Advise after 25 year career

[Chickenlittle]

Zaphod wrote:

Donnie wrote:

Chickenlittle wrote:

Your missing the points of the post. Most are focused on how options could result in returns like that. Will give you an example of one trade. Tsla at 25. Almost everyone antcipating bk of company. I thought otherwise. I had test driven modelS prior to delivery of anyone’s but signature cars. I could not believe my experience.  Read Musks history and  Bought options strike 50 for 18 months out. There were 330 contracts with open interest I owned 305. They cost from 1.5 upto 2. I stopped buying more because I could not figure out what the market knew that I didn’t. The price of the stock was over 150 at the option maturity. From there continued to buy further options. I am sorry to have everyone focus on that aspect. It was remarkable experience but the advise I was giving was not how to make a fortune but how to better manage your finances

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You post about turning your entire liquid net worth of $300k into $20M by buying options despite never really investing in the market before and think anyone will focus on anything else?

Tesla raised $200M in 2011 and had a market cap of $3B when it was last trading in the 20’s.  No one thought it was going to BK.  It only IPO’ed in June of 2010.

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In fairness everyone has always worried about Tesla and never thought much of them, and in total fairness, as soon as the liquidity tap turns off they will absolutely go bankrupt.

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I remain forever grateful to those that believe as you do and never get tired of making more money

[Zaphod]

hatton1 wrote:

I no longer do any of the things I was talking about.  Plenty of people make good money with individual stocks but it is hard work to do it.  The tax implications led me to hold on to winners in 2000 that I should of sold.  Wideopenspaces most of the terms are stock ticker symbols. I think index investing is a get rich slowly technique and will work well for most people posting here.

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Agree, and too much risk. A buyout, fraud, takeover, merger of competition, anything whatsoever can happen to a single stock. If one feels inclined to a certain stock, there is always a sector or very specific etf to gain exposure while diversifying that single stock risk.

Recognizing the above, learning about indexing etc...and admitting I didnt even have the ability to hold onto great buys/picks anyway, I just moved to indexing which is much better for me. I still mess with it too much and cut off some winnings but I get better all the time.

Options are unnecessary and dangerous. Theyre dangerous given they are complicated and highly leveraged. Most people are going to have extreme difficulty just understanding the basics (I gave up a couple times because it was boringly dense to learn about), let alone know where the real risk lies and how to set yourself up to avoid those things. They can be great in vanilla situations like hatton was using, or to get slight leverage with lower costs and risks (not zero), or you really want to express an opinion like shorting a stock but dont want unlimited risk or margin costs.

[Hatton]

I no longer do any of the things I was talking about.  Plenty of people make good money with individual stocks but it is hard work to do it.  The tax implications led me to hold on to winners in 2000 that I should of sold.  Wideopenspaces most of the terms are stock ticker symbols. I think index investing is a get rich slowly technique and will work well for most people posting here.

[q-school]

G wrote:

wideopenspaces wrote:

This feels like a crixus post except other normal people seem to understand what is being discussed 

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I absolutely love this comment! I’m still chuckling 10 min later.

I’ve looked into the fancier techniques, but in my opinion it seemed to move from “hobby” to “job.”  Similar to all of the real estate threads on this forum, I’m sure there are folks who crush it with very little effort, but it is work for us average joes.  I’m gonna spend the day skiing with my family, not looking at trades!

Funny you mention Crixus…with the roller coaster of bitcoin, the Koreas talking, our executive branch racking up frequent flyer miles despite the US being out of money…seems there is plenty up for discussion.

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plus we haven't talked about tax implications.  when you are actively trading, your taxes start to get extremely hard to predict.

for the vast majority, it is way better imo to start with index funds.  if a portion is invested actively after achieving certain milestones, that's certainly one reasonable option.  but options are probably best left for the advanced who want to spend time following this stuff carefully.  I guess you can use options to cover positions but again, that starts to go into the land of is that the best way to spend time to increase happiness.

jmo

ymmv

 

[G]

wideopenspaces wrote:

This feels like a crixus post except other normal people seem to understand what is being discussed

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I absolutely love this comment! I'm still chuckling 10 min later.

I've looked into the fancier techniques, but in my opinion it seemed to move from "hobby" to "job."  Similar to all of the real estate threads on this forum, I'm sure there are folks who crush it with very little effort, but it is work for us average joes.  I'm gonna spend the day skiing with my family, not looking at trades!

Funny you mention Crixus...with the roller coaster of bitcoin, the Koreas talking, our executive branch racking up frequent flyer miles despite the US being out of money...seems there is plenty up for discussion.

[Neuro-doc]

Yes, it's fine not to understand any of those terms!

You can build a very successful portfolio by using a simple mix of broad based, low cost index funds with an asset allocation suitable to your goals and risk tolerance. If you stick to your plan and rebalance every 1-2 years, your results will beat the majority of active investors. You can invest for your whole lifespan and never have to buy an option.

Remember, for every "winning" option trade discussed earlier in this tread, someone on the other side of the trade "lost". Add in expenses such as trading costs etc, it becomes very hard to beat the market consistently.

[wideopenspaces]

Is it ok that I have no idea what most of this BK, options, time running out, etc is all about? This feels like a crixus post except other normal people seem to understand what is being discussed so I assume these are real terms that just sound like gibberish to me.

