Re: options (finance)
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What you have to really and truly understand is that the market is a zero-sum game, so every dollar you make is a dollar another trader/investor just lost.
[/ QUOTE ] Not to nit-pick but the market isn't a zero-sum game. You probably meant options.
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No, I meant precisely what I said. Minus what you pay in commissions, every other cent you make and lose comes out or goes into another trader's pocket.
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Everyone decides to buy the Vanguard Total Stock Market Index Fund. Tell me, who's losing money?
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Someone said about wrong decisions in the market resulting in greater losses. Umm, lol, no they don't. I daily take positions worth over 250k, the worst loss I've had has been about 1k. It's called stop-loss, and it's totally sweet.
[/ QUOTE ] I don't know much about options but I find the above claim hard to believe. Because if stop-loss is that sweet, why did funds such as Amaranth and LTCM lost billions of $$$?
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SlowHabit, I'm sorry but you simply don't know what you're talking about. Read the book "When Genius Failed: Rise and Fall of LTCM" its all explained in there. To summarize, though, LTCM did not have any sort of stop-losses set in combined with the fact that using massive amounts of derivates and debt they were leveraged, at their highest point, almost 30:1. They did not practice any sort of stop-loss b/c they were convinced that they cannot go wrong, and couldn't really do it if they tried that well anyway simply because of how they were structured. Seriously, read the book, it's a great read in and of itself.
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I agree that I don't know much about options. However, I will do more research to see if taking positions over 250k with the downside of only 1k is an optimal strategy. If such is the case, I'm definitely in the wrong area of investing.
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