Back to Being an Options Trader

Posted by $ Abaco 1 year, 1 month ago to Economics
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Anybody else watching this stock market? It seems to be a more volatile version of Obama's market. I knew this might happen. Looks like I'm going to have to hone my options trading skills further - long straddles and such. You can see the uneasy feeling in America reflected in how the stock market is behaving. I haven't read the details of Biden's tax plan yet. I'm trying to steel myself before I have to bear down to get through it...But, I've heard some tidbits from a couple friends. I just hope they're wrong...

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  • Posted by CircuitGuy 1 year, 1 month ago
    Generally I think it's wrong to associate the stock market with politicians. It's not President Obama's or President Trump's stock market but rather a market of millions of people making little decisions on taking a risk on ideas to serve customers.

    That being said, I'm concerned about the government spending President Biden is proposing. I have been concerned for 15 years that borrowing will lead to a monetary crisis, forcing tight monetary and fiscal policy during a recession, and that that could lead to further political instability. I'm more worried about it now b/c Biden is a non-threatening figure capable of pushing through some radical policies.

    OTOH, most times in my life when I imagined political events would influence the market, I've been wrong. Politicians make a living getting attention, but value created by the economy comes from things that are not screaming for attention. I suspect following figures for demand for construction equipment from companies like CAT and demand for priority shipping from UPS is way more useful for investing than following what politicians are doing.

    Long Straddles - I can see why people employ long straddles when they think the market underestimates risk. You could take the position several times and lose, and totally make it up the one time something unexpected happens. BUT, I don't like it b/c psychologically I don't like being able to look up my positions' Thetas and know exactly how much I'll lose today if nothing happens.

    Short Out-of-the-Money Puts on SPY - I write them every month. Maybe I'll kick myself when there's a big crash, but it's one way to a return > inflation on cash without buying into the market at these high multiples. Long-term, I'm bullish on domestic large caps.

    Precious Metals - I think the market for gold does not have enough risk of a monetary crisis priced into it. I have a small amount of physical gold and silver, which is inefficient, but it's a psychological thing to be able to go and see my hedge against bad times if I wanted to. I also have small amounts of gold and silver, most of it with covered calls on them. I don't care if some of it gets called away. In that case I'll just write puts and buy it back if/when it falls. I don't write calls on all of it, so I still have that has a hedge against doom. :)

    Crypto - I have small positions in cryptocurrencies, almost all in BTC. I also have some COIN and some puts written on payment processing companies. The reason for this is I suspect blockchain will change the world by decentralizing trust, but I'm not sure what form it will take. I'm thinking mainstream payment processors will use it to create value for their customers and/or wallets like COIN will disrupt their business.

    Businesses I'm Involved with - I really wish I owned a business I were personally involved in that were scalable and "saleable". In theory I would like to be invested in local office buildings or a tech company run by people I know with a business model I clearly understand.

    Boring Mutual Funds - I do better with asset allocation funds from Vanguard and Fidelity than I do with stuff I actually think about. Hopefully that's not true for you.

    Were you the one who invested in marijuana? I wonder if big tobacco companies are going along with demonizing/banning tobacco with the plan of making more money from marijuana. They've had plans for decriminalization since the 90s.
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