Re:Ethereum will use around 99.95% less energy post merge
by uncomputation on Wednesday May 19, 2021 @12:22AM
(#27204550)
Am I missing something? If GLD drops and your initial put was ATM and the buyer exercises, then you lose.
Re:Ethereum will use around 99.95% less energy post merge
by perl4ever on Wednesday May 19, 2021 @07:57PM
(#27215897)
That can happen occasionally. But the idea is that you limit the amount so as to only lose as much as if you owned shares of it in the first place, and therefore any losses are sustainable, temporary, and not frequent. Given the conviction it has to go up in the medium term.
Can you really imagine selling insurance against gold cratering in the near term being disastrous, barring leverage which can always ruin you?
I think it's probably important, for managing risk, to have the self control to only hold as many short contracts as you have cash for assignment, and also not to get greedy when the price moves in your favor, but wait until the end of the week to swap them for a different strike.
The downside scenario is gold dropping 50%, or 100%, which just seems implausible, maybe more implausible than in living memory.
What if you deposit your cash in a regular brokerage account and every week sell an equal amount (that is, one contract for every 100 shares you can afford to buy) of at-the-money puts on GLD? This is literally digital gold.
If the probability of gold going to zero (or GLD) is essentially nothing, and inflation is inevitably going to pick up, then this feels plausibly "risk free". The worst that can happen is you are assigned some shares, which you can sell or sell calls on. In any case, people are apparently willing to pay a surprising amount for short term volatility on it.
Even better, you can buy the cheapest longest dated out-of-the-money put to lay off some risk at minimal cost.
You may be able to do this on Robinhood, I haven't tried.
Just an idea...of course analyzing how this could hide large risks would be interesting.