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If you’re so certain, which specific steps are you taking to position yourself to benefit?
People can make predictions without betting on them, and still arrive at the correct prediction.
You can also make a bad prediction and bet on it.
A prediction backed by a bet speaks more to the confidence of the predicter than the correctness of the prediction. Confidence is frequently misplaced.
I sometimes make predictions, but I never bet on them. First it's just a game on an Internet forum. Second, I don't try to pick stocks or time the market.
People can make predictions without betting on them, and still arrive at the correct prediction.
You can also make a bad prediction and bet on it.
A prediction backed by a bet speaks more to the confidence of the predicter than the correctness of the prediction. Confidence is frequently misplaced.
I sometimes make predictions, but I never bet on them. First it's just a game on an Internet forum. Second, I don't try to pick stocks or time the market.
You’re right, and I’ve made the same argument against the crypto fans here about not needing to bet against something. I guess here I made that comment because there’s just so many general doomsdayers here who think “everything” is going to go down at some very specific point and it’s just so eye rolling to me because if it’s just that obvious, it should be east to capitalize on it.
Earlier this month I raised a lot of cash. I’m roughly 75% cash right now. I’m selling weekly cash-secured puts on SQQQ and SARK to generate income as I await a pullback.
Well, I’d wish you could luck but I’d never pull for a general market decline.
Algebra is not appreciated enough, IMO. It's the one math I use almost every day, in numerous situations. I wish I had appreciated it more when I was first learning it.
As for the S&P, I think it has a place in portfolios. Whether that place is 20% or 40% or 60%+, that's an individual choice.
I use it quite often with work but it’s certainly not the complexity of the full page of formulas college algebra would take. I always enjoyed it the , but it seemed like more of a game than anything when 1 problem could fill more than a page.
... I’m selling weekly cash-secured puts on SQQQ and SARK to generate income as I await a pullback.
Quote:
Originally Posted by Thatsright19
Well, I’d wish you could luck but I’d never pull for a general market decline.
Honestly, I struggle to parse the double-negatives to even comprehend the gentleman's strategy. Thus:
- there are trading-vehicles that rise when the market falls.
- there are options on these vehicles.
- one such set of options, is the right to sell the underlying vehicle, at some price. If said vehicle falls below the strike price, the option becomes valuable.
- selling the option means that one believes that the value of the option will decline.
- evidently, if one sells unsecured puts, and the puts expire in-the-money, then one gets assigned the underlying stock, getting saddled with that security, of which one has a negative opinion.
- assuming that one gets lucky, putting (no pun intended) the above together: ARK or QQQ fall, so SARK or SQQQ rise. So, puts on them become less valuable (or expire worthless). And so, by selling those puts short, one profits with leverage.
... wow ... People actually do this? I mean, real people, who post on the internet... actually do this? Now I'm starting to see how AIG blew up.
My conclusions:
1. This strategy is so far down the proverbial rabbit hole, that despite my ~30 years in the stock market, I lack the wherewithal to fathom what's going on. It's like an 8th-grader first coming into contact with algebra, trying to understand variational calculus.
2. This is a narrow bet on big-cap tech stocks, and the vicissitudes affecting Ms. Kathy Wood. It doesn't say much about the S&P 500.
As for tech companies' earnings foundering... well, it's about time, no? Personally I'd love to see a rotation into the stocks of companies that actually, you know, MAKE things!
Honestly, I struggle to parse the double-negatives to even comprehend the gentleman's strategy. Thus:
- there are trading-vehicles that rise when the market falls.
- there are options on these vehicles.
- one such set of options, is the right to sell the underlying vehicle, at some price. If said vehicle falls below the strike price, the option becomes valuable.
- selling the option means that one believes that the value of the option will decline.
- evidently, if one sells unsecured puts, and the puts expire in-the-money, then one gets assigned the underlying stock, getting saddled with that security, of which one has a negative opinion.
- assuming that one gets lucky, putting (no pun intended) the above together: ARK or QQQ fall, so SARK or SQQQ rise. So, puts on them become less valuable (or expire worthless). And so, by selling those puts short, one profits with leverage.
... wow ... People actually do this? I mean, real people, who post on the internet... actually do this? Now I'm starting to see how AIG blew up.
My conclusions:
1. This strategy is so far down the proverbial rabbit hole, that despite my ~30 years in the stock market, I lack the wherewithal to fathom what's going on. It's like an 8th-grader first coming into contact with algebra, trying to understand variational calculus.
2. This is a narrow bet on big-cap tech stocks, and the vicissitudes affecting Ms. Kathy Wood. It doesn't say much about the S&P 500.
As for tech companies' earnings foundering... well, it's about time, no? Personally I'd love to see a rotation into the stocks of companies that actually, you know, MAKE things!
Years ago I saw The Big Short with someone. At the end of the movie she asked, but how can you make money when prices go down?
It was good for a chuckle, as a significant part of the movie explains how short selling works, but at the same time it's a salt of the earth response to what sometimes seems like a ridiculous arrangement.
Selling a put option is not a bearish bet, but rather a wager that the underlying will not drop too much in price. Collect the premium and hope the put expires worthless. Or if the underlying's price goes up, one might choose to buy it back before the option expires and book a profit.
Since we've veered far of topic, I'll also mention that I did stay at a Holiday Inn Express last night.
Honestly, I struggle to parse the double-negatives to even comprehend the gentleman's strategy. Thus:
- there are trading-vehicles that rise when the market falls.
- there are options on these vehicles.
- one such set of options, is the right to sell the underlying vehicle, at some price. If said vehicle falls below the strike price, the option becomes valuable.
