So I bought S&P 500 2500 puts

[bobandsherry]

OK, one more. Sorry, but the typing brings other things to mind...

If "the call" was really a near term drop, then the thing to do would be to buy near-term puts at the money. Those would be the most sensitive to a move in the underlying stock.

But that is not what the OP did, he bought them pretty far below the money.

Like the tree in a forest, can a 'call' be 'good/bad' if it wasn't even a 'call'?

-ERD50

I get it, you get it, somehow others either have more information or they don't get it

 

[Fedup]

Some of us wants to give OP the benefit out the doubt. Simple as that. I appreciate his post.

 

[ERD50]

Some of us wants to give OP the benefit out the doubt. Simple as that. I appreciate his post.

OK, your prerogative. But I'm still confused about this 'call'? What in the OP are you giving him credit for? There seems to be a large area of 'doubt', as there was little in the way of specifics. From the OP:

It could be that we just get a repeat of 1966 - 1981 where the market just trades in a price range while inflation consumes values to the down side.

And later, he did provide a bit more info (emph mine):

... This is just a position of less than 1% of my portfolio to buy insurance on a major market decline.

If a decline were to happen and begin occurring then two things will occur the S&P 500 will decline in price getting closer to my in the money call and the fear premium will increase dramatically increasing the value of my put.

If on the other hand nothing happens or preferably the market continues to increase, then I basically will lose less than 1 percent of my portfolio and continue on my happy accretion ways and the puts will expire worthless.

Worst case would be a steady slow decline into year end into the 2600 range, but even then I will have met the mark on what I am looking for in my portfolio. I am not too concerned if they expire worthless the cost to me is not that onerous relative to the potential gain should the reaction get out of hand. ...

While that is not an action I would take, I can see why someone might decide to do that.

But it's not a 'call', IMO. It is merely a feeling that the market is primed for a drop, and the OP wants to have insurance against that, and accepts that it might not happen and he will lose 100% of his premium ( a 1% hit on his portfolio).

Fine. But I see no reason to make it something it isn't. It has almost nothing to do with this recent drop. It's a bit like betting on a horse that has a good record. You have some expectations for the horse to show, but no guarantee, and you place a bet that is small enough to not hurt you. And if you win, you win a small amount since the odds were with you. Kind of a yawner, IMO. Nothing wrong with it either, but that's all it is, IMO.

-ERD50

 

[haha]

Really, really, tough crowd.

A big drop occurs 3 days after he posts that he bought the puts. They are worth more today. End of story.

Why is it that when it is obvious that credit is due, folks are unable to give it? Is it any skin off your back?

Did anyone else post that they were shorting the market or buying puts within the past week?

He made a good/timely call. You don't want to congratulate him or give him credit, you don't have to. I will.

++++ I don't get it either does his successful call make any of the other members here look bad? Not that I can see.

Ha

 

[ERD50]

++++ I don't get it either does his successful call make any of the other members here look bad? Not that I can see.

Ha

What does "make any of the other members here look bad" have to do with anything?

This recent drop doesn't really even appear to be what the OP was talking about. It's the pumping up that I'm not getting.

-ERD50

 

[Fedup]

ERD, you need to get back to the TSLA thread. You and running_man seem to agree on that.

 

[NYEXPAT]

It is not worth my time to reread OP's post or track options premiums. On my first reading (I did enjoy your post OP), your "worst case" example, led me to surmise you bought December puts. So, I will measure it on that basis unless the OP cares to correct me?

 

[ERD50]

ERD, you need to get back to the TSLA thread. You and running_man seem to agree on that.

Actually, I have had very little if any, disagreement with Running_Man in this thread.

I've asked him for detail (expiry, price) so we can try to make more sense out of just what he is looking for.

I think we've agreed that he's looking at this as insurance, in case a drop happens (not that he expects it), and that he might be able to make money on the option itself.

My disagreement is with others for claiming that he made a great 'call', based on the market the past few days. Maybe I missed it, but I didn't see Running_Man himself making any claims of 'winning' at this point.

