Margin Definition - investopedia.com

Hedging for Autists

Hedging for Autists

Listen up autists because you are about to get your ass saved by this knowledge I'm about to drop on you. Because today we're going to learn about hedging strategies. I've noticed that some of us may be confused on how to limit downside risk.
For those of you lazy bananas just waiting for the TLDR, well here it is: 3/27 270c; 3/27 200p; 3/27 230c, 3/27 210p [Edit: better range]. You're going to have to read to figure out why buying both is useful.
First, let's get clear on what a hedge refers to. According to Investopedia:

A hedge is an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security.
In plain-speak, a hedge is placing the opposite or comparable bet to make sure your ass is saved if everything goes tits up.1

Believe it or not, but options are not just for playing the market like casino chips.
In fact, they can be used in combination with regular stock, or along with other assets, to reduce risk and maximize returns.
Options accomplish 2 primary things:

  • They allow us to control for downside risk,
    • similar to buying car insurance for your speed demon of a wife.
    • When you buy puts you are protecting yourself from losses if your long position goes tits up.

  • They allow us to leverage our existing assets for greater returns.
    • Similar to renting out your condo to buy more rental condos, you can "rent out" stocks that you own by selling covered calls or puts, a concept we will discuss further down.
    • This is where Theta gang get their tendies.

Shit happens quickly, as we saw Friday. Unless you fart magic you're not going to predict when it will shift. Luckily, you don't need to with these simple tricks.

Trick #1: The Straddle
It is not just what your wife does to the neighbor while you film. It is also what you can use when you don't know whether witches will appear as promised, or if stone cold warlocks will grab your balls and squeeze them for max pain.

A long straddle is a combination of buying a call and buying a put, both with the same strike price and expiration. Together, they produce a position that should profit if the stock makes a bigly move either up or down.[2]

As you can see, the the above scenario may come in handy for days like Monday where we are all basically 50/50 whether it will be upsies or downsies.
It is the Schrodinger's cat of options plays. Except, either of the two states will result is an alive portfolio.
Literally can't go tits up, unless you suffer from IV crush, or it goes sideways..
Which leads us to:

A short straddle is an options strategy comprised of selling both a call option and a put option with the same strike price and expiration date. It is used when the trader believes the underlying asset will not move significantly higher or lower over the lives of the options contracts.

Use the above scenario when the underlying asset is trading inside a defined range.
Be careful, because any escape up or down will mean certain doom.
You should be aware that selling a call and a put implies that you own shares of the underlying security, otherwise you will be on the hook to purchase if it goes the wrong direction.
When it comes to buying straddles you need a decent amount of cash to buy both a call and put for the same strike price.
Also, what if you are certain that the stonk will go up but still want some downside protection?
That leads us to:

Trick #2: The Strangle
  • A strangle is a more cost-effective way to hedge while still maintaining a position on a direction of a security.
  • It involves purchasing an opposite position with a different strike price.
  • The strike price can be OTM or NTM depending on how much you would like to control for downside risk.
More info:
A strangle is an options strategy where the investor holds a position in both a call and a put option with different strike prices, but with the same expiration date and underlying asset. A strangle is a good strategy if you think the underlying security will experience a large price movement in the near future but are unsure of the direction. However, it is profitable mainly if the asset does swing sharply in price.3
Example:
Say Friday you decided to hedge on witches and bought an SPY 3/20 $280c like a retard.
Had you also purchased an SPY 3/20 210p you may have come out ahead, or at least retained your principal.

Long Strangle
The long strangle, also known as buy strangle or simply \"strangle\", is a neutral strategy in options trading that involve the simultaneous buying of a slightly out-of-the-money put and a slightly out-of-the-money call of the same underlying stock and expiration date. Long Strangle Construction.
Just as with straddles, strangles can go long or short. To retain a position on a security that you expect to trade sideways you can use the short strangle.
Short Strangle

The short strangle, also known as sell strangle, is a neutral strategy in options trading that involve the simultaneous selling of a slightly out-of-the-money put and a slightly out-of-the-money call of the same underlying stock and expiration date.
Maximum profit for the short strangle occurs when the underlying stock price on expiration date is trading between the strike prices of the options sold.
At this price, both options expire worthless and the options trader gets to keep the entire initial credit taken as profit.4

Trick #3: Selling Call Options
  • You may hear a lot of people throw around Theta gang.
  • They are referring to the type of options play where you sell a call option via 'sell to open' on a security that they own.
  • If they do not own the security they are selling a 'naked call' which can be risky if the play goes the wrong way.

A covered call is an options strategy involving trades in both the underlying stock and an option contract. The trader buys (or already owns) the underlying stock. They will then sell call options for the same number (or less) of shares held and then wait for the option contract to be exercised or to expire.
This is the most basic way to profit from your portfolio in a situation where the stock may not move up in price. That way you can keep your shitty JNUG shares and earn money while they slowly move down to $1. Just sell an OTM call, but make sure that you have at least 100 shares of JNUG for each contract sold otherwise you'll have a margin call if it goes up beyond your strike price.

Trick #4: Credit Spread
  • In finance, a credit spread, or net credit spread is an options strategy that involves a purchase of one option and a sale of another option in the same class and expiration but different strike prices.
  • It is designed to make a profit when the spreads between the two options narrows.

The call credit spread is a bearish to neutral options trading strategy that capitalizes on theta decay and downward price moves in the underlying asset. It is comprised of a short call and a long call, and is sometimes also referred to as a “bear call spread.”
The call credit spread option strategy also works in minimally rising markets, as the trade will be entirely profitable if the underlying asset closes below short call strike price at option expiration.5
Example:

Stock XYZ is trading at $50 a share.
Sell 53 call for $0.50
Buy 55 call for $0.20
The net credit received for this trade is $0.30 ($30).
The best case scenario for a call credit spread is for the underlying instrument, stock XYZ in this case, to move down or stay the same. If stock XYZ is anywhere below $53 at expiration (the price of the short strike), this trade would be a full winer.

Take care to review the below resources and watch some YouTube to fully understand these plays before partaking. It is important that you understand how to properly leverage and control for risk to avoid a massive GUH when you fuck up.
Implied Volatility on SPY and Other Assets - Important Info
One of the most practical applications of the above strategies is to hedge against the leverage the decline in VIX to control for IV decay. bigd0g111 does an excellent job of explaining this in their post on how to avoid IV Crush:

Hedge vega (the quantifiable proxy for IV on option pricing). Vega represents the change in an option value for a 1% change in IV.
The hedge is by going long $SPY calls, and hedging the vega by shorting the $VIX with puts. All you need to do is match up the vega of the $SPY call with the delta of the $VIX put.
The Hypothetical Trade:
Long $SPY 4/17 240c - trading at 9.65 a piece with a vega of 0.2404
Long $VIX 4/15 52.5p - trading at 7.90 a piece with a delta of -0.2463

If you autists aren't taking the bare minimum protections to hedge against downside risk, especially for VIX then you have no-one to blame but yourself if you get pinched.
Take a read of the post(s) I mention above and be sure to ask any silly questions below if you get stuck. Remember, there are no silly questions, just silly people. Thanks and goodnight.
Edits:
  • 3/22 - a lot of you autists smart people mentioned that we heed the danger of the IV crush that is happening to all of our calls/puts. Implied Volatility is a fucker that kills and cannot be killed. IV personified is scarier than covid-19 and Umbrella corp tyrant virus all in one. Don't fuck with IV it will come out from behind a counter and bite your ass and then game over, son!
  • IV crush is a risk when using long strangles and long straddles, so be aware that you may lose a ton to IV if you hold a long time.
  • ^ Also, puts on VIX futures may not ameliorate the risk of IV crush.
  • I just hedged to some other sexy subreddits and busted and it was great.

  1. https://www.investopedia.com/terms/h/hedge.asp
  2. https://www.theoptionsguide.com/short-strangle.aspx
  3. https://www.investopedia.com/terms/s/strangle.asp
  4. https://www.theoptionsguide.com/short-strangle.aspx
  5. https://www.optionsbro.com/call-credit-spread-option-strategy-example/
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Long-Term Falling Interest Rates and the Rise of Neofeudalism

Historian Paul Schmelzing recently published an exceptional working paper on eight centuries of global real and nominal interest rates, from 1311 to 2018.
Nominal rates graph
What he discovered surprised me: nominal and real rates over very long periods of time are in "suprasecular decline" and that the fall in real and nominal interest rates over the last forty years are merely a reversion to long-term historical trends. When I say "interest rates", I mean both literal rates (paid for debt servicing), as well as effective rates (i.e., at what earnings multiple stocks trade). Schmelzing is more limited in his definition but I will use the term "falling rates" to mean both lowering bond yields and rising equity multiples. What's more surprising, the rate of decline is fairly "rapid" across human history at about 2 basis points (.02%) a year. In 100 years, interest rates will be a full 2% lower in expectation. If this phenomenon is reliable and persists into the future, what will the world look like when interest rates are near-zero or negative? Allow me to engage in some rank speculation.
1). Outsized wealth creation will no longer be possible by professional "asset compounders" like Warren Buffett because there's not a lot of "compounding" one can do when rates are so low. I mean this very literally: since expected human lifespans are only getting a little bit longer, and the Rule of 72 remains true for all non-relativistic finance we literally can't live long enough to compound enough money to move the needle. Instead, capitalism will heavily favor "asset gatherers" and "money-raisers" that invest in direct capital projects -- people who raise a lot of money to do something low-return and (legally) skim a bit off the top, because there's going to be simply so much more money floating around and the return hurdle is so much lower. Insofar as this is already painfully true of capitalism by the early 2000s and 2010s, it will be even more the dominant reality for our grandchildren's grandchildren. Someone like Warren Buffett was truly born in the right decade: a time when, at the midpoint of his life, interest rates were unusually high (i.e., assets were unusually cheap) and began a long decline, driving outsized returns for "professional capitalists" and especially for value investors who correctly assigned a very high cost of capital to earnings. The dominant model of wealth creation has shifted from squirrely hoarders like Buffett to either bombastic asset gatherers like Adam Neumann, or to extremely talented builders like Elon Musk, in part because interest rates are much, much lower.
2). Monopolies will be more valuable than ever and non-monopolies will trade at more significant discounts. As required returns lower, capital will flow toward non-monopolistic, competitive industries (think Quip, Boll & Branch, and whatever other favorite podcast sponsor you have) and reduce returns in those industries even further than where they are now. What really matters isn't how much money a company is making per se, but the certainty that they will earn those returns in the future. This certainty in maintaining pricing, margins, and market share enables investors to capitalize businesses at very high multiples because there's "nothing else left to invest in". More on this later.
3). Commodity-capital industries become particularly bad industries over time. Finance (all of it: main street banking, investment management, insurance) becomes even more commoditized than it already is. Funnily, I think investment banking is a service and will be excluded from this implosion, and the high-end firms should remain well-insulated as capital raising and valuation-setting activities from IPOs remain a fairly sensitive activity. Real estate cap rates should continue to decline and so should their associated capitalization requirements and costs of capital: one day we'll commonly start to get 100% debt financed apartment complexes that only cost 3% to service (China is perilously close to this phenomenon already).
4). The rise of what I can only describe as Neofeudalism. Imagine a world where a "typically risky" asset has a 2.5% nominal return: a. If you can build an income stream, it will trade at 40x earnings. b. If you fail to build an income stream, you need 40x the money to replicate the same-sized income stream. c. If your parents were rich and frugal, you will be rich, because they amassed all of the asset increase benefits from when interest rates were high and dropped. Inheritances, in some weird reversion to the mean, will once again become a greater determinant of wealth. d. It will be almost impossible to become independently wealthy as a wage-worker, because if you save money, you'll only be earning a 2% nominal return. e. "High-certainty assets" will be seen as even more valuable than before, relative to peers. This is due a weird intersection of behavioral finance and arithmetic: an investor being willing to accept a company valued at 1% cap rate instead of 2% will go from valuing a company at 50x earnings to 100x earnings. In low interest rate worlds, the value of securitizing and financializing income streams only grows, because the equivalent capital required to generate those equivalent streams becomes very high. This is why payments startups make so much more sense today than ever before: their revenue streams are incredibly reliable, on an ever-growing churn of economic activity. Even if their profits are low now, the certainty of the growth of future cash-flows is extremely high, and being certain as interest rates asymptote to zero enables the biggest and best valuations.
Why do low future rates bring about Neofeudalism? Interest rates are like a very long lever. As rates go lower, the lever gets longer, and the more valuable income streams become. At some point the lever itself becomes a sort of king-maker: if you are able to build a perpetual-income business of any kind, you will effectively control an economic fiefdom, because that income stream will be considered incredibly valuable. And if you fail to create that perpetual income stream, you'll be a serf, forced to either deplete your savings (since returns aren't high enough) or work forever.
This also re-calibrates our understanding of Baby Boomer wealth. They entered the job market when interest rates were at their very highest in recent human history. If you were a reasonably competent young person who could secure a job, you could compound an unbelievable amount of wealth over the ensuing 5 decades.
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Everything You Always Wanted To Know About Swaps* (*But Were Afraid To Ask)

