NEET status
Good day my fellow NEET bros, One of the most important thing to reach eternal peace and sublime freedom is to have your expenses going out each month below your income. First thing is, as NEETs, we MUST suppress our expenses. This is my current monthly expense living in Nevada. I have trimmed down my monthly spending to only 6 recurring objects. 1 Rent 530 a month 2 Medical Insurance 48 a month 3 Dental Insurance 12 a month 4 Instacart Membership 8.25 a month 5 Mail Forwarding 12 a month 6 Food 250 a month In Total my total spending each month, minus surprises, should be equal or less than 860.25 USD Yearly expense should be equal or less than 10323 USD. There are surely sporadic expenses such as once or twice a year dental appointments and bus tickets, which should not be too much given you have dental coverage. Or you can just tough it out, floss and brush everyday and avoid sweets at all cost, so you can risk skipping dental insurance without much financial liabilities. Again, as NEETs, we MUST suppress our expenses to the lowest our body can physically, and healthily withstand. No car ownership, No luxury products, No new phones, No new laptops, No frivolous spending, No smoking, No alcohol purchase, No Gambling, No simping, No relationships, No marriage, No children. You will find the more things you give up, the more freedom you have and the happier you become. You kind of find yourself your extremely worry-free, childhood like sweet times back, at least partially. Another thing you need to build, is Proper, Legitimate, Worry-Free passive income. This I am talking about proper dividends or interests coming from Legitimate, low cost, well diversified index funds or index ETFs. If you can stomach the high risks you can buy all world, low cost Vanguard index funds, such as VT or State Street's SPGM. Both very low cost with expense ratio 0.08 and 0.09. If you don't like the undulations of equity market you can accumulate bond funds such as Vanguard's BNDW. VT and SPGM invests in diversified stocks from all public companies all over the world, BNDW invest bonds from all over the world, both at bottom level costs as of Today. If you are non US you can buy VWRD, Irish based, if you don't want to buy VT. If you are US only buy VT not VWRD because you would be subjected to PFIC rules. Evetually as you save, your equity will large enough to support your low-expense lifestyle, which is why it is so important to keep your expenses as LOW as you physically can, which means you don't need to save as much money. There are also other hacks to further drive down your cost 1 Live with parents, as long as the can tolerate you, treat them well, help out in household chores, so you don't have to help out your abusive boss 2 Move to a cheaper country, if you have family members in developing country, you can try to move back in with them after you have saved for enough money to live in that country extendedly. This is a killer NEET tip, because I squeezed myself to the core and I still have to spend 900 a month, yet if you know your way in Mexico, Turkey, Ecuador, the Philippines, Vietnam or Cambodia, you can cut your monthly outgoing total expense from 900 to 300-400 USD, or even lower if you know what's going on over there. Maybe 200 a month you can rent nice small apt and eat very well. 3 Rid of every un-necessary objects and items you have. I sold a ton of my old phones, laptops. tools and cables on Offer Up. Each time you sell some items it makes you realize how hard it is to make money, and make you cling to your savings a little bit tighter and make you seriously refrain from buying any new things that are not absolutely essential to your survival. 4 Rid of your wants and needs. Single is best, last things NEETs need is to simp over another human and lose your control to your finance and your mental health. Just stay safe, and stay single. Spare your hobby spending, stop buying alcohol, stop smoking, stop all these money devouring habbits. When you get rid of all these day to day "hobbies", you will realize how clean you have become and how free you will become. 5 Take on as little responsibility as possible. Home ownership is BS, car ownership is BS, last thing a NEET wants is to have any more BS on top of his or her shoulder. Stop Owning things, except bank balance or Low Cost Vanguard Index Funds. Stop owning physical things. When ALL you have is your backpack, 1 laptop, 1 phone, 1 wallet, 1 document folder for your birth certificate and social, 1 blanket, a few T shirts, jackets, pairs of pants and undergarments. You will know that even if you have to move around every 3 months, you have NOTHING to lose and NOTHING to worry about. No Car break-downs, no home ownership headaches, no property taxes, no smog checks, no HOA fees, no homeowner's insurance, no car insurance, no gas bills. Just your backpack, and your clothing, docs, your lean electronics, and off you go! 6 Make good relationships with your parents or friends, but determined to let them know when they want you to get a job. Love your parents, treat them well, but when they tell you to work, just politely decline. Or until you have enough savings to risk them cutting you off. It really depends on the type of families. Some families will not cut their children off, others do at a young age. In general, as NEETs, we need to slash our expenses, be thrifty, be sober, be minimalist. Save our money, cut our expenses, buy our Index Funds, and enjoy our life without being squeezed at work everyday.