-ERD50

 

[Fedup]

Maybe he doesn’t want to gloat yet. But he has refused to give specific details because like he said in the TESLA thread, you get to eat crows when you make it so public. I’m respecting his wish by not publicly disclose what he purchased, frankly I don’t really care. At the end of the day, it’s his money, not mine.

 

[ERD50]

Maybe he doesn’t want to gloat yet. But he has refused to give specific details because like he said in the TESLA thread, you get to eat crows when you make it so public. I’m respecting his wish by not publicly disclose what he purchased, frankly I don’t really care. At the end of the day, it’s his money, not mine.

And that's all well and good... right up to the point when someone says/agrees he made a 'great call'. I don't see how anyone can do that w/o specifics.

OK, it's been said too many times. Horse is dead, I'm out.

-ERD50

 

[OldShooter]

It baffles me that people in this thread feel that the OP somehow owes them answers to whatever questions they choose to post.

I have already said that I think the OP is a pretty smart guy. My bet is that he's not interested in gloating because he fully understands that predicting the market is a fools errand. His purchasing of puts was not a prediction; it was a wager where he felt that the odds of winning were favorable relative to the amount wagered.

 

[MichaelB]

Thanks to Running Man for posting his timing moves and views on valuations once again. As can be seen by some of the responses, that's not easy to do. People might find the discussion more useful and informative if they spent less time judging and more time exploring his reasoning - or their own.

 

[ownyourfuture]

Some of us wants to give OP the benefit out the doubt. Simple as that. I appreciate his post.

I'm in the same camp. Can't believe 'some' of the other posters here. If they were a migrating wildebeest, & came to a river filled with giants crocs, they'd chastise the one who separated from the herd & crossed further up-river where there wasn't any.

 

[NYEXPAT]

I'm in the same camp. Can't believe 'some' of the other posters here. If they were a migrating wildebeest, & came to a river filled with giants crocs, they'd chastise the one who separated from the herd & crossed further up-river where there wasn't any.

I think we need to be clear here. Are you referring to what some call "blue wildebeest" or the "western white-bearded wildebeest" or the less talked about "eastern white-bearded wildebeest"?

 

[Sunset]

I have certainly appreciated Running Man's post (AGAIN).

It's something I have considered doing, but never got around to it and frankly the calculations needed to be correct are something I only have a vague understanding about.

This makes the 3rd time, he has posted something relevant to my situation and he has been correct about it.

I'm one of those folks who think selling calls or buying puts is not market timing, but more like insurance of one's investments.

 

[NYEXPAT]

I have certainly appreciated Running Man's post (AGAIN).

It's something I have considered doing, but never got around to it and frankly the calculations needed to be correct are something I only have a vague understanding about.

This makes the 3rd time, he has posted something relevant to my situation and he has been correct about it.

I'm one of those folks who think selling calls or buying puts is not market timing, but more like insurance of one's investments.

+100, speaking strictly as a DMT myself!

 

[FinancialDave]

2200 is lower than 2500, I think a very reasonable expectation of a rapid decline, should one occur. I am sorry to have created such an indecipherable thread, I think it is fairly clear myself. I do not plan on providing any more clarity as I think results will pretty much speak for themselves, I grant the idea that I am 95% likely to lose the funds invested, on the other hand, if I do "win" on this investment, I think that will be equally obvious.

It's not clear at all unless we know the strike price and expiration of the Puts. Otherwise the conversation is useless.

 

[bobandsherry]

It's not clear at all unless we know the strike price and expiration of the Puts. Otherwise the conversation is useless.

Useless to try and discuss with them, they just don't get it.

 

[ERD50]

It's not clear at all unless we know the strike price and expiration of the Puts. Otherwise the conversation is useless.

The only thing clear to me is the obfuscation.

-ERD50

 

[FUEGO]

The only thing clear to me is the obfuscation.