Hello, dummies
It's your old pal, Fuzzy.
As I'm sure you've all noticed, a lot of the stuff that gets posted here is - to put it delicately - fucking ridiculous. More backwards-ass shit gets posted to wallstreetbets than you'd see on a Westboro Baptist community message board. I mean, I had a look at the daily thread yesterday and..... yeesh. I know, I know. We all make like the divine Laura Dern circa 1992 on the daily and stick our hands deep into this steaming heap of shit to find the nuggets of valuable and/or hilarious information within (thanks for reading, BTW). I agree. I love it just the way it is too. That's what makes WSB great.
What I'm getting at is that a lot of the stuff that gets posted here - notwithstanding it being funny or interesting - is just... wrong. Like, fucking your cousin wrong. And to be clear, I mean the fucking your *first* cousin kinda wrong, before my Southerners in the back get all het up (simmer down, Billy Ray - I know Mabel's twice removed on your grand-sister's side). Truly, I try to let it slide. I do my bit to try and put you on the right path. Most of the time, I sleep easy no matter how badly I've seen someone explain what a bank liquidity crisis is. But out of all of those tens of thousands of misguided, autistic attempts at understanding the world of high finance, one thing gets so consistently - so *emphatically* - fucked up and misunderstood by you retards that last night I felt obligated at the end of a long work day to pull together this edition of Finance with Fuzzy just for you. It's so serious I'm not even going to make a u/pokimane gag. Have you guessed what it is yet? Here's a clue. It's in the title of the post.
That's right, friends. Today in the neighborhood we're going to talk all about hedging in financial markets - spots, swaps, collars, forwards, CDS, synthetic CDOs, all that fun shit. Don't worry; I'm going to explain what all the scary words mean and how they impact your OTM RH positions along the way.
We're going to break it down like this. (1) "What's a hedge, Fuzzy?" (2) Common Hedging Strategies and (3) All About ISDAs and Credit Default Swaps.
Before we begin. For the nerds and JV traders in the back (and anyone else who needs to hear this up front) - I am simplifying these descriptions for the purposes of this post. I am also obviously not going to try and cover every exotic form of hedge under the sun or give a detailed summation of what caused the financial crisis. If you are interested in something specific ask a question, but don't try and impress me with your Investopedia skills or technical points I didn't cover; I will just be forced to flex my years of IRL experience on you in the comments and you'll look like a big dummy.
TL;DR? Fuck you. There is no TL;DR. You've come this far already. What's a few more paragraphs? Put down the Cheetos and try to concentrate for the next 5-7 minutes. You'll learn something, and I promise I'll be gentle.
Ready? Let's get started.
1. The Tao of Risk: Hedging as a Way of Life
The simplest way to characterize what a hedge 'is' is to imagine every action having a binary outcome. One is bad, one is good. Red lines, green lines; uppie, downie. With me so far? Good. A 'hedge' is simply the employment of a strategy to mitigate the effect of your action having the wrong binary outcome. You wanted X, but you got Z! Frowny face. A hedge strategy introduces a third outcome. If you hedged against the possibility of Z happening, then you can wind up with Y instead. Not as good as X, but not as bad as Z. The technical definition I like to give my idiot juniors is as follows:
Utilization of a defensive strategy to mitigate risk, at a fraction of the cost to capital of the risk itself.
Congratulations. You just finished Hedging 101. "But Fuzzy, that's easy! I just sold a naked call against my 95% OTM put! I'm adequately hedged!". Spoiler alert: you're not (although good work on executing a collar, which I describe below). What I'm talking about here is what would be referred to as a 'perfect hedge'; a binary outcome where downside is totally mitigated by a risk management strategy. That's not how it works IRL. Pay attention; this is the tricky part.
You can't take a single position and conclude that you're adequately hedged because risks are fluid, not static. So you need to constantly adjust your position in order to maximize the value of the hedge and insure your position. You also need to consider exposure to more than one category of risk. There are micro (specific exposure) risks, and macro (trend exposure) risks, and both need to factor into the hedge calculus.
That's why, in the real world, the value of hedging depends entirely on the design of the hedging strategy itself. Here, when we say "value" of the hedge, we're not talking about cash money - we're talking about the intrinsic value of the hedge relative to the the risk profile of your underlying exposure. To achieve this, people hedge dynamically. In wallstreetbets terms, this means that as the value of your position changes, you need to change your hedges too. The idea is to efficiently and continuously distribute and rebalance risk across different states and periods, taking value from states in which the marginal cost of the hedge is low and putting it back into states where marginal cost of the hedge is high, until the shadow value of your underlying exposure is equalized across your positions. The punchline, I guess, is that one static position is a hedge in the same way that the finger paintings you make for your wife's boyfriend are art - it's technically correct, but you're only playing yourself by believing it.
Anyway. Obviously doing this as a small potatoes trader is hard but it's worth taking into account. Enough basic shit. So how does this work in markets?
2. A Hedging Taxonomy
The best place to start here is a practical question. What does a business need to hedge against? Think about the specific risk that an individual business faces. These are legion, so I'm just going to list a few of the key ones that apply to most corporates. (1) You have commodity risk for the shit you buy or the shit you use. (2) You have currency risk for the money you borrow. (3) You have rate risk on the debt you carry. (4) You have offtake risk for the shit you sell. Complicated, right? To help address the many and varied ways that shit can go wrong in a sophisticated market, smart operators like yours truly have devised a whole bundle of different instruments which can help you manage the risk. I might write about some of the more complicated ones in a later post if people are interested (CDO/CLOs, strip/stack hedges and bond swaps with option toggles come to mind) but let's stick to the basics for now.
(i) Swaps
A swap is one of the most common forms of hedge instrument, and they're used by pretty much everyone that can afford them. The language is complicated but the concept isn't, so pay attention and you'll be fine. This is the most important part of this section so it'll be the longest one.
Swaps are derivative contracts with two counterparties (before you ask, you can't trade 'em on an exchange - they're OTC instruments only). They're used to exchange one cash flow for another cash flow of equal expected value; doing this allows you to take speculative positions on certain financial prices or to alter the cash flows of existing assets or liabilities within a business. "Wait, Fuzz; slow down! What do you mean sets of cash flows?". Fear not, little autist. Ol' Fuzz has you covered.
The cash flows I'm talking about are referred to in swap-land as 'legs'. One leg is fixed - a set payment that's the same every time it gets paid - and the other is variable - it fluctuates (typically indexed off the price of the underlying risk that you are speculating on / protecting against). You set it up at the start so that they're notionally equal and the two legs net off; so at open, the swap is a zero NPV instrument. Here's where the fun starts. If the price that you based the variable leg of the swap on changes, the value of the swap will shift; the party on the wrong side of the move ponies up via the variable payment. It's a zero sum game.
I'll give you an example using the most vanilla swap around; an interest rate trade. Here's how it works. You borrow money from a bank, and they charge you a rate of interest. You lock the rate up front, because you're smart like that. But then - quelle surprise! - the rate gets better after you borrow. Now you're bagholding to the tune of, I don't know, 5 bps. Doesn't sound like much but on a billion dollar loan that's a lot of money (a classic example of the kind of 'small, deep hole' that's terrible for profits). Now, if you had a swap contract on the rate before you entered the trade, you're set; if the rate goes down, you get a payment under the swap. If it goes up, whatever payment you're making to the bank is netted off by the fact that you're borrowing at a sub-market rate. Win-win! Or, at least, Lose Less / Lose Less. That's the name of the game in hedging.
There are many different kinds of swaps, some of which are pretty exotic; but they're all different variations on the same theme. If your business has exposure to something which fluctuates in price, you trade swaps to hedge against the fluctuation. The valuation of swaps is also super interesting but I guarantee you that 99% of you won't understand it so I'm not going to try and explain it here although I encourage you to google it if you're interested.
Because they're OTC, none of them are filed publicly. Someeeeeetimes you see an ISDA (dsicussed below) but the confirms themselves (the individual swaps) are not filed. You can usually read about the hedging strategy in a 10-K, though. For what it's worth, most modern credit agreements ban speculative hedging. Top tip: This is occasionally something worth checking in credit agreements when you invest in businesses that are debt issuers - being able to do this increases the risk profile significantly and is particularly important in times of economic volatility (ctrl+f "non-speculative" in the credit agreement to be sure).
(ii) Forwards
A forward is a contract made today for the future delivery of an asset at a pre-agreed price. That's it. "But Fuzzy! That sounds just like a futures contract!". I know. Confusing, right? Just like a futures trade, forwards are generally used in commodity or forex land to protect against price fluctuations. The differences between forwards and futures are small but significant. I'm not going to go into super boring detail because I don't think many of you are commodities traders but it is still an important thing to understand even if you're just an RH jockey, so stick with me.
Just like swaps, forwards are OTC contracts - they're not publicly traded. This is distinct from futures, which are traded on exchanges (see The Ballad Of Big Dick Vick for some more color on this). In a forward, no money changes hands until the maturity date of the contract when delivery and receipt are carried out; price and quantity are locked in from day 1. As you now know having read about BDV, futures are marked to market daily, and normally people close them out with synthetic settlement using an inverse position. They're also liquid, and that makes them easier to unwind or close out in case shit goes sideways.
People use forwards when they absolutely have to get rid of the thing they made (or take delivery of the thing they need). If you're a miner, or a farmer, you use this shit to make sure that at the end of the production cycle, you can get rid of the shit you made (and you won't get fucked by someone taking cash settlement over delivery). If you're a buyer, you use them to guarantee that you'll get whatever the shit is that you'll need at a price agreed in advance. Because they're OTC, you can also exactly tailor them to the requirements of your particular circumstances.
These contracts are incredibly byzantine (and there are even crazier synthetic forwards you can see in money markets for the true degenerate fund managers). In my experience, only Texan oilfield magnates, commodities traders, and the weirdo forex crowd fuck with them. I (i) do not own a 10 gallon hat or a novelty size belt buckle (ii) do not wake up in the middle of the night freaking out about the price of pork fat and (iii) love greenbacks too much to care about other countries' monopoly money, so I don't fuck with them.
(iii) Collars
No, not the kind your wife is encouraging you to wear try out to 'spice things up' in the bedroom during quarantine. Collars are actually the hedging strategy most applicable to WSB. Collars deal with options! Hooray!
To execute a basic collar (also called a wrapper by tea-drinking Brits and people from the Antipodes), you buy an out of the money put while simultaneously writing a covered call on the same equity. The put protects your position against price drops and writing the call produces income that offsets the put premium. Doing this limits your tendies (you can only profit up to the strike price of the call) but also writes down your risk. If you screen large volume trades with a VOL/OI of more than 3 or 4x (and they're not bullshit biotech stocks), you can sometimes see these being constructed in real time as hedge funds protect themselves on their shorts.
(3) All About ISDAs, CDS and Synthetic CDOs
You may have heard about the mythical ISDA. Much like an indenture (discussed in my post on $F), it's a magic legal machine that lets you build swaps via trade confirms with a willing counterparty. They are very complicated legal documents and you need to be a true expert to fuck with them. Fortunately, I am, so I do. They're made of two parts; a Master (which is a form agreement that's always the same) and a Schedule (which amends the Master to include your specific terms). They are also the engine behind just about every major credit crunch of the last 10+ years.
First - a brief explainer. An ISDA is a not in and of itself a hedge - it's an umbrella contract that governs the terms of your swaps, which you use to construct your hedge position. You can trade commodities, forex, rates, whatever, all under the same ISDA.
Let me explain. Remember when we talked about swaps? Right. So. You can trade swaps on just about anything. In the late 90s and early 2000s, people had the smart idea of using other people's debt and or credit ratings as the variable leg of swap documentation. These are called credit default swaps. I was actually starting out at a bank during this time and, I gotta tell you, the only thing I can compare people's enthusiasm for this shit to was that moment in your early teens when you discover jerking off. Except, unlike your bathroom bound shame sessions to Mom's Sears catalogue, every single person you know felt that way too; and they're all doing it at once. It was a fiscal circlejerk of epic proportions, and the financial crisis was the inevitable bukkake finish. WSB autism is absolutely no comparison for the enthusiasm people had during this time for lighting each other's money on fire.
Here's how it works. You pick a company. Any company. Maybe even your own! And then you write a swap. In the swap, you define "Credit Event" with respect to that company's debt as the variable leg . And you write in... whatever you want. A ratings downgrade, default under the docs, failure to meet a leverage ratio or FCCR for a certain testing period... whatever. Now, this started out as a hedge position, just like we discussed above. The purest of intentions, of course. But then people realized - if bad shit happens, you make money. And banks... don't like calling in loans or forcing bankruptcies. Can you smell what the moral hazard is cooking?
Enter synthetic CDOs. CDOs are basically pools of asset backed securities that invest in debt (loans or bonds). They've been around for a minute but they got famous in the 2000s because a shitload of them containing subprime mortgage debt went belly up in 2008. This got a lot of publicity because a lot of sad looking rednecks got foreclosed on and were interviewed on CNBC. "OH!", the people cried. "Look at those big bad bankers buying up subprime loans! They caused this!". Wrong answer, America. The debt wasn't the problem. What a lot of people don't realize is that the real meat of the problem was not in regular way CDOs investing in bundles of shit mortgage debts in synthetic CDOs investing in CDS predicated on that debt. They're synthetic because they don't have a stake in the actual underlying debt; just the instruments riding on the coattails. The reason these are so popular (and remain so) is that smart structured attorneys and bankers like your faithful correspondent realized that an even more profitable and efficient way of building high yield products with limited downside was investing in instruments that profit from failure of debt and in instruments that rely on that debt and then hedging that exposure with other CDS instruments in paired trades, and on and on up the chain. The problem with doing this was that everyone wound up exposed to everybody else's books as a result, and when one went tits up, everybody did. Hence, recession, Basel III, etc. Thanks, Obama.
Heavy investment in CDS can also have a warping effect on the price of debt (something else that happened during the pre-financial crisis years and is starting to happen again now). This happens in three different ways. (1) Investors who previously were long on the debt hedge their position by selling CDS protection on the underlying, putting downward pressure on the debt price. (2) Investors who previously shorted the debt switch to buying CDS protection because the relatively illiquid debt (partic. when its a bond) trades at a discount below par compared to the CDS. The resulting reduction in short selling puts upward pressure on the bond price. (3) The delta in price and actual value of the debt tempts some investors to become NBTs (neg basis traders) who long the debt and purchase CDS protection. If traders can't take leverage, nothing happens to the price of the debt. If basis traders can take leverage (which is nearly always the case because they're holding a hedged position), they can push up or depress the debt price, goosing swap premiums etc. Anyway. Enough technical details.
I could keep going. This is a fascinating topic that is very poorly understood and explained, mainly because the people that caused it all still work on the street and use the same tactics today (it's also terribly taught at business schools because none of the teachers were actually around to see how this played out live). But it relates to the topic of today's lesson, so I thought I'd include it here.
Work depending, I'll be back next week with a covenant breakdown. Most upvoted ticker gets the post.
*EDIT 1\* In a total blowout, $PLAY won. So it's D&B time next week. Post will drop Monday at market open.
submitted by fuzzyblankeet to wallstreetbets [link] [comments]