Which weed ETF will provide most exposure to US market if weed becomes legalized in America?
I've been researching the funds MJ, and THCX. Look them up, and both graphs follow very closely. There is a lot of crossover surely. There are few American companies represented in each. Seem to be pharmaceuticals, or tobacco industry. My bet, is that weed will be legalized within the next year in America. If this happens, I want to make sure I have maximum exposure to the US market for marijuana. I am curious about other thoughts on which ETFs could accomplish this best. I am not interested in political discussion. I know this is a gamble, that is why I am here. I'm ready to push my chips into the pot and see what happens. https://thcxetf.com/ https://etfmg.com/funds/mj/
So, this post will be about GameStop, more specifically, explaining the details of its stock and how counterproductive WSB has been in terms of “owning” the elites. However, one thing that has been blatantly obvious, people don’t do their research on the specific stock they intend to buy (well, at least in this case). Moreover people seem to be against the idea of shorts, and while I have no strong opinion of it. If played right anyone can benefit off shorting. What is a STOCK? A Stock, in its most basic term, is a security that represents ownership in a company. These securities have a value, they may go up and down depending on the amount of people buying or selling (of course, things like shorting can hurt a stock, a call option can also both help and hurt a stock). However, this will be more so about the GameStop stock itself (GME), specifically how this has not only failed to damage MOST of the “elite”, but enrich them more. Shorting Shorting, in its most basic definition, is betting against a stock. Basically, one person borrows a stock, say its market price is 20 bucks, that person will sell the borrowed stock at 20$, and hope it goes down in value to buy it back at 10. If he succeeds he/she will have made 10 dollars profit. However, if the stock goes up, they will lose profit depending how much the stock has gone up. This can lead to infinite losses. TO PREFACE, SHORT SELLERS DID GET SCREWED HERE, DON'T GET ME WRONG, However, the “elites” came out of this situation fine. The Big Misconception GameStop, the stock itself, is OVERWHELMINGLY owned by mutual funds and other institutional traders (119.77% compared to the 15.90% of individuals). While some funds took heavy losses, others like BlackRock and Fidelity were part of 9 “funds” that would INSTANTLY make 16 billion dollars. I doubt this will hurt the “elite” nearly as much as it will hurt those poor folk who went in at 250+ GME. This is a movement which started off by the “common redditor” and has quite literally been taken over by WALL STREET itself. (This next point is not inherently bad, pointed out by u/christes) Moreover today (Friday 1/29/2021) the whole market saw its worst fall since October, and while it will rebound, shows how much this meme trading hurts the common man (generally speaking, panic selling seems to hurt the man with less money, than the man with more money). Now onto the bigger question, How much were Retail Investors actually influencing the stock (to the extent that is being talked about)? High Frequency and Algorithm Trading Let's say a trader buys 25 stocks when its certain MA(Moving Average) is above an even longer period of MA (for instance buying stock when the 80 day is higher than 240). The next step would be to sell when the 240 MA is on average higher than the 80 day. When a computer is set up to do this it will always monitor prices, trades will be done at the best prices, with this less errors, and less transaction fees. The average traders do not have this, multi billion dollar funds do. High frequency trading, is using powerful computer programs with algorithms to achieve high turnover rates and high order to trade order that leverages some of the highest quality financial data there is (Bloomberg Terminals etc). Furthermore, HFTers typically amplify trends with both shorting and investing (remember its computers making trades as humans). Now, it's quite obvious that HFT is inherently institutional, as only large firms can typically afford a Bloomberg terminal which sits at about 22,000 dollars a year. Moreover in this situation, it definitely seems like professional money rode the bullish move done by the individual traders. For instance “You’ve got reckless and unsuspecting investors out there that push stocks around and you [institutional investors] can see the flows” was stated written by David Trainer, a former analyst by Credit Suisse. Likewise, there were 10,000 share blocks being traded, which was a clear sign that this was not just the common trader. At the end of the day, one investment firm will always have more money than thousands of individual traders, meaning that their trade will weigh much more than WSB. While I do believe WSB had a sizable influence, they will be the hardest burned once