Re:Senate Stock Watcher
by eanzenberg on Saturday April 11, 2020 @12:11AM
(#22839584)
Do this 4 times a year times 10 years (last bull run) and you expire worthless 39/40 times for a net loss.
You wouldn't do it in the beginning of a bull run, only once it's been going for a decade plus.
Re:Senate Stock Watcher
by IAmGraydon on Saturday April 11, 2020 @02:00AM
(#22839905)
Black swan events don’t wait for a 10-year bull market to occur first. You strategy might hedge against a market bubble (still very questionable), but what about all of the other things that can crash the market?
It's futile to try to make a strategy that will work 100% of time and still return the same or better than a non hedged strategy. If it's a black swan event, you won't be able to predict it by definition. I'm not sure what you're trying to argue.
SPY (S&P 500 index exchange traded fund) was around 335 in February.
Buy, cheaply a put (right to sell 100 shares) at a price of 300, expiring in 60 or 90 days, for about $150.
A couple of weeks ago, SPY was at 240. Sell the put, for a gain of at least (300 - 240) times 100 times delta (a description of relation of the option gain to the stock change) of about 0.60, for a gain of at least $3500 to $4500.