Video games are the future. ATVI DD inside.

Video games are the future. ATVI DD inside.
What's up fuckers. TSLA fuckboy here writing a post about video games. Go figure. I posted the link about Daddy Elon and legalizing weed last weekend, and got fucking temporarily banned for it because I flaired it with DD. It definitely wasn't DD. Learn from my mistake and don't fuck around with flairs or the mods. In my defense, I have ADHD, was high af, and am likely retarded. I served my sentence, and am here to try to redeem myself with some real DD on Activison-Blizzard (ATVI). I actually wrote this a few days ago when ATVI was $68 (proof attached), but couldn't post it until now. That's ok though, I committed a sin and you all have to pay the price by getting this DD 4 days late (love you mods). Don't fret though (like the market this morning wtf), there is still time for tendies.
I'm long ATVI. They are going to steadily rise for the next 5-10 years. In the paragraphs below, you'll learn why. To be fair, I bought puts on BYND when it was trading at $70 in April, so, I'm pretty fucking smart. Do your due diligence (or fucking don’t, whatever). Obligatory this is not financial advice.
Pictures, positions and TL;DR at the bottom for those of you that don’t know how to read (and let’s be honest, most of you don’t know how to read. Most of you need crayons to eat while you look at pictures. Lookin at you 220p SPY bag holders lmao.) That or you have the attention span of the stock market in March. Either way, enjoy!

Long-Term thoughts

You know that saying, the one that rich-fucks who inherited a bunch of money from their crazy aunt (they've never even met this Aunt obviously) say, “You gotta make your money work for you or you'll never be rich!” Yeah, well fuck those people. I got one better. I make ogres and trolls and wizards and guns (oh my) do the work for me, and it turns out they work really fucking hard, 24/7/365.
Activison-Blizzard is one of the biggest powerhouses of the video game industry and I think they have a tremendous opportunity for growth in the long term. They are also recession/virus/pandemic/protest proof. And in reality, most of these things actually make ATVI more attractive.
Can’t go outside because there's a fucking curfew (we have to be in a simulation), or your downtown is literally on fire from a protest and there’s a deadly virus just hanging out on every corner trying to murder your grandma? Cool. You don’t give a fuck because you’re sitting in your Lovesac (just fucking don't), playing COD while eating your BYND meat fake burger with a non-gmo, organic, gluten-free lettuce wrap with a 42oz Monster at 3 am. Why face reality when video games are so much more fun, AND you don't have to put on pants. Also, the gov is literally handing out money to people on unemployment.
Put on your thinking cap and think really fucking hard for a second. Really hard. Do you think there's a correlation between people that are unemployed (and getting insane unemployment payments + stimulus + more stimulus at the end of July and are basically being ENCOURAGED TO STAY HOME), and the likelihood of that person playing video games? Hmm. FUCKING MAYBE.
Earnings - They make lots of money lol
They have crushed recent earnings (and most other earnings), and they have really fucking solid financials. Boatloads of cash on hand and relatively low debt. They have rock-solid management that has been there for years, and they are devoted to the company. Here's some great info on how they make money.
Also, most importantly, u/fuzzyblankeet said "they are a great company" (proof attached) and that guy doesn't fuck around.
Current and upcoming games
  1. COD - (literally prints fucking money every single release) and the new free-to-play Warzone mode has been insane, taking tons of market share from Fortnite and PUBG. They also have gotten tremendous traction with their COD Mobile game. They will also obviously announce a new COD for the next-gen consoles coming from Microsoft and Sony, Holiday 2020. This holiday season will unquestionably be the most gigantic video game fiesta the world has ever seen, and COD will be the Fucking King. Mark my words.
  2. Overwatch 2 - No date announced yet, but you can bet your allowance (that your wife's boyfriend gives you) that they're gonna try and get it out during the Holiday season. I bet it sells 45-55 million copies, on top of all the micro-transactions, similar to its predecessor).
  3. Diablo 4 and Diablo Immortal - Diablo's fan base are addicts. Blizzard killed it with Diablo 3, and many people expect these 2 new games to be even more epic. One of them being a console game similar to Diablo 3 (for next-gen consoles obviously), and the other being a free-to-play (micro.fucking.transaction'$) game made for iPhone/Android (lol losers). Much smaller fan base than COD/Overwatch, but still, 10's of millions is pretty massive.
  4. WoW - Not what it used to be, but still has a large player base of millions. They are releasing another new expansion this year and the revitalization of its classic Wow has been a hit.
  5. Hearthstone - More than 100 million people have played the game as of 2018 (most recent data I could find). I'd guess that with their new Battlegrounds Mode, in addition to multiple yearly expansions, this game will continue pulling in significant revenue for years to come, especially if they find ways to invent new game modes that bring old players back.
  6. Starcraft - Although this area of the business doesn't make them much money right now, I think it's safe to say that the Starcraft Universe still carries a lot of weight in a lot of gamers' minds. I wouldn't be surprised if we see a Starcraft 4 or some mobile variation of it in the next 3 years, and I think that it would do excellent.
  7. Hero's of the Storm - The game is still played, but is definitely one of the smallest revenue generators for them.
  8. Revitalizing Spyro and Crash Bandicoot - Although there is no real news on theses getting re-vamped, ATVI thinks of them as a flagship brand. I bet they sell a shit load of copies each on console if they go that route, especially the Nintendo Switch (which happens to be in the hands of 55 million people).
  9. Tony Hawk's Pro Skater 1+2 Remaster - Yeah, they are remastering this shit. You remember how badass these games were back in the day. Set to release Sept, 2020. I actually think this might be a surprise revenue generator. It'll sell 25-35 million copies.
  10. King Digital Entertainment - ATVI bought them for around 6 billion a few years back, and it's pretty clear that this was a wise purchase. Their suite of current games and upcoming games/expansions should continue to print money and at a good margin. They are a dominat player in the mobile space, and could leverage those users to try other games from ATVI (Diablo Immortal)
  11. Tv show - Pretty strong rumors that Blizzard is working on a few TV shows based on their Diablo and Overwatch worlds. Animated TV shows are growing in popularity, even for adults. Both of these shows will attract ALL blizzard fans (100's of millions around the world), and lots of new people too, as I'm sure they'll make it easy enough to digest for someone who doesn't know the game/universes already. This could also bring brand new people into the Blizziverse. And I'm sure Netflix/HBO Max/Apple TV would be happy to pay a pretty penny for rights to it.