the bubble pops. Conclusion This post was rather short, however the purpose of this post was meant to show that this big “message” is utter bullshit. I also think this shows how populist the movement has become. It is not based on how well GameStop will do, but how much Wallstreet will cry. However, what seems to be the most obvious end result, is that the “little guy” will be screwed over. Make no mistake, THESE PEOPLE took the gamble. However I also feel a lot of newcomers bought into the hype of WSB, and lose a lot of money they could not afford to lose. “Owning the rich” is never as simple as it seems. When the bubble pops, probably after the funds see the best chance to profit, many people, mostly middle class, will be hit the hardest. SOURCES https://www.barrons.com/articles/it-wasn-t-just-small-investors-behind-the-gamestop-frenzy-investors-fear-51611872066 https://news.gamestop.com/stock-information/institutional-ownership https://www.investors.com/etfs-and-funds/sectors/gme-stock-gamestop-investors-instantly-make-16-billion-gamestop-stock-squeeze/ https://www.nytimes.com/live/2021/01/29/business/us-economy-coronavirus https://www.investopedia.com/articles/active-trading/101014/basics-algorithmic-trading-concepts-and-examples.asp
Time to snap you out of it, Bogleheads: Gamestop saga is not "sticking it to The Man", it is enriching him. Buying/Holding Gamestop = being someone's stooge. There is no allyship between $GME and this sub.
I'm shocked to see the degree to which this GME situation has broken the brains of Bogleheads. For whatever reason it is now common sentiment to think it is good to cheer on -the worst possible- investor behavior. The reasons posters have presented are a complete joke. Stop encouraging overtly terrible investment advice. Did y'all collectively have a stroke or something? There is no "but this time it's okay" to tell people to "HODL $GME TO THE MOON then invest in VT afterwards." No! What?! If you have found yourself in the position of holding GME, get the hell out, the basics of the market haven't changed, and buy VT now. If this sub stands for anything, it is that you should -never- get swept up in the next big hot stock tip. What would Bogle think if he saw his followers telling each other, "I'm gonna put my money in the most volatile possible stock in the market, try to time that individual stock at the tippy top of a short squeeze-induced speculative bubble of size never before seen, then at some point buy index funds." Now there are posts talking about why we should load up on SILVER ETFS AND OPTIONS in order to TAKE ADVANTAGE OF TECHNICAL ANALYSIS....because it is WSBs latest crusade! Come on. Snap out of it! The little guy is no longer a serious factor. In reality, the whales are battling on this one now, and retail investors have been -selling- on net, not buying on net https://twitter.com/modestproposal1/status/1355208503602917381?s=20 . And this started well before the Robinhood trading restrictions! Explaining this as retail little guy vs hedge funds hasn't been true since at least Monday. The little guy isn't even harming the big guys. Financial institutions get enriched by trading activity and fees. Not the actual performance of their funds! If performance of funds is how Wall Street got rich, there wouldn't be a rich man on Wall Street. On net, Wall Street is going to come out much richer than when this started...because of the stupid little guy being stupid. And just to clear this up, the reason that trading was shut down was NOT because the big rich overlords wanted to stop the little guy and protect billionaires. It was because of an Obama-era "consumer protection" over-regulation that quite literally mandates the shutting down of trading in situations like this. https://marginalrevolution.com/marginalrevolution/2021/01/why-was-share-trading-restricted.html. I have not seen EVEN ONE screeching redditor go after the true cause of the buying limitation, which is Dodd-Frank. Why aren't they calling for the removal of this law from the books when it is the sole cause? Answer: Because their interest has become some sort of ideological amalgam combined with Qanon level conspiracy thinking. Yes, I'll say it. The people who think that their humble actions in buying Gamestop will be the downfall of an evil "Cabal" (jesus christ you use the exact same words!) in your own symbolic storming of a center of power ("this is OUR HOUSE TOO") is pathetic. And it would be downright funny if it wasn't going to end in a generation of people entering the market just to lose it all and be taught that stocks just = gambling, while being cheered on and rationalized by this entire website and an entire sphere of influencers, media, and now even this typically sensible sub. The only way to stick it to Wall Street is through low cost index investing, preferably through Vanguard (the only mutually-owned mutual fund company) where you give Wall Street literally nothing but get all the gains of the stock market. You people know this, right?