[StarTrekDoc]

hatton1 wrote:

Your advice is very sound.  The only options I have done is covered calls.  Now I index.  Zaphod it is much harder to sell a big winner than to just hold on.  It is called falling in love with your big winners.

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Hit the eject button on my long term winners back in 4/2017 before our Costa Rica trip and moved to index --- had very nice rides on AMZN, V, BOA.

Tax bill for 2017 gonna hurt, but it was worth it!

A lot better than crying over my pink sheets

[CM]

Zaphod wrote:

I dont have that problem unfortunately. I always sell too soon

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Value investors typically buy (falling stocks) and sell too soon.

Some years ago I attended one of hedge fund manager Monish Pabrai's annual meetings for his limited partners. He had a successful track record at that time, but he reported that he tracked the performance of the stocks he sold and found that they outperformed the portfolio he held.

He joked that he planned to start a second fund that would buy all of the stocks sold by his first fund.

[G]

Zaphod wrote:

I always sell too soon, one of the big reasons I dont do individual stocks, even when I was lucky enough to be very right I could never hold long enough for it to fully play out in my favor.

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I hear that!  I've missed out on big gains with SBUX, AMZN, ISRG for similar reasons.  I always remember WFC because of the round numbers:  I bought it at just below 10 and thought I was a genius when I sold it at 13!

[Chickenlittle]

Read my original post

[Donnie]

Supposing your story is true (post a single trade confirm if you want to establish credibility), you do a massive disservice to people coming here looking for advice on how to manage their finances. You say you got lucky, but uniformed will read what you wrote as a guide to get rich quickly by following their guts and making outsized bets on way out of the money options. Probably lighting money on fire has a better ROI to the average Main Street investor than that. I spend a reasonable amount of time on this forum, and I am not interested in letting such a statement as “I casually turned $300k into $20M in three years by playing options” go unchallenged. I believe it’s a harmful statement, even if true. If it’s false or exaggerated, it is even worse.

[PhotonsRGR8]

Dr.Chickenlittle, I salute you sir.

[Zaphod]

hatton1 wrote:

Your advice is very sound.  The only options I have done is covered calls.  Now I index.  Zaphod it is much harder to sell a big winner than to just hold on.  It is called falling in love with your big winners.

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I dont have that problem unfortunately. I always sell too soon, one of the big reasons I dont do individual stocks, even when I was lucky enough to be very right I could never hold long enough for it to fully play out in my favor. For example, I bought Bank of America at 11.3 a couple of years ago and sold very quickly after for a nice gain, but missed out on the big gains I'd have gotten from just holding (31.72 today).

With options of course there is always the time component and you have to balance whether or not the probability of further delta in your favor is higher than the remaining theta (time value).

I think TSLA is going to be a major winner one of these days (on the short side) unless some kind of impossible money fountain is found, but until the environment changes its still not very safe to go short even with puts as IVs are big and theyre spendy. One day...

[Chickenlittle]

Donnie wrote:

Chickenlittle wrote:

Your missing the points of the post. Most are focused on how options could result in returns like that. Will give you an example of one trade. Tsla at 25. Almost everyone antcipating bk of company. I thought otherwise. I had test driven modelS prior to delivery of anyone’s but signature cars. I could not believe my experience.  Read Musks history and  Bought options strike 50 for 18 months out. There were 330 contracts with open interest I owned 305. They cost from 1.5 upto 2. I stopped buying more because I could not figure out what the market knew that I didn’t. The price of the stock was over 150 at the option maturity. From there continued to buy further options. I am sorry to have everyone focus on that aspect. It was remarkable experience but the advise I was giving was not how to make a fortune but how to better manage your finances

Click to expand…

You post about turning your entire liquid net worth of $300k into $20M by buying options despite never really investing in the market before and think anyone will focus on anything else?

Tesla raised $200M in 2011 and had a market cap of $3B when it was last trading in the 20’s.  No one thought it was going to BK.  It only IPO’ed in June of 2010.

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Ok getting annoyed now last response. I had a lot of experience in market with keogh (which I converted to ira). Mutual funds then just prior to mortgage crisis listened to interview with new Citi chairman when Prince was fired. New ceo (who was prior citi employee) claimed not to know yet whether there were more mortgage losses after Prince fired for the initial 5 billion in losses. There was no way he was not yet aware (just hiding the loss) so I planned to wait for them to report further losses and always believed the market would come back after a dip. I lost on that because I bought the stock after the next report but it didn’t come back. I realized that my mistake was not betting on what I knew and instead betting on the price recovering.  Learned about options and realized I should have bought puts when I realized there would be further losses.  Would have done even better on that than tesla.  So my next move was to buy puts on sales in 2008. The stock price was 25. The ceo was James breeden. They had just sold Bailey biddles stores for millions and chose to use the funds to buy back stock to keep price up. I thought the move foolish since crisis so deep doubted a budget jewelry store would do well. I bought puts. Breeden a former chairman of sec hot sales listed as a financial institution with the sec (times so desperate that you couldn’t short sell financial stocks). It didn’t help and I sold my puts when the stock dropped to 75 cents (it had actually gone a little lower than that.  My next options foray was tesla. It’s a learning process all the way. I would have done better with the tesla option play I made by not holding on as long. Deep in the money options don’t rise as much with rising stock price, you loose the time premium. So I don’t claim to not have made mistakes along the way.  Anyway again not the point of my post. Refuse to go into further not worth the effort