E-Sports - The Future of 'sports' entertainment

E-Sports will largely replace real sports in our lifetime, and we’re just now really getting started. Disagree? Great, I don’t give a fuck. Go ask any 10 year-old this question. “Hey little Johnny-Sue. Would you like to watch some sweaty dudes smash into each other for 3 hours, or would you rather watch your favorite team play in their respective competitive E-Sport league on Twitch?” 9/10 times, Lil-fuckin-Johnny-Sue gonna pick video games, and that's a fact.
Teams and Orgs
Esports are also BOOMING in colleges, with lots of colleges offering significant scholarships to come play video games for their school. Let me help you draw a mental picture. Concentrate.
Remember Lil-Fucking-Johnny-Sue from above? If he/she gets good enough at whatever game he/she is playing, they could get a full-ride scholarship to college, and then possibly get a job afterwards as a professional Esports athlete (and make more money then a CPA makes their first few years of working). THEN, when he/she gets too fucking old and slow to play the game (25-30 years old typically) they can become an analyst, caster, coach, manager, scout, etc etc. Maybe they become the next N0tail (highest paid Esports athlete to date) and make a cool 6.8 million a year. Imagine making 6 figures a year to play fucking video games and rekt n00bs on stage. Fuck I want that life so bad.
There are literally stadiums being filled with fans to watch people play video games, while another 100 million people watch from home. Esports organizations are becoming bigger and bigger. TSM is a major Esports organization in the US and they are building a $50 million facility in LA. More words on other organizations to help put things into perspective. While these facilities are clearly impressive, this is nothing compared to major sports facilities.
Here's my point. Is it reasonable to assume that these facilities/teams/Esports stadiums/orgs will continue to get bigger? And if they get bigger, they will demand more attention from celebrities/rich folk because they want to get in on the action. As a result, the salaries of players/managers/staff/coaches/analysts will continue to go up and there will be more and more opportunities for jobs in this field. This then causes more young people to be more interested in video games, because not only are they fun af (and insanely addictive), but you could play pro someday! Schools/colleges will continue to develop competitive Esports teams because A: You better fucking believe that there are lots of kids out there that care about this and B: The school knows that it could lead to jobs (more like a dream job, but still something that's reasonable to consider if you are really good at a video game).
Still disagree? More words for you to look at and not understand.
Blizzard Esports Revenue
There are competitive (money generating) Esports leagues for 7 different ATVI games. (Overwatch, Hearthstone, WoW, COD, COD Warzone, COD Mobile, Starcraft). Here are some thoughts from Pete Vlastelica (head of E-Sports at Blizzard).
E-Sports will be 10x in 10 years. Bet your bottom dollar on it.

Technicals - (kinda, but only 1 cause fuck TA)

Honestly, just fucking look at the 50-day moving average (image attached). They crashed and burned cause Rona (so did everything else you autist). But Rona has been canceled, and even if it hasn't, ATVI is gonna be better off because of it.
TL;DR - ATVI makes a lot of money and they are in a strong position to grow and make lots more fucking cash regardless of C19/protests/riots and they might actually do even better because of it. (3 -12 months = 80's) (12-24 months = 90's.)
Yolo 100c mid-2021.
EDIT: misspelled ATVI ticker one time in post and some autist called me out. Fixed. Also, fuck off.
https://preview.redd.it/8g6urh79oa451.png?width=2476&format=png&auto=webp&s=cfc5dc86d808439bbb5ff7612d2f40d86c0742e2
https://preview.redd.it/ry0jel79oa451.png?width=739&format=png&auto=webp&s=1f683884fc309d90803a24e3c32d1c626ef84cb0
https://preview.redd.it/qq32ek79oa451.png?width=596&format=png&auto=webp&s=11661a18e989e7fdf5fc94979f15fb64645d8907
submitted by tslatothemoon to wallstreetbets [link] [comments]

"Should I buy X?" "Is X going to go up in Price?" "Why did X happen with Y" A guide to market trading. [O]

I know there's a newbie thread already, but I had some free time in between classes and I see this all the time here. You probably do too. Everyone is looking for recommendations, ideas, tips, etc. when it comes to what they should buy next, or what the next hot item is going to be that they should buy now. If you're looking for quick advice, this isn't the post for you, and I won't even be recommending something for you to purchase at the end (although I will give you a sample of one of my current trades and the thought process behind it). The point of this post isn't to give you investment advice, it's to give you a rough idea on what you should be looking for, and how to separate bad advice from good advice. With that out of the way and if you've made it so far, lets begin
Who are you? Why should I listen to you?
I don't mean for this part to come off as self advertising, but lesson one of taking advice is know who you're taking advice from, and ignoring the people who have no idea what they're talking about. That being said I like to think I have a pretty good idea of how the market system works. I've been actively trading skins since the steam trading system was introduced. I started trading on TF2 Trading Servers, where I ran and updated the crate unboxing sheet, eventually switching to CSGO around the time that the steam market was introduced. I've done and have experience in pretty much the entire ecosystem, from trading, to RL currency trading, bot making, etc. I'm sure if you look around you'll find my main account and posts, which should speak for themselves. Recently as I've started to wrap up school and move into my career, I don't have the time required to trade and invest as much as I used to and I mostly do it now for fun in my free time, but suffice to say steam trading paid my way through college. While this isn't what was intended when Valve introduced it, the steam market has turned into a full blown consumer market, and the more you understand about it, the better.
What is Steam Investing?
For most people here, the answer is pretty obvious, but if your new and looking for a VERY simplistic definition, steam investing is purchasing digital game items that you expect to be worth more in the future than they are now that you can then sell for a profit. While for everyone here the concept should be pretty easy to understand, some people who have no experience in how digital markets work might be a little confused. Suffice to say, skins are a product that people who play games place a value on. Valve has created a unique, one of a kind marketplace, where in game items can be traded between players, and more importantly, created an API supported ecosystem that allows those items to be easily traded on third party sites. These two factors have created a limited supply for something people want, that effectively turned a good that can be unlimitedly cloned (weapon skins) into a good that consumers believe hold value and are willing to pay for. Whether you think they have value or not is irrelevant. The market views these items as valuable, and therefore they have value.

What should I invest in?

It depends (You'll hear this alot). I know that's not the answer that you want to hear, but seriously, it does. The steam market has thousands of items and millions of dollars and transactions every day. There's ideas that are large enough for thousands of people to be involved, and there's markets that if two people are in it, the profit margins just aren't there. Before you start looking for things to buy, do a couple things that will help you in the future.

Step 1: Picking your currency base

If you haven't done this yet, do this now: Pick a currency you want to count your profits in. Are you looking to do this casually, and just want to increase your steam wallet? That's fine! But understand that the cost of a dollar outside the market is different from one already in your steam wallet. The second you buy steam wallet funds, you lost around 30% of the value. For me, I use what I call "paypal value", what I could get for items if I sold them for cash. Here's what my current personal sheet looks like, I value anything in the ecosystem at 70% of their market value; for example, if I have a capsule key that sells for $1.10 on steam market, I would value that as $0.77. Whatever you decide to do, pick a base currency, decide how you convert between them, and stick with it. Otherwise it'll be impossible to see if you actually made a profit.

Step 2: What sites to use?

Alright, we're starting to get into the meat of things. Generally, you can break sites into three categories: Steam Market/Steam Inventory, Trading Bots, and Cashout Sites.
Steam Market/Steam Inventory should be pretty self explanatory. It's the easiest to use, with the highest volume, but also the highest fees. Everyone does this differently, but I find it very hard to turn a profit buying things at market price. If you're serious about investing, you should always be setting buy orders and never buying at the market price. If you can't get enough of an item this way, my advice would be either use one of the other two options, or pick a different item.
Trading Bots are things like CS.Money. Generally, this is where I make my bread and butter. It's hard to beat the prices available, the liquidity is decent, and the fees are far lower, meaning you don't need prices to rise nearly as much as other options to turn a profit. If you don't use these, I would recommend them, and I'll probably give an overview of how I use them in the future.
Cashout Sites are the true drivers of these markets for you. Know your sites. Don't use P2P trading. Trust me, you WILL get scammed. I've been scammed. Everyone I know who trades has been scammed. There's no getting around it, if you do enough person to person trading, someone will fuck you. Unless you are INCREDIBLY EXPERIENCED, DO NOT BUY OR SELL WITHOUT USING SOMETHING LIKE BITSKINS AS A MIDDLEMAN FOR YOU. IT'S NOT WORTH THE RISK. UNLESS YOU HAVE SIZABLE CASH REP, YOU WILL NOT GO FIRST AND YOU ARE RELYING ON THE ETHICS OF STRANGERS ON THE INTERNET. If you think you know better, by all means go ahead, but realize the risks that are inherent with this type of trading system.

