Official Shiny Things thread—Part III

[3sniper]

Hi ST, performance wise, whats your opinion on these 3 ETFs UDOW, UPRO,TQQQ; which seek returns which are 3 times the respective underlying benchmarks as compared to say DIA, SPDR, QQQ?

 

[Shiny Things]

Hi ST, performance wise, whats your opinion on these 3 ETFs UDOW, UPRO,TQQQ; which seek returns which are 3 times the respective underlying benchmarks as compared to say DIA, SPDR, QQQ?

You'll have to imagine I'm putting clap emoji between each of these words for emphasis: do not buy-and-hold leveraged or inverse ETFs, ever.

On any timescale longer than a single day, leveraged and inverse ETFs will always do worse than you expect, because of a thing called volatility decay; the easy way to explain it is "losing 3% and then gaining 3% is worse than losing 1% and then gaining 1%".

If you're holding a leveraged or inverse ETF overnight, you are doing something very, very wrong. They're only for intraday trading.

 

[w1rbelw1nd]

41.2% contraction quarter on quarter for Singapore.

Reminder not to have home bias when it comes to investing. Suspect property price drop to occur over the next 1-2 years.

 

[iperiodic]

Hi ST, seeking some advice because I don't know how to tell my cousin in a non-douchey manner.

So about a year (slightly less) back, I borrowed a few books on index investing and some classics like The Intelligent Investor hoping that he would start learning a bit about investing. I just met him recently and he returned the books to me and I asked how was it and he said he didn't read them. Instead, he felt that these were too slow, and instead started to dabble in options trading after probably reading some stuff online.


He said that he has been in options trading for a month, and at first he lost a few grand by following random online sources, but has since recouped his losses by joining one of those options trading group in which you pay a fee to the administrator to be in it and the administrator will from time to time call out what options to get and they will just follow. He says that he recouped his losses and also earned ~5-10k (the bulk of it through some options regarding tesla) ever since following the group. He says that the guy is almost always right with the calls.

I am not against any other forms of trading even though I believe in investing for the long term personally. I believe that if you do your due diligence, other forms of tradings like options, forex etc (random examples here) will still net you a profit. The thing is, should I be worried that he will eventually burn his hands and not say anything or try to talk some sense into him? He has 0 knowledge in investing and are just reading online articles when he doesn't understand financial terms, I feel that it is dangerous.

He is saying that he may want to quit his day job as an engineer and do full time by following the chat groups because the guy is rarely wrong, I guess the few grand profit from that tesla options made him a little more confident, and in my opinion, i guess he is starting to think that it's easier than having a full time job.

Honestly at this point idk what to tell him because in his eyes, he has profited from it and is probably not able to listen to my advice since I can prove nothing while he has 'proven' himself to be correct because of the profits. According to him if the options contract (idk what it's called because i don't dabble in it) expire before you exercise it, you just lose a few hundred, but if you exercise it the upside is much higher, so he feels that you can't go broke with it.

OR: Am I just crazy for thinking that it's risky for him to dabble in options this way? Perhaps that chat group 'guru' is the real deal or something?

I don't wish for him to end up going broke, but at this point it seems that whatever I say so far isn't deterring him from learning before playing it. :/

 

[Finbias]

Hi ST, seeking some advice because I don't know how to tell my cousin in a non-douchey manner.

Good news is your cousin can only lose so much if he's only buying options. Bad news is he will lose a lot one day if he's selling them.

Honestly people with that mentality you can't talk out of it, they will have to make their own mistakes.

Chat guru guy is either a) lucky b) in posession of material non public information c) running a scatter across different groups - start with 20 groups tell half of them one trade and the other half the opposite, do that 4 times and you have 2-3 groups that think you are a genius getting 4 in a row.

There are some products where the market is so saturated it's impossible to have an edge. I have traded derivs at a top5 fx bank, we saw some of the biggest fx flows in the world, and yet I never once saw a g10 spot trader globally make consistent prop pnl over and above the deal related pnl.

 

[gerdhold]

OR: Am I just crazy for thinking that it's risky for him to dabble in options this way? Perhaps that chat group 'guru' is the real deal or something?

