JPM is part of the problem but I would rather bet with corruption than against it. Sad state of affairs no question but this is about financial survival right now. At least for me anyways.
I agree. Also I have to say: As a daytrader I have to go long and short. That depends on the situation on hourly to weekly basis. And it depends on the Stock/Index/Asset. On Wednesday for example I took profit in a DAX Put. At the same time I am holding a longer running Call on DAX. In Dow I am also holding a longer running Call but decided not to short in a shorter timeframe because Dow is much stronger than Dax and it is to risky imo. My "short" around the corner in Dow is to wait with buying more Calls.
I think greg means "hedge" in the technical trading sense, rather than in the fundamental/macro sense. I'll do my best at grossly simplifying but you'll need to research this yourself to get a deeper grasp (lots of youtube vids explaining the nuances of this)
So one hedge method could be if you buy a call, look to hedge the position by buying a put on the same asset, at a lower strike price (in case our investment idea is wrong and price goes down instead of up). careful here - the way you hedge, in this case buying a put option, will largely determine the risk profile and maximum downside of the trade. This whole issue with hedging using options, risk management generally (numerically defining downside risk using trading techniques like above for example), and nearly every other type of equities trade imho, is usually the hardest things for traders to master.
overall it will reduce profitability as you may lose the bulk of the contract value for either your call or put option. broadly speaking with options, only 2 out of 3 (1 up/2 down/3 sideways) price movement scenarios will make you money. Scenario 1: underlying JPM price goes up so your call option contract value goes up and you take profits, assuming the profit you gain from your call option is higher than the loss you'll potentially incur from closing out your put with some value still left in it, or even letting it expire worthless = win. second scenario is JPM price does not go up by november, it goes down instead (we were wrong in our thesis). now you have profit to take on your put but your call option is worth, say, 10% of original value, or you even let it expire worthless. This scenario is pretty much just the inverse of scenario 1, but given that the whole idea about this trade is that we're bullish in the near term and buying dips on JPM, likely you're heavier on the call than the put. but here we escape with a much smaller draw down on our account as we balance the profits we made on hedge with the mistake we made on our call option.
3rd scenario... price just goes sideways with very little volatility and both your call and put option slowly loses 5% every day and you question your existence and whether or not trading financial derivatives during the largest market bubble of all time is really the right way to deploy capital :D
I have a special hatred for JPM. But I like making money.
JPM is part of the problem but I would rather bet with corruption than against it. Sad state of affairs no question but this is about financial survival right now. At least for me anyways.
Winter is coming....
👍
Cheers for the tip as always
I agree. Also I have to say: As a daytrader I have to go long and short. That depends on the situation on hourly to weekly basis. And it depends on the Stock/Index/Asset. On Wednesday for example I took profit in a DAX Put. At the same time I am holding a longer running Call on DAX. In Dow I am also holding a longer running Call but decided not to short in a shorter timeframe because Dow is much stronger than Dax and it is to risky imo. My "short" around the corner in Dow is to wait with buying more Calls.
I think you will be ok, always stay hedged when buying calls.
I think greg means "hedge" in the technical trading sense, rather than in the fundamental/macro sense. I'll do my best at grossly simplifying but you'll need to research this yourself to get a deeper grasp (lots of youtube vids explaining the nuances of this)
So one hedge method could be if you buy a call, look to hedge the position by buying a put on the same asset, at a lower strike price (in case our investment idea is wrong and price goes down instead of up). careful here - the way you hedge, in this case buying a put option, will largely determine the risk profile and maximum downside of the trade. This whole issue with hedging using options, risk management generally (numerically defining downside risk using trading techniques like above for example), and nearly every other type of equities trade imho, is usually the hardest things for traders to master.
overall it will reduce profitability as you may lose the bulk of the contract value for either your call or put option. broadly speaking with options, only 2 out of 3 (1 up/2 down/3 sideways) price movement scenarios will make you money. Scenario 1: underlying JPM price goes up so your call option contract value goes up and you take profits, assuming the profit you gain from your call option is higher than the loss you'll potentially incur from closing out your put with some value still left in it, or even letting it expire worthless = win. second scenario is JPM price does not go up by november, it goes down instead (we were wrong in our thesis). now you have profit to take on your put but your call option is worth, say, 10% of original value, or you even let it expire worthless. This scenario is pretty much just the inverse of scenario 1, but given that the whole idea about this trade is that we're bullish in the near term and buying dips on JPM, likely you're heavier on the call than the put. but here we escape with a much smaller draw down on our account as we balance the profits we made on hedge with the mistake we made on our call option.
3rd scenario... price just goes sideways with very little volatility and both your call and put option slowly loses 5% every day and you question your existence and whether or not trading financial derivatives during the largest market bubble of all time is really the right way to deploy capital :D