Step 3: Picking an Item

Alright, what you've all been waiting for. How exactly do you pick an item? Everyone has different criteria but I usually ask a couple questions, that almost work like a flowchart.
First: Does this item have a limited supply?
You can invest in items that don't, and I don't mean to steer you away from things like trade up fodder, as they are viable strategies, but I find I make the most money looking for items that are either A) on sale for some reason, or B) have no new quantities being released. You can probably guess I own a bunch of stickers, passes, etc, and this is where I make the majority of my money. If an item doesn't have a limited supply, I usually just ignore it
Second: Can I actually buy enough of this to make it worth my time?
Finding something that's limited isn't worth jack if you can't actually buy any. Unless you can find enough to make your purchase worth while, your time is better spent looking elsewhere. I often find that a good place to start looking is bot trading services. Often times people will dump illiquid items they just want to get rid of, that you can get a large stake in easily.
Third: Why do I think this item will go up in the future? What's the value proposition?
Why do I think this item is going to be worth more in the future? Contrary to what I see on this sub all the time, it's not enough for an item to be rare in my opinion, it also has to have a reason for it to go up in price.
Fourth: Time Value of Money
Aright, if you've gotten this far and you can grasp the concept, congrats you're at the level of about a college sophomore set to make 6 figures in the finance industry.
If I offered to pay you $1 a year forever, and you knew for certain that I was certain to pay you back (pretend this was risk free, IE there was no chance I didn't pay you your 1$ every year), what would you pay me for the privilege? If your answered around ~$50: Cash Flow/T Bill Rate : 1/.0176 and understand why, congrats and move on. Otherwise, consider reading below.
Think of it this way; The Time Value of Money is the idea that a dollar in the future isn't worth a dollar now. You should figure out how much less you value a dollar a year from now compared to one now, and if you think you can get a better return than that, invest in the item. If not, you should look for a better deal elsewhere. (This is obviously very simplified, if you want to learn more check out investopedia)

Disclaimer: I own a bunch of B.M.O.Cs

To give you an example, take a look at the TF2 Hat, The B.M.O.C
https://steamcommunity.com/market/listings/440/The%20B.M.O.C.
Lets go down the list in order:
First: Is the item limited? Looks like it is based on the TF2 wiki. The item came out in 2011, and no new ones have been released since. It's probably safe to say that it won't be re-released. Alright, first step done.
Second: Can I get enough of them? Well, backpack.tf has plenty listed for sale, and the steam market is relatively full. To give some context, I bought about 30 with a buy order set around 10 dollars on steam market over 3 months, and another 25 through trading.
Third: Notice anything distinct about its price chart? The hat typically is worth more during the Winter than the Spring and Summer, since people buy it to be festive during the holidays. Boom, value proposition established.
Fourth: Time Value of Money: If you purchased them at an $11 average during the Spring and Summer, what would your rate of return be if you sold them on average 8 months later for $20 dollars on steam market? The Formula for RoR is (Selling Price - Purchase Price) / Purchase Price, so in our example, we would do
(20*.85-11)/11 = 54%. Not bad, over 50% return on your money! I've checked off all my boxes, so now it's time to start buying.
Now before we go further I know some of you are going to run off and buy it now. Not so fast! Lets do the math if you tried to buy them now at what they sell at, $16:
(20*.85-16)/16 = 6.25%
Eeessh. That doesn't look that good anymore does it? Seems like the really good chance to buy this has already passed. Here's some advice; it doesn't matter how much the item went up before, it matters how much it goes up after you buy it. I see people buying things that have doubled in price over night, then getting angry when they lose money. A good rule is if you don't know what you should sell the item at, don't buy it.
Fifth: Buying the Items
Alright, we know what we want to buy, time to start actually doing it. I'll usually set a buy order ASAP (remember that steam goes by oldest order not highest price first. Get the buy order into steam market as soon as possible!) then start browsing trading sites every so often looking for deals. Remember how you have a base currency? If you're doing key trading, find out what you value each key at, and when you buy one record the price at the comparable price. I usually find setting buy orders and posting once a week is enough to get enough interest for items I'm looking for. Also, remember that once you get started trading you can keep some cash set aside to buy items with cash too. Sometimes you'll get great deals from people who have the item you want but just want to cash out ASAP for one reason or another.
Sixth: Selling
Set sell orders as you buy the items. I advise this for two reasons; one, I have noticed that the more items are listed on steam market, the lower people will drop the price. If you're looking to buy still, listing your items means if someone wants them they can buy them, and also has the added bonus of lowering the price, making it easier to buy more at your price point. Second, you might feel tempted to not sell once you reach your target. Humans have a weird tendency to panic buy when items are going up and panic sell when they are going down. Unless something fundamentally has changed or something new has happened, always know what you're going to sell the item for before you buy it. Trust me, it'll save you headaches in the future.
I know I only went over the basics here, but I intend to make this more of a series, where I'll introduce more complex financial topics for those who want them (I'm thinking next I'll go over more on Rate of Return and what CAGR is + more on how they're applicable to trading). For now, feel free to post any questions and I'll try to answer them.
~Freddy
submitted by Freddy_Ebert to csgomarketforum [link] [comments]

Best Online Day-Trading Courses?

Hello!
So my father loves day-trading and wants to learn more about it, as it's a hobby for him. He never received a formal education in finance or trading and wants some resources at the introductory college-level to help him learn more about day-trading and make him more confident. Preferably, he would have something that would allow him to watch videos and take quizzes on them; my dad definitely doesn't need any frills, just the underlying fundamental education.
I've narrowed down two programs that I do not think are scams; one is Investopedia's "How to Become a Day-Trader" course, and the other is Vantage Point Trading's "Stock Market Swing Trading" video course. These courses do not cost thousands of dollars and neither promise to "get rich quick, make 10000% margin!" that many courses that are true scams do.
Would getting one of these courses be worth it as a present for my dad? Keep in mind that he just wants to learn something new about trading and engage in his hobby, so I'm not looking for anything super serious or hardcore (he's already been trading for years with a pretty impressive success rate, but wants to learn something more in depth and get new strategies).
submitted by onlyMadeAnAccountFo to Daytrading [link] [comments]

Does PDT rule affect cash accounts?

Hi all. Trading newbie here.
I just opened a cash account with Schwab. Its PDT rule looks confusing because it does not state whether it only affects margin account or both (Link: https://help.streetsmart.schwab.com/pro/4.36/Content/Pattern_Day_Trading.htm). However, by the definition from Investopedia (https://www.investopedia.com/terms/p/patterndaytrader.asp), it says it's only for margin account. Could anyone explain it for me?
submitted by erickli to Daytrading [link] [comments]

A Case for Young People to Trade on Margin

Trading on margin gets a really bad rap in this subreddit, but it can be a powerful tool to use in one's investing strategy.
I should preface this post by saying that I'm by no means experienced in investing and that everything I'm saying here is a condensed version of this paper in the National Bureau of Economics Research by two professors at Yale. This paper advocates for taking on high margin (i.e. 2x -3x) to invest in market cap weighted ETFs for investors in their 20s and early 30s. People should then decrease their exposure to the market over time by first reducing margin and then incorporating bonds into their portfolio.
Expected Returns
It's pretty well understood that trading on margin will yield higher returns on investments. If you can get a margin at a 1-2% interest rate and the stock market increases by an average of 10% a year, it's pretty clear that investing ETFs on margin leads to positive expected return.
Volatility
Normally, increasing your exposure to markets through margin increases your volatility. However, by taking on margin when young, people can get greater time diversification in their portfolio, reducing market risk. Intuitively, investing with no margin makes my total returns disproportionately sensitive to market conditions near retirement, as you have the most money then. Through both historical records and bootstrapped simulations, the paper finds that the worst performing portfolios taken under margin actually outperform the worst performing portfolios without margin.
Some Caveats
submitted by chickenpowerUSA to personalfinance [link] [comments]

My First Year of Trading

So here it is, three more days and October begins, which marks one year of trading for me. I figured I would contribute to the forum and share some of my experience, a little about me, and what I've learned so far. Whoever wants to listen, that's great. This might get long so buckle up..
Three years ago, I was visiting Toronto. I don't get out much, but my roommate at the time travels there occasionally. He asked everyone at our place if we wanted to come along for a weekend. My roommate has an uncle that lives there and we didn't have to worry about a hotel because his uncle owns a small house that's unlived in which we could stay at. I was the only one to go with. Anyways, we walk around the city, seeing the sights and whatnot.
My friend says to me "where next?"
"I don't know, you're the tour guide"
"We can go check out Bay Street"
"what's 'Bay Street?'"
"It's like the Canadian Wall street! If you haven't seen it you gotta see it!"
Walking along Bay, I admire all the nice buildings and architecture, everything seems larger than life to me. I love things like that. The huge granite facades with intricate designs and towering pillars to make you think, How the fuck did they make that? My attention pivots to a man walking on the sidewalk opposite us. His gait stood out among everyone, he walked with such a purpose.. He laughed into the cell phone to his ear. In the elbow-shoving city environment, he moved with a stride that exuded a power which not only commanded respect, but assumed it. I bet HE can get a text back, hell he's probably got girls waiting on him. This dude was dressed to kill, a navy suit that you could just tell from across the street was way out of my budget, it was a nice fucking suit. I want that. His life, across the street, seemed a world a way from my own. I've worn a suit maybe twice in my life. For my first communion, it was too big for me, I was eleven or whatever so who gives a shit, right? I'm positive I looked ridiculous. The other time? I can't remember.
I want that. I want the suit. I want the wealth, the independence. I want the respect and power, and I don't give a shit what anyone thinks about it.
Cue self doubt.
Well, He's probably some rich banker's son. That's a world you're born into. I don't know shit about it. \sigh* keep walking..*