I don't wish for him to end up going broke, but at this point it seems that whatever I say so far isn't deterring him from learning before playing it. :/

You are right it is too risky for him to be dabbling in options but even if you fail to convince him the market will eventually deliver the lessons.

Guru is not real deal, Finbias is right.

I run FX vol book and seen it over and over again.
A little knowledge is sometimes worse than having no knowledge at all when it comes to options - because when a person has zero knowledge they tend to avoid options altogether.

 

[viventa]

Good news is your cousin can only lose so much if he's only buying options. Bad news is he will lose a lot one day if he's selling them.

This is assuming that he's got some sense of position sizing, though. If he goes full WallStreetBets with buying options (which is a real possibility, especially if he's been on a winning streak and feels "hot") then a portfolio wipe is on the cards...

 

[iperiodic]

Good news is your cousin can only lose so much if he's only buying options. Bad news is he will lose a lot one day if he's selling them.

Honestly people with that mentality you can't talk out of it, they will have to make their own mistakes.

Chat guru guy is either a) lucky b) in posession of material non public information c) running a scatter across different groups - start with 20 groups tell half of them one trade and the other half the opposite, do that 4 times and you have 2-3 groups that think you are a genius getting 4 in a row.

There are some products where the market is so saturated it's impossible to have an edge. I have traded derivs at a top5 fx bank, we saw some of the biggest fx flows in the world, and yet I never once saw a g10 spot trader globally make consistent prop pnl over and above the deal related pnl.

Hahaha, I told my cousin that it's probably just luck too but he insists that luck can't make him profitable >90% of the types for 2-3 months straight, hard to dissuade otherwise. I doubt he will sell options, nor does he have the knowledge to. Probably just going to keep buying them or something, at least that's what he told me.

You are right it is too risky for him to be dabbling in options but even if you fail to convince him the market will eventually deliver the lessons.

Guru is not real deal, Finbias is right.

I run FX vol book and seen it over and over again.
A little knowledge is sometimes worse than having no knowledge at all when it comes to options - because when a person has zero knowledge they tend to avoid options altogether.

He had 0 knowledge, and I spent hours speaking to him about ETFs, although I do dabble in long term growth stocks as part of my portfolio as well, but never dabbled with options before.

This is assuming that he's got some sense of position sizing, though. If he goes full WallStreetBets with buying options (which is a real possibility, especially if he's been on a winning streak and feels "hot") then a portfolio wipe is on the cards...

Well, I believe he tried Stocktwits or something similar before encountering that guru

 

[SGRevolution]

IWDA so high now....60
can buy?

 

[shallow]

IWDA so high now....60
can buy?

Anytime is a good time if you are in for long

Sent from Samsung SM-N950F using GAGT

 

[rantasaurus]

I usually find that clients who get the most benefit from my consulting have a net worth in the high six figures or above. (There’s no upper limit.) And I work with corporates, endowments, and investment funds as well.

Hi ST,

May I ask how did you get involved in consulting/advisory roles such as these? Was it through informal channels such as friends and peers? I'm keen to transition to such roles eventually once I've either accumulated enough financial assets or have decided to semi-retire (still far away though )

Thanks!

 

[Shiny Things]

Hi ST, seeking some advice because I don't know how to tell my cousin in a non-douchey manner.
[...]

He said that he has been in options trading for a month, and at first he lost a few grand by following random online sources, but has since recouped his losses by joining one of those options trading group in which you pay a fee to the administrator to be in it and the administrator will from time to time call out what options to get and they will just follow. He says that he recouped his losses and also earned ~5-10k (the bulk of it through some options regarding tesla) ever since following the group. He says that the guy is almost always right with the calls.
[...]
Honestly at this point idk what to tell him because in his eyes, he has profited from it and is probably not able to listen to my advice since I can prove nothing while he has 'proven' himself to be correct because of the profits.

OR: Am I just crazy for thinking that it's risky for him to dabble in options this way? Perhaps that chat group 'guru' is the real deal or something?

I don't wish for him to end up going broke, but at this point it seems that whatever I say so far isn't deterring him from learning before playing it. :/

Oof. Yeah, this is a gnarly one.