-ERD50

Just skimmed through the thread. So we never got more details on Runningman's position? Short term puts sounds like under 6 months to me. Two or more weeks into this experiment, we're still sitting at an SP500 quote 12% higher than his strike price with the time value ticking away. Will be interesting to follow along and watch since it's not my money on the casino table!

For the record, I've been calling the next big downturn for five years now. I finally laid my money down in 2017-2018 and shifted to 90/10 (10% bonds/cash/CDs) from a previous ~100% stock portfolio.

 

[OldShooter]

This thread is a puzzle to me. People seeming to think the OP owes them information and explanations and I don't understand the reason for what I read as snarkiness from @ERD50. Not your usual pleasant forum thread.

The strategy is very simple and is right out of Nassim Taleb's playbook: Find options (puts or calls) that are far out of the money, with prices that are less than what statistics predict for payoff. Expect the vast majority of them to expire worthless while waiting patiently for the very infrequent big wins that the trader expects. (Note: "Trader" not "Investor.")

Whether the trader views it simply as a trading strategy or whether he/she views it as "insurance," it is the same thing.

All this obsessing for information on length and strike price is really irrelevant unless the demanding posters have their own way of determining whether the specific option is underpriced and want to compare notes with the OP. Niggling about day-to-day movements in the S&P is probably evidence that the poster does not understand the strategy.

The trick, obviously, is to reliably identify underpriced options. Taleb argues that underpricing often occurs for options out in the fat tails of the distribution. Maybe. I don't know. I am not a statistician. I am an investor, so this kind of analysis and statistical betting is not in my skill set and not of any interest to me. But I don't get why people seem to have so much trouble understanding it. At its heart it is very simple.

 

[gauss]

Saying that you bought 2500 puts without disclosing the expiration or other relative details that occurred in the past (ie cost) seems a bit lacking. On the other hand if we all know the expiration then we could potentially front-run his exit trade and mess up his potential profit.

Perhaps RM will disclose the entire trade once he has exited his position and then we can discuss the quantitative aspects of it. What do you say RM?

-gauss

 

[OldShooter]

... Perhaps RM will disclose the entire trade once he has exited his position and then we can discuss the quantitative aspects of it. What do you say RM? ...

Gauss, you're not getting it. His trade will almost certainly expire worthless and there is absolutely nothing to be concluded from that. That is the whole point of the strategy; to absorb pinpricks while waiting for a win big enough to overwhelm the pinpricks and then some.

 

[ERD50]

This thread is a puzzle to me. People seeming to think the OP owes them information and explanations and I don't understand the reason for what I read as snarkiness from @ERD50. Not your usual pleasant forum thread. ....

I'm sorry you see my posts as 'snarky', or 'unpleasant' in any way. I don't understand that view at all.

OP said he was buying protective puts @ 2500, and considering 2200, fine. But then others jumped in that a drop shortly thereafter was some sort of sign that the call was 'genius' and such.

I challenged that view (not the OP). Since we don't know the expiry, and we don't know if OP sold, I simply see no way to call the trade a 'win' or not. And I even said, if OP just bought the puts as insurance, and they expire worthless, that's not 'losing' either - he got the insurance he paid for, fair deal.

I don't understand the reluctance of OP to state the details, after starting the thread in the first place. Why not just keep quiet about it? I doubt the OP or any of us have enough power or motivation to affect that trade. But if he doesn't want to share, fine. But why all the praise from others? That's what makes no sense to me.

If you can point out any snarkiness or unpleasantness in my posts in this thread, please point them out to me. Maybe they came across differently than what I intended, and maybe I can learn from that. I suspect it to be just overly-sensitive readers, reading far too much into those posts, but I'm open to a challenge on that.

-ERD50

 

[ERD50]

Gauss, you're not getting it. His trade will almost certainly expire worthless and there is absolutely nothing to be concluded from that. That is the whole point of the strategy; to absorb pinpricks while waiting for a win big enough to overwhelm the pinpricks and then some.

As I said, accepting that they likely will expire worthless is fine. But that's way different from the posts like this:

You bought puts a couple days ago? GENIUS!!!

-ERD50