A year later, I'm visiting my parents at their house, they live an hour away from my place. My dad is back from Tennessee, his engineering job was laying people off and he got canned... Or he saw the end was near and just left... I don't know, hard to pay attention to the guy honestly because he kind of just drones on and on. ("Wait, so your mom lives in Michigan, but your dad moved to Tennessee... for a job?" Yea man, I don't fucking know, not going to touch on that one.) The whole project was a shit show that was doomed to never get done, the way he tells it. And he's obviously jaded from multiple similar experiences at other life-sucking engineer jobs. My mom is a retired nurse practitioner who no longer works because of her illness. I ask him what he's doing for work now and he tells me he trades stocks from home. I didn't even know you could do that. I didn't know "trading" was a thing. I thought you just invest and hope for the best.
"Oh that's cool, how much money do you need to do that?"
"Ehh, most say you need at least $25,000 as a minimum"
"Oh... guess I can't do that..."
Six months later, I get a call and it's my dad. We talk a little about whatever. Off topic, he starts asking if I'm happy doing what I'm doing (I was a painter, commercial and residential) I tell him yes but it's kind of a pain in the ass and I don't see it as a long term thing. Then he gets around to asking if I'd like to come work with him. He basically pitches it to me. I'm not one to be sold on something, I'm always skeptical. So I ask all the questions that any rational person would ask and he just swats them away with reassuring phrases. He was real confident about it. But basically he says for this to work, I have to quit my job and move back home so he can teach me how to trade and be by my side so I don't do anything stupid. "My Name , you can make so much money." I say that I can't raise the $25,000 because I'm not far above just living paycheck to paycheck. "I can help you out with that." Wow, okay, well... let me think about it.
My "maybe" very soon turned into a "definitely." So over the next six months, I continue to work my day job painting, and I try to save up what I could for the transition (it wasn't a whole lot, I sucked at saving. I was great at spending though!). My dad gives me a book on day trading (which I will mention later) and I teach myself what I can about the stock market using Investopedia. Also in the meantime, my dad sends me encouraging emails. He tells me to think of an annual income I would like to make as a trader, and used "more than $100,000 but less than a million" as a guideline. He tells me about stocks that he traded that day or just ones that moved and describes the basic price action and the prices to buy and sell at. Basically saying "if you bought X amount of shares here and sold it at X price here, you could make a quick 500 bucks!" I then use a trading sim to trade those symbols and try to emulate what he says. Piece of cake. ;)
Wow, that's way more than what I make in a day.
He tells me not to tell anyone about my trading because most people just think it's gambling. "Don't tell your Mom either." He says most people who try this fail because they don't know how to stop out and take a loss. He talks about how every day he was in a popular chatroom, some noob would say something like, "Hey guys, I bought at X price (high of day or thereabout), my account is down 80% .. uhh I'm waiting for it to come back to my entry price.. what do I do??"
Well shit, I'm not that fucking dumb. If that's all it takes to make it is to buy low, sell high, and always respect a stop then I'll be fantastic.
By the end of September, I was very determined. I had been looking forward everyday to quitting my painting job because while it used to be something I loved, it was just sucking the life out of me at this point. Especially working commercial, you just get worked like a dog. I wasn't living up to my potential with that job and I felt awful for it every minute of every day. I knew that I needed a job where I could use my brain instead of slaving my body to fulfill someone else's dream. "Someone's gotta put gas in the boss's boat" That's a line my buddy once said that he probably doesn't know sticks with me to this day.
It ain't me.
So now it was October 2018, and I'm back living with Mom n' Pops. I was so determined that on my last day of work I gave away all of my painting tools to my buddy like, "here, I don't need this shit." Moving out of my rental was easy because I don't own much, 'can't take it with ya.' Excited for the future I now spend my days bundled up in winter wear in the cold air of our hoarder-like basement with a space heater at my feet. My laptop connected to a TV monitor, I'm looking at stocks next to my dad and his screens in his cluttered corner. Our Trading Dungeon. I don't trade any money, (I wasn't aware of any real-time sim programs) I just watch and learn from my dad. Now you've got to keep in mind, and look at a chart of the S&P, this is right at the beginning of Oct '18, I came in right at the market top. Right at the start of the shit-show. For the next three or four weeks, I watch my dad pretty much scratch on every trade, taking small loss after small loss, and cursing under his breath at the screen.
Click.
"dammit."
Click.
"shit."
Click. Click.
"you fuck."
Click.
This gets really fucking annoying as time goes on, for weeks, and I get this attitude like ugh, just let me do it. I'll make us some fucking money. So I convince him to let me start trading live. I didn't know anything about brokers so I set up an account using his broker, which was Fidelity. It was a pain and I had to jump through a lot of hoops to be able to day trade with this broker. I actually had to make a joint account with my dad as I couldn't get approved for margin because my credit score is shit (never owned a credit card) and my net worth, not much. Anyways, they straight up discourage day trading and I get all kinds of warning messages with big red letters that made me shit myself like oooaaahhh what the fuck did I do now. Did I forget to close a position?? Did I fat finger an order? Am I now in debt for thousands of dollars to Fidelity?? They're going to come after me like they came after Madoff. Even after you are approved for PDT you still get these warning messages in your account. Some would say if I didn't comply with "whatever rule" they'd even suspend my account for 60 days. It was ridiculous, hard to describe because it doesn't make sense, and it took the support guy on the phone a good 20 minutes to explain it to me. Basically I got the answer "yea it's all good, you did nothing wrong. As long as you have the cash in your account to cover whatever the trade balance was" So I just kept getting these warnings that I had to ignore everyday. I hate Fidelity.
My fist day trading, I made a few so-so trades and then I got impatient. I saw YECO breaking out and I chased, soon realized I chased, so I got out. -$500. Shit, I have to make that back, I don't want my dad to see this. Got back in. Shit. -$400. So my first day trading, I lost $900. My dumbass was using market orders so that sure didn't help. I reeled the risk back and traded more proper position size for a while, but the commissions for a round trip are $10, so taking six trades per day, I'm losing $60 at a minimum on top of my losing trades. Quickly I realized I didn't know what the hell I was doing. What about my dad? Does HE know? One day, in the trading dungeon, I was frustrated with the experience I'd been having and just feeling lost overall. I asked him.
"So, are you consistently profitable?"
"mmm... I do alright."
"Yea but like, are you consistently profitable over time?"
.........................
"I do alright."
Silence.
"Do you know any consistently profitable traders?"
"Well the one who wrote that book I gave you, Tina Turner.. umm and there's Ross Cameron"
......................
"So you don't know any consistently profitable traders, personally.. People who are not trying to sell you something?"
"no."
...................
Holy fucking shit, what did this idiot get me into. He can't even say it to my face and admit it.
This entire life decision, quitting my job, leaving my rental, moving from my city to back home, giving shit away, it all relied on that. I was supposed to be an apprentice to a consistently profitable day trader who trades for a living. It was so assumed, that I never even thought to ask! Why would you tell your son to quit his job for something that you yourself cannot do? Is this all a scam? Did my dad get sold a DREAM? Did I buy into some kind of ponzi scheme? How many of those winning trades he showed me did he actually take? Are there ANY consistently profitable DAY TRADERS who TRADE FOR A LIVING? Why do 90% fail? Is it because the other 10% are scamming the rest in some way? Completely lost, I just had no clue what was what. If I was going to succeed at this, if it was even possible to succeed at this, it was entirely up to me. I had to figure it out. I still remember the feeling like an overwhelming, crushing weight on me as it all sunk in. This is going to be a big deal.. I'm not the type to give up though. In that moment, I said to myself,
I'm going to fucking win at this. I don't know if this is possible, but I'm going to find out. I cannot say with certainty that I will succeed, but no matter what, I will not give up. I'm going to give all of myself to this. I will find the truth.
It was a deep moment for me. I don't like getting on my soapbox, but when I said those things, I meant it. I really, really meant it. I still do, and I still will.
Now it might seem like I'm being hard on my dad. He has done a lot for me and I am very grateful for that. We're sarcastic as hell to each other, I love the bastard. Hell, I wouldn't have the opportunity to trade at all if not for him. But maybe you can also understand how overwhelmed I felt at that time. Not on purpose, of course he means well. But I am not a trusting person at all and I was willing to put trust into him after all the convincing and was very disappointed when I witnessed the reality of the situation. I would have structured this transition to trading differently, you don't just quit your job and start trading. Nobody was there to tell me that! I was told quite the opposite. I'm glad it happened anyway, so fuck it. I heard Kevin O'Leary once say,
"If I knew in the beginning how difficult starting a business was, I don't know that I ever would've started."
This applies very much to my experience.
So what did I do? Well like everyone I read and read and Googled and Youtube'd my ass off. I sure as hell didn't pay for a course because I didn't have the money and I'm like 99% sure I would be disappointed by whatever they were teaching as pretty much everything can be found online or in books for cheap or free. Also I discovered Thinkorswim and I used that to sim trade in real-time for three months. This is way the hell different than going on a sim at 5x speed and just clicking a few buy and sell buttons. Lol, useless. When you sim trade in real-time you're forced to have a routine, and you're forced to experience missing trades with no chance to rewind or skip the boring parts. That's a step up because you're "in it". I also traded real money too, made some, lost more than I made. went back to sim. Traded live again, made some but lost more, fell back to PDT. Dad fronted me more cash. This has happened a few times. He's dug me out of some holes because he believes in me. I'm fortunate.
Oh yeah, about that book my dad gave me. It's called A Beginner's Guide to Day Trading Online by Toni Turner. This book... is shit. This was supposed to be my framework for how to trade and I swear it's like literally nothing in this book fucking works lol. I could tell this pretty early on, intuitively, just by looking at charts. It's basically a buy-the-breakout type strategy, if you want to call it a strategy. No real methodology to anything just vague crap and showing you cherry-picked charts with entries that are way too late. With experience in the markets you will eventually come to find that MOST BREAKOUTS FAIL. It talks about support/resistance lines and describes them as, "picture throwing a ball down at the floor, it bounces up and then it bounces down off the ceiling, then back up." So many asinine assumptions. These ideas are a text book way of how to trade like dumb money. Don't get me wrong, these trades can work but you need to be able to identify the setups which are more probable and identify reasons not to take others. So I basically had to un-learn all that shit.
Present day, I have a routine in place. I'm out of the dungeon and trade by myself in my room. I trade with a discount broker that is catered to day traders and doesn't rape me on commissions. My mornings have a framework for analyzing the news and economic events of the particular day, I journal so that I can recognize what I'm doing right and where I need to improve. I record my screens for later review to improve my tape reading skills. I am actually tracking my trades now and doing backtesting in equities as well as forex. I'm not a fast reader but I do read a lot, as much as I can. So far I have read about 17-18 books on trading and psychology. I've definitely got a lot more skilled at trading.
As of yet I am not net profitable. Writing that sounds like selling myself short though, honestly. Because a lot of my trades are very good and are executed well. I have talent. However, lesser quality trades and trades which are inappropriately sized/ attempted too many times bring down that P/L. I'm not the type of trader to ignore a stop, I'm more the trader that just widdles their account down with small losses. I trade live because at this point, sim has lost its value, live trading is the ultimate teacher. So I do trade live but I just don't go big like I did before, I keep it small.
I could show you trades that I did great on and make people think I'm killing it but I really just don't need the validation. I don't care, I'm real about it. I just want to get better. I don't need people to think I'm a genius, I'm just trying to make some money.
Psychologically, to be honest with you, I currently feel beaten down and exhausted. I put a lot of energy into this, and sometimes I work myself physically sick, it's happened multiple times. About once a week, usually Saturday, I get a headache that lasts all day. My body's stress rebound mechanism you might call it. Getting over one of those sick periods now, which is why I barely even traded this week. I know I missed a lot of volatility this week and some A+ setups but I really just don't give a shit lol. I just currently don't have the mental capital, I think anyone who's been day trading every day for a year or more can understand what I mean by that. I'm still being productive though. Again, I'm not here to present an image of some badass trader, just keeping it real. To give something 100% day after day while receiving so much resistance, it takes a toll on you. So a break is necessary to avoid making bad trading decisions. That being said, I'm progressing more and more and eliminating those lesser quality trades and identifying my bad habits. I take steps to control those habits and strengthen my good habits such as having a solid routine, doing review and market research, taking profits at the right times, etc.
So maybe I can give some advice to some that are new to day trading, those who are feeling lost, or just in general thinking "...What the fuck..." I thought that every night for the first 6 months lol.
First of all, manage expectations. If you read my story of how I came to be a trader, you can see I had a false impression of trading in many aspects. Give yourself a realistic time horizon to how progress should be made. Do not set a monetary goal for yourself, or any time-based goal that is measured in your P/L. If you tell yourself, "I want to make X per day, X per week, or X per year" you're setting yourself up to feel like shit every single day when it's clear as the blue sky that you won't reach that goal anytime soon. As a matter of fact, it will appear you are moving further AWAY from that goal if you just focus on your P/L, which brings me to my next point.
You will lose money. In the beginning, most likely, you will lose money. I did it, you'll do it, the greatest Paul Tudor Jones did it. Trading is a skill that needs to be developed, and it is a process. Just look at it as paying your tuition to the market. Sim is fine but don't assume you have acquired this skill until you are adept at trading real money. So when you do make that leap, just trade small.
Just survive. Trade small. get the experience. Protect your capital. To reach break even on your bottom line is a huge accomplishment. In many ways, experience and screen time are the secret sauce.
Have a routine. This is very important. I actually will probably make a more in-depth post in the future about this if people want it. When I first started, I was overwhelmed with the feeling "What the fuck am I supposed to DO?" I felt lost. There's no boss to tell you how to be productive or how to find the right stocks, which is mostly a blessing, but a curse for new traders.
All that shit you see, don't believe all that bullshit. You know what I'm talking about. The bragposting, the clickbait Youtube videos, the ads preying on you. "I made X amount of money in a day and I'm fucking 19 lolz look at my Lamborghini" It's all a gimmick to sell you the dream. It's designed to poke right at your insecurities, that's marketing at it's finest. As for the bragposting on forums honestly, who cares. And I'm not pointing fingers on this forum, just any trading forum in general. They are never adding anything of value to the community in their posts. They never say this is how I did it. No, they just want you to think they're a genius. I can show you my $900 day trading the shit out of TSLA, but that doesn't tell the whole story. Gamblers never show you when they lose, you might never hear from those guys again because behind the scenes, they over-leveraged themselves and blew up. Some may actually be consistently profitable and the trades are 100% legit. That's fantastic. But again, I don't care, and you shouldn't either. You shouldn't compare yourself to others.
"Everyone's a genius in a bull market" Here's the thing.. Markets change. Edges disappear. Trading strategies were made by traders who traded during times when everything they did worked. Buy all the breakouts? Sure! It's the fucking tech bubble! Everything works! I'm sure all those typical setups used to work fantastically at some point in time. But the more people realize them, the less effective they are. SOMEONE has to be losing money on the opposite side of a winning trade, and who's willing to do that when the trade is so obvious? That being said, some things are obvious AND still work. Technical analysis works... sometimes. The caveat to that is, filters. You need to, in some way, filter out certain setups from others. For example, you could say, "I won't take a wedge pattern setup on an intraday chart unless it is in a higher time frame uptrend, without nearby resistance, and trading above average volume with news on that day."
Have a plan. If you can't describe your plan, you don't have one. Think in probabilities. You should think entirely in "if, then" scenarios. If X has happens, then Y will probably happen. "If BABA breaks this premarket support level on the open I will look for a pop up to short into."
Backtest. Most traders lose mainly because they think they have an edge but they don't. You read these books and all this stuff online telling you "this is a high probability setup" but do you know that for a fact? There's different ways to backtest, but I think the best way for a beginner is manual backtesting with a chart and an excel sheet. This builds up that screen time and pattern recognition faster. This video shows how to do that. Once I saw someone do it, it didn't seem so boring and awful as I thought it was.
Intelligence is not enough. You're smarter than most people, that's great, but that alone is not enough to make you money in trading necessarily. Brilliant people try and fail at this all the time, lawyers, doctors, surgeons, engineers.. Why do they fail if they're so smart? It's all a fucking scam. No, a number of reasons, but the biggest is discipline and emotional intelligence.
Journal every day. K no thanks, bro. That's fucking gay. That's how I felt when I heard this advice but really that is pride and laziness talking. This is the process you need to do to learn what works for you and what doesn't. Review the trades you took, what your plan was, what actually happened, how you executed. Identify what you did well and what you can work on. This is how you develop discipline and emotional intelligence, by monitoring yourself. How you feel physically and mentally, and how these states affect your decision-making.
Always be learning. Read as much as you can. Good quality books. Here's the best I've read so far;
Market Wizards -Jack Schwager
One Good Trade -Mike Bellafiore
The Daily Trading Coach -Bret Steenbarger
Psycho-cybernetics -Maxwell Maltz
Why You Win or Lose -Fred Kelly
The Art and Science of Technical Analysis -Adam Grimes
Dark Pools -Scott Patterson
Be nimble. Everyday I do my research on the symbols I'm trading and the fundamental news that's driving them. I might be trading a large cap that's gapping up with a beat on EPS and revenue and positive guidance. But if I see that stock pop up and fail miserably on the open amidst huge selling pressure, and I look and see the broader market tanking, guess what, I'm getting short, and that's just day trading. The movement of the market, on an intraday timeframe, doesn't have to make logical sense.
Adapt. In March I used to be able to buy a breakout on a symbol and swing it for the majority of the day. In the summer I was basically scalping on the open and being done for the day. Volatility changes, and so do my profit targets.
Be accountable. Be humble. Be honest. I take 100% responsibility for every dime I've lost or made in the market. It's not the market makers fault, it wasn't the HFTs, I pressed the button. I know my bad habits and I know my good habits.. my strengths/ my weaknesses.
Protect yourself from toxicity. Stay away from traders and people on forums who just have that negative mindset. That "can't be done" mentality. Day trading is a scam!! It can certainly be done. Prove it, you bastard. I'm posting to this particular forum because I don't see much of that here and apparently the mods to a good job of not tolerating it. As the mod wrote in the rules, they're most likely raging from a loss. Also, the Stocktwits mentality of "AAPL is going to TANK on the open! $180, here we come. $$$" , or the grandiose stories, "I just knew AMZN was going to go up on earnings. I could feel it. I went ALL IN. Options money, baby! ka-ching!$" Lol, that is so toxic to a new trader. Get away from that. How will you be able to remain nimble when this is your thought process?
Be good to yourself. Stop beating yourself up. You're an entrepreneur. You're boldly going where no man has gone before. You've got balls.
Acknowledge your mistakes, don't identify with them. You are not your mistakes and you are not your bad habits. These are only things that you do, and you can take action necessary to do them less.
It doesn't matter what people think. Maybe they think you're a fool, a gambler. You don't need their approval. You don't need to talk to your co-workers and friends about it to satisfy some subconscious plea for guidance; is this a good idea?
You don't need anyone's permission to become the person you want to be.
They don't believe in you? Fuck 'em. I believe in you.
submitted by indridcold91 to Daytrading [link] [comments]