- selling the option means that one believes that the value of the option will decline.
- evidently, if one sells unsecured puts, and the puts expire in-the-money, then one gets assigned the underlying stock, getting saddled with that security, of which one has a negative opinion.
- assuming that one gets lucky, putting (no pun intended) the above together: ARK or QQQ fall, so SARK or SQQQ rise. So, puts on them become less valuable (or expire worthless). And so, by selling those puts short, one profits with leverage.
... wow ... People actually do this? I mean, real people, who post on the internet... actually do this? Now I'm starting to see how AIG blew up.
My conclusions:
1. This strategy is so far down the proverbial rabbit hole, that despite my ~30 years in the stock market, I lack the wherewithal to fathom what's going on. It's like an 8th-grader first coming into contact with algebra, trying to understand variational calculus.
2. This is a narrow bet on big-cap tech stocks, and the vicissitudes affecting Ms. Kathy Wood. It doesn't say much about the S&P 500.
As for tech companies' earnings foundering... well, it's about time, no? Personally I'd love to see a rotation into the stocks of companies that actually, you know, MAKE things!
What’s so hard to comprehend? I think the market has reached a short term top but rather than outright buying shares of SQQQ and SARK I’m selling OTM weekly puts. This strategy provides me a cushion in case I’m wrong. But to be wrong, the Nasdaq and/or ARKK have to rise quite a bit (3%+) in a week’s time. This week I set my strike price to equate to QQQ at $324 and ARKK at $40. So long as they finish below those prices tomorrow, the SQQQ and SARK puts expire worthless and I collect the premium.
It's so formulaic... For the 'average joe' who doesn't know much about investing, the advice everywhere could be AI generated - keep steadily adding money to a ETF type portfolio that is or closely resembles the S&P 500.
And it's worked; for now. But it's a self fulfilling prophecy that's largely boosted by the demographic situation we're in where boomers and millennials are outsized large demographic cohorts. Nobody has money in the stock market just to have money in the market. All those funds will someday be used to pay for something, retirement expenses for most people.
Right now we are probably close to peak contribution to retirement funds, with boomers (who were the first post pension generation) just about at the end of their career cycle with their highest earning paychecks. And not many boomers are starting to withdraw from their nest egg yet - the large medical expenses and cash reserve draining haven't hit yet. But they ARE going to start withdrawing those funds or at least de risking them, shifting from equity to bonds or safer options as horizons shorten.
If you were in the same boat as everyone else, you benefited from the headwinds of contributions > withdrawals. But those headwinds will turn to tailwinds when for the first time, we have mass withdrawal from funds that are now parked in S&P Indexed accounts. Essentially it's like a giant slow motion version of pandemic Gamestop, where contributions mattered more than fundamentals. And the S&P fundamentals, especially the biggest companies, are out of wack from what the rest of the market and international markets are at.
Passive investing and ETFs will always have their merits, I just think the S&P bucket is not one that I'd want to be in for the upcoming years.
Efficient capital market theory says that security prices at any time "fully reflect" all available information. That means that the known or expected perturbation events of the market such as movements to bonds are already priced into the individual stocks and the market as a whole. This means that the S&P 500 is unlikely to be greatly impacted by this.
Also, the amount moving out of stocks by retirees is likely to be mostly offset or matched by others adding to their 401K as they approach retirement. And while those over 65 own some 43% of stock, most of it is concentrated in just a small percent that are not likely to need stocks to retire so much of the value is unlikely to move to bonds as their owners age. Much will eventually go to charities and their heirs - extending the timeframe significantly.
Frankly, the biggest reason not to invest in something else is because this has been shown to not get the returns that the market gets over the long term. Essentially this proposal is throwing out the higher expected return for the minor chance that the impact will drive the return lower than expected many years from now - not a good tradeoff. The value of the underlying assets will not really be changed by who owns them - it is still essentially the same companies so value will not decrease significantly as ownership changes hands to different groups.
Honestly, I struggle to parse the double-negatives to even comprehend the gentleman's strategy. Thus:
- there are trading-vehicles that rise when the market falls.
- there are options on these vehicles.
- one such set of options, is the right to sell the underlying vehicle, at some price. If said vehicle falls below the strike price, the option becomes valuable.
- selling the option means that one believes that the value of the option will decline.
- evidently, if one sells unsecured puts, and the puts expire in-the-money, then one gets assigned the underlying stock, getting saddled with that security, of which one has a negative opinion.
- assuming that one gets lucky, putting (no pun intended) the above together: ARK or QQQ fall, so SARK or SQQQ rise. So, puts on them become less valuable (or expire worthless). And so, by selling those puts short, one profits with leverage.
... wow ... People actually do this? I mean, real people, who post on the internet... actually do this? Now I'm starting to see how AIG blew up.
My conclusions:
1. This strategy is so far down the proverbial rabbit hole, that despite my ~30 years in the stock market, I lack the wherewithal to fathom what's going on. It's like an 8th-grader first coming into contact with algebra, trying to understand variational calculus.
2. This is a narrow bet on big-cap tech stocks, and the vicissitudes affecting Ms. Kathy Wood. It doesn't say much about the S&P 500.
As for tech companies' earnings foundering... well, it's about time, no? Personally I'd love to see a rotation into the stocks of companies that actually, you know, MAKE things!
You said that far better than I could have but I'm in the same boat with you. This seems an overly complicated and risky bet on a trader's hope of short-term market direction. It wouldn't be a fun weekend after getting a bunch of triple short ETFs put to me on a big down Friday.
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Algebra is not appreciated enough, IMO. It's the one math I use almost every day, in numerous situations. I wish I had appreciated it more when I was first learning it. 