You and I can both see that your cousin has been lucky, not smart. Problem is, he can't see that.

If you want to try to get him back on a more sensible path than YOLOing TSLA (which, you're right, will inevitably end up with him betting the wrong way eventually and hosing it all away), there are a few angles you can take:
1) Why not take some of your profits and put them in something other than Tesla, so you can diversify and lock in your gains?
2) If your options guru really knows what he's doing, he'd make so much more money working at a hedge fund. Why is he selling signals to random people?
3) Nobody has a 100% hit rate. Nobody. The most profitable hedge funds have a 50-60% hit rate. Are you sizing your positions so that you can handle the loss when your guru gets one wrong?

It's totally OK to let this one drop, though. If he won't listen to you trying to teach him the easy way, he might have to learn the hard way. (Just don't say "I told you so" when he does.)

 

[Shiny Things]

Guru is not real deal, Finbias is right.

I run FX vol book and seen it over and over again.

Right, question for you: where’s your two-way in 1yr AUD 25-delta vs 10-delta put spread in 100 by vega?

 

[BBCWatcher]

1) Why not take some of your profits and put them in something other than Tesla, so you can diversify and lock in your gains?

Maybe be a little more explicit, for example “With every profitable trade, how about taking half the profit and invest it in a low cost global stock index fund, either VWRA or IWDA?”

 

[flowerpalms]

Revolution;128481158]
IWDA so high now....60
can buy?

Dont time the market,but time in the market

Posted from PCWX using SM-G973F

 

[viventa]

IWDA so high now....60
can buy?

Sounds like a good question to add to the thread's FAQs!

 

[monkeyboy88]

In Singapore, TPD ("Total and Permanent Disability") insurance is bundled with life insurance, so that's easy. You get TPD automatically when you buy the usual/typical term life insurance. The TPD portion might have certain payout limits that are different (lower) than the death payout.

TPD is very hard to claim. The disability must be "total and permanent," as the policy defines it.

Disability Income Insurance (DII) has a definition of disability that's associated with an inability to work and earn an income. It's a much broader definition.

There are also ElderShield and (rolling out now) CareShield Life policies. Those policies are a bit hard to classify, but I think they fit best in the "Long-Term Care" (LTC) insurance category. Those policies pay monthly benefits (for life in the case of CareShield Life) when you cannot perform at least some number (usually 3) of the 6 "Activities of Daily Living" without significant assistance. The 6 ADLs are: washing, dressing, feeding, toileting, walking or moving around (mobility), and transferring (moving from a bed to and from a chair or wheelchair, for example). Optional, extra cost ElderShield policy supplements are available that can reduce the threshold to 2 out of 6 ADLs, and perhaps that'll be true of CareShield Life supplements. The 3 (or 2) out of 6 ADLs definition of disability is a pretty narrow one, too.

Anyway, DII is really quite important for the vast majority of early to mid career individuals. TPD is inseparable from term life insurance (if you have a dependent, cannot self-insure, and thus need life insurance), so that's easy. LTC (CareShield Life) is compulsory if you're in a young cohort and well worth considering otherwise. CSL helps with long-term care needs if you're quite seriously disabled, beyond an inability to work and earn an income, and require assistance. And CSL covers you for life once all the premiums are paid.

How about cancer insurance. is it neccessary?

 

[Finbias]

Right, question for you: where’s your two-way in 1yr AUD 25-delta vs 10-delta put spread in 100 by vega?

ref .6994 atmf .6460/.5900 1x1 put spread, 1.25/2.25 vol spread, 11.75 vol mid on the near strike

 

[gerdhold]

Right, question for you: where’s your two-way in 1yr AUD 25-delta vs 10-delta put spread in 100 by vega?

ref .6994 atmf .6460/.5900 1x1 put spread, 1.25/2.25 vol spread, 11.75 vol mid on the near strike

That's wide for vn spread. I'm 1.4/2.0. He's prob seller

 

[Finbias]

That's wide for vn spread. I'm 1.4/2.0. He's prob seller

Haha nah not when skew has recovered this much. Plus the strikes are actually not bad to buy the spread as general risk off hedge against long equity possi