How to avoid free riding on Robinhood?

Is it possible to freeride on Robinhood?
The reason I ask is because I don’t want to get in trouble, but whenever I sell something, the funds are immediately showing in my account without me having to wait three days.
Does Robinhood have protection features to avoid letting users freeride and getting a 90 day freeride penalty by not showing the funds as settled (aka not allowing them to invest until they’re settled)?
For example - I signed up for an account and it has instant deposit, but I didn’t turn on margin investing. I’ve made a bunch of trades and I definitely didn’t wait three days for the funds to settle since it said I had buying power. I even sold those trades for a profit. My overall portfolio is up.
With margin off, it shows I have $3,747.77 buying power and instant deposit health is good. Here are three pictures.
I turned margin investing on just to see what it shows, and my overall buying power increased to $7,808.10, my margin health is good, but I have -$430.37 margin maintenance and -$2,869.98 day trade limit. Here are two pictures.
TO CONFIRM - I DON’T WANT TO FREERIDE. I’M JUST CONFUSED WHEN THE FUNDS SHOW UP IN MY ACCOUNT IMMEDIATELY AFTER SELLING.
submitted by ghsNICK to RobinHood [link] [comments]

Foreign Exchange Trading Course: A Needs To for Foreign Exchange Beginners

Foreign Exchange Trading Course: A Needs To for Foreign Exchange Beginners
Foreign Exchange Trading Course: A Needs To for Foreign Exchange Beginners

On the planet's largest monetary market where exchanges rise to trillions of dollars every day, many individuals would truly intend to participate in this market. In addition to being the biggest financial market in the world, Forex blogs is likewise the most liquid market worldwide where professions are done 24 hours a day.

A lot of investors have actually become really rich trading in the Forex market. As well as, lots of people who trade in the Foreign exchange market everyday have actually located an excellent means to change their day jobs. Some even came to be millionaires practically overnight by just selling this monetary market.

Trading in the Foreign exchange market can be extremely eye-catching. Nevertheless, you must likewise recognize that there have actually been people who endured severe economic losses in the Forex market. It holds true that the Forex market supplies an excellent economic opportunity to a lot of individuals, however it additionally has its dangers.

It is a reality that individuals that really did not have the ideal understanding and abilities trading in the Forex market suffered substantial financial losses and also some also went into financial obligation. So, prior to you enter the Foreign exchange market, it is important that you need to have the necessary knowledge as well as abilities as a Foreign exchange trader in order to decrease the danger of losing money and make the most of the capacity of generating income.

Many people who were successful in the Foreign exchange market have went through a Foreign exchange trading training course to obtain the expertise and skills required to effectively sell this very fluid and huge monetary market.

In a Forex trading course, you will learn about when it is the right time to acquire or sell, chart the movements, place market trends and likewise understand how to utilize the different trading systems readily available in the Foreign exchange market.
https://preview.redd.it/vayvygfjrcr41.jpg?width=1920&format=pjpg&auto=webp&s=0ab6e21fa99273f65928b3de5a90228c57ccbbaf

You will also be acquainted with the terms utilized in the Foreign exchange market. Even the basic understanding concerning trading in the Forex articles blog can be a terrific help with your lucrative endeavor worldwide's biggest market.

There are different Forex trading training courses offered, all you need to do is choose one that suits your requirements as a trader. There are refresher courses where all the basic features of Foreign exchange will be shown to you in a short period of time, full time on the internet programs, where you will discover all about Forex through the web and there are also full time the real world classroom programs where you can discover the ropes regarding Forex in a genuine class with a real-time teacher.

You can also become an apprentice. However, in order to find out a great deal about Foreign exchange as an apprentice, you need to ensure that you have an experienced Foreign exchange trader who can share a lot of points to you about the Foreign exchange market.

Right here are a few of the basic things you must seek in a Foreign exchange trading course in order for you to get the enough expertise regarding Forex trading:

- Margins.
- Leveraging.
- Kinds of orders.
- Major currencies.

An excellent Foreign exchange trading program will certainly additionally explain a whole lot about the essential as well as technological analysis of charts. As an investor, knowing exactly how to evaluate a graph is an essential skill that you ought to have. So, when you are seeking a Foreign exchange trading program, you should seek a course that provides essential and technical evaluation instruction.