I'm 42 and I started investing about 6 months ago. Better late than never eh? My goal was long term growth, either for retirement or if ever I needed some additional funds. I have a mixed portfolio of single stocks and etf funds. My portfolio is up about 2k, and I think it's important to note I've never sold anything. This leads me to my question. A bunch of my stocks have had great and low results, obviously. I'm torn between taking the risk of selling some for profits and then hopefully waiting for a dip to rebuy. That seems like a perfect scenario, but I know it's a gamble. Is it a good gamble tho? Im not a day trader by any means but I monitor daily. Maybe it's better to just keep buying/investing and not take that risk? I'm just looking to see if there's a general consensus on this strategy. Shrug. Ty Edit: prob should note, this investing I'm doing is additional. I already have 3 retirement funds from in my 20's.
Rebalanced to a more aggressive (but still mostly passive) portfolio
Hello Bogleheads, I've thankfully learned early and often that I'm not good enough to pick individual stocks consistently, but I do still like to have some fun in the market. A few years ago I took a break from work to do a masters program, during which I basically moved all my investments to the VASIX Income Fund (~80% bonds, 20% stocks) as I wouldn't have a steady pay check coming in and wanted to preserve what I had in case of emergency. After graduating rather than rebalancing I sort of built my portfolio around it using it as a safe anchor to build out from. A couple days ago I took a hard look at my total portfolio and realized I was invested probably a lot more conservatively than I ought to be at my age (34) and set to work on a rebalance. Interested in getting some feedback on my allocation and maybe some tips for a where to stash some money in a relatively safe position. My portfolio is basically in 3 blocks:
Retirement (68%)
ETFs (20%) - Where i could use some critiquing
YOLO (10%) - Here is where I exorcise my trading (gambling) demons with crypto and meme stocks.
As you can see I'm heavily weighted toward retirement which is basically comprised of 3 low-expense target date funds (401K, Roth IRA, Military Thrift Savings Plan) and potentially (not included in the allocation percentages) a military reservist pension and a civilian employer pension if i stick around both long enough. I mention all this just to illustrate that I have a fairly robust and semi-conservative retirement foundation that I don't intend on touching until age 60 or so. My newly balanced ETF block consists of the following. Note that the percentages are the percentage of this 20% block.
VOO Vanguard 500 Index ETF (16%)
VXUS Vanguard Total International Stock Index (3%)
VTI Vanguard Total Stock Market Index Fund (8%)
ICLN iShares Global Clean Energy ETF (3%)
ARKK ARK Innovation ETF (8%)
ARKQ ARK Autonomous Technology & Robotics ETF (29%) (I know there's a lot of holdings overlap between this and ARKK)
ARKG ARK Genomic Revolution ETF (33%)
As I said my goal here was to be quite aggressive with this block, maintaining a well diversified core with the Vanguard funds while also having exposure weighted to the sectors most attractive to me. I still have a chunk of unallocated cash that I'm considering either splitting into the 3 vanguard funds which would make those funds account for ~50% of my ETF block or possibly using those funds for exposure to something relatively stable like bonds (BND?) or a REIT (VNQ?) but both those sectors haven't looked particularly attractive to me right now. Would welcome some feedback on where to round out this portfolio with that unallocated cash or any feedback on my portfolio in general. I'm also considering just throwing everything into a non-retirement account Target-date fund as I've been very impressed with those returns thus far. My investment goals are to make enough to retire or at-least semi-retire into a low-paying but enjoyable job and/or do something entrepreneurial in 10 years (age 44) -- so I'd like to build enough wealth to enable that without touching my retirement accounts until they fully mature and are accessible without penalty. Any thoughts or insights would be greatly appreciated!
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