Tension plays an essential part in Forex traders. Understanding exactly how to handle anxiety is also a skill that you need to create. An excellent Forex trading program must instruct you just how to deal with anxiety and trade properly and also successfully.

As high as possible, you must search for a Foreign exchange trading training course that use actual trading systems where pupils can trade genuine cash on the Forex market or at least trade on dummy accounts in a substitute Foreign exchange market. This hands-on experience will substantially benefit you. Besides, the best method to learn more about anything is by in fact experiencing it. Live trading and simulations must be supplied in a Forex trading training course.

So, if you plan on getting associated with the Foreign exchange market, take into consideration discovering all these things in a Foreign exchange trading course. Creating the best expertise and skills in trading in the world's largest and most liquid market in the world will most definitely help you make it to the leading as well as attain your dreams as a Forex investor.

submitted by AdolfoHawkins55 to u/AdolfoHawkins55 [link] [comments]

What I learned: Introduction to investing

Valuable information for new investors
Warning. Looooong post. TL:DR in the bottom.
Recently I have been chatting a ton with people who are very new to investing. I don’t claim to have mastered anything, however I have been able to help a lot of people through chats and messages. I’ve given advice and answered questions, and through that I found out a lot of problems new people run into, and decided to compile some of the points I found important. I will start this with the primary compiled information I usually give people when prompted, and then move on to specific questions I found important. A final note is that this is my own opinion and views, so feel free to disagree! I’d love input, even if I feel confident about this advice.
First off I’d recommend searching for posts about starting out & learning the basics, both here and on other investing/trading subreddits. The question has been asked hundreds of times, and you’ll find some amazing answers if you look.
The first thing you need to understand is that finance is all about information. If you want to learn, you need to take in information. All of the information. Books, news, financial statements, press releases and earning calls. Read everything. You will find hundreds of words you don’t understand, so look them up (investopedia have a majority of them). In the beginning you will struggle, however, as time goes by, you will start to understand. If you do not like reading, learn to like it. There is no way around this. If you find yourself investing without reading tons, you are going to lose.
Books to recommend: Anything written by Warren Buffet, A random walk down wall street by Burton Malkiel (how I started), Stress test by Timothy Geithner & The intelligent investor (“thick” but all important).
Pick out your favorite company in the world, and check if they are public. If they are, head over to their investor relations page and read the transcript to their latest earnings call. Read their financial statement (10-Q). If you don’t understand a word, look it up. This is frustrating but required. This method of reading, finding things you do not understand and looking it up (and learning it), will be the absolute unavoidable key to improvement.
There are 3 things you should consider buying as your first investment:
Large cap companies. These are the most risky you should consider buying. These large companies (Apple, Banks, Microsoft, 3M, JnJ, Walmart and the like) are stable, but can for sure give you a great return.
Specific ETFs. An ETF is a basket of stocks, often with some sort of focus. It gives you instant diversification. The specific ETFs are less risky than the single stocks, but hold risk nonetheless. Specific ETFs are baskets of stocks of varying number, letting you buy one security, and get a tiny portion of many companies. This lets you bet on a sector. Say you think that robotics and automation is the future, you can bet on that by investing in $ROBO. Other examples of these are $KWEB, chinese e-com, $FNG, media and tech, $ITA, aerospace and defence and $SOXX, semiconductors. These let you invest in a promising industry, without having the risk of a single company failing.
Lastly, and by far the best choice, is indexing. These are ETFS like $VOO, $VTI, $VWO and $VOOG, and is a way to take on the least amount of risk while still gaining along with the market. You get a wide basket of stocks, focusing on things like the S&P500 ($VOO), which is an index of large (minimum 6.1 billion USD) US companies. Historically , you can expect 7% annual gain here. That’s realistic. Anything offering much more than that without risk has tons of risk without disclosing it, per definition. $VOOG indexes growth companies, focusing less on the giants and more on the up and coming. $VWO focuses on emerging markets, getting places like brazil, russia and all over asia. Indexing is by far the best choice, and will very often gain you a steady growth. The final and great choice is $VTI, which is the global basket which contains the market as a whole.
Remember, if you have to ask simple questions, you should be indexing. Asking questions is very important and a great way to learn, however, you should not make specific investments unless you can make the call 100% yourself with confidence. If you are not sure, you are making a mistake in purchasing.
Lastly, and honestly most importantly, here is a list of things you should ALWAYS be able to answer before buying a security, equity or derivative:
  • Why am I getting this instead of an index? Where is the upside?
  • If the stock goes up, what action do I take? When do I sell? At what price or % gain.
  • If the stock goes down, when do I sell? At what % loss or a price.
  • What risks are there? How does the worst case realistic scenario look like?
  • Why am I making this investment right now? Is there a better time?
  • What exactly am I buying?*
And finally, always, without exception, perform your own Due Diligence. Don’t take advice from other people without understanding the situation yourself. If you have to ask questions, you should not own the equity. Ask about what you do not own. If you have to ask questions about an equity you already own, you have messed up, and should rethink your strategy.
A last but VITAL note is to keep a journal. You should note down every stock purchase you make or decided to not make, noting down the stock, price, date and answers to the 6 questions. This will help massively over time, where you can look back how you felt before and why you made decisions. It helps to keep temporary emotion out, as well as self reflecting which is the most vital learning method of any craft.
Q&A
Should I buy cheap stocks like $XXX for 4 dollars per share, or expensive stocks like $YYY for 500 dollars per share? IT DOES NOT MATTER. The price of the individual share have no effect whatsoever on the price of the company, how much you will gain or how much risk there is. If you buy 10 A-stocks for 1 dollashare, and if you buy 1 B-stock for 10 dollars/share, both these purchases are EXACTLY the same, in practice. If stock A gains 10% you earn $1.00, if stock B gains 10% you earn $1.00. Then the stocks are valued at $1.1 and $11 respectively. But there is no different. Don’t let the price of the share fool you. The only thing that matters is the market cap, which is the (number of shares*price of 1 share). The market cap is the cost of ALL the shares in the entire company. Some stocks like being expensive to seem exclusive and expensive, but it’s really the company's choice.
What numbers matter the most for the companies so I can compare? Well, that's complicated. DIfferent investors value different things. Some value P/E (price per earnings) and some value margin changes. You have to decide for yourself what matters, which leads to tons and tons of reading. Really, if you don't like reading and analyzing, this isn't something for you. Look at ETFs then. As a rule of thumb, 1 or 2 numbers is not enough to gauge the HUGE and COMPLEX being that is a corporation, so don’t get caught on something like P/E. Compare everything.
Will I be able to profit? Probably. As a new investor, especially a young one, will see both success and failure over time. This is natural. I recommend investing a smaller amount of money. Either you will gain a few % and be excited to learn and continue, or you will lose a few % and you find the ultimate opportunity to analyze what your mistake was.
Is $XXX enough money? Probably. It depends on your broker and fees. Any amount invested into the market is great, and a 10% increase is a 10% increase no matter how much you invest. Depending on your broker though, it might be easier or harder. With high commission, a smaller amount will be eaten by fees. With smaller amount, some expensive stocks (see $BRK.A) might be out of your reach. This shouldn’t be too much of a problem though.
What broker should I use? The best one for you! Hard question. It is country dependent. Look around. You want low commission and any perks you require. To start out, depending on how much money you have to invest, look for low-commission brokers. $0 - $3 is a good range per stock purchase. If you pay more than 2% on your investment, you lose 2% to buy in. This would generally cause stock to not be worth to buy. So do some thinking on your own, to invest you will have to get used to it. Some brokers let you buy partial shares as well, which might be a plus if your capital is low to buy the more expensive stocks.
What should I invest in? There are so many things! Like said above, cheap funds and common stock are good places to start. They are the core of investing, and should be your start. After that, move on and understand bonds. It will be all important during your career in investing. On top of that there are warrants, options, forex, commodities, and all kinds of additional derivatives. Stay clear of those completely until you can confidently make the call to try it out.
My stock increased/decreased in value. Should I sell?
Asking this question means that you weren’t thorough enough when you made the purchase. You should always have it written down on a paper. When do you get out? A valid answer is never. If you believe in the business and they prove themself strong, why ever sell? Some people like selling if they gain 30% or lose 30%. Some do the same on 15% respective 10%. It comes down to how much long term faith you have in the company, when you’ll need the money and what your risk tolerance is. Personally, when I buy a company, I will ignore it until something changes in the core business. I re-analyze each company each earning. It takes a lot of time, but its my method. If I buy something more high risk, I will sell at a set loss-% (20-40% loss) and the same on gain.
How does taxes work and how should I plan for taxes? Taxes are hard and complicated, but it is something you must understand how it works. Capital gains taxes are vital to understand. Sadly, they work differently in each country, so there is no easy answer except for you to look up it yourself. But know it, it is vital.
To end, these are the most important 4 rules of learning how to do all this:
  • Read. Everything.
  • Keep a journal and record the answers to all 6 questions each time you make a purchase, or decided in the end to not.
  • Each time in your reading if you come over a concept, word or idea that you do not understand, get used to looking it up and learning what it is. It’s key.
  • When you succeed, analyze if you got lucky or if your actual reasoning was the correct call. When you fail, analyze what your mistake was and write it down in your journal. Both are vital.
TL:DR: Investing is about reading. You should probably start by reading this now or give up. If you read it all, success! Keep going!
Disclaimer: Don't invest money that you can't afford to lose. You might lose all your funds. Probably don't.
lykosen11
submitted by lykosen11 to StockMarket [link] [comments]

WSB101 - THE BOOK OF YOLO: BEGINNERS GUIDE TO TRADING LIKE A DEGENERATE AND EVERYTHING WSB

The Book of Yolo: COMPLETE GUIDE TO WSB
The goal of this is to actually create something that all of you WSB newbies can read - because we’re all tired of seeing the endless wave of uninformed and unavoidable stupidity from those who have never touched the stock market. CALLING ALL NEWFAGS AND NORMIES.
If you can’t read, GFY now.
Now that we will be on the popular section of reddit, this has become pertinent. WSB can't avoid newcomers, so we might as well explain how the clock ticks here. This one is for you all.
This is to serve as a reference what values we hold, what instruments we use, and as a general place to educated the uneducated.
First off, this is the LEAST helpful stock market-based community for newcomers. Sarcastic answers are the only thing of true value here. It isn't a place to learn, but a place to plan out where you will dock your yacht. Newcomers are usually berated upon asking the inevitable stupid questions that they could learn slowly from reading here, or just using a damn search engine. Instead of embarrassing yourself here, you now have the opportunity to read this and get what we’re all rambling about.
This will help you understand what to expect if you make the decision to undertake a WSB style trading career, so you can stay here and contribute to the yolo lifestyle or otherwise GFY.
I will edit in any suggestions that our frequenting users or mods want to add to this as well.
To begin: Here are our topics for WSB101
-Basics (Equities/Stocks)
;
-ETF's
;
-Options
;
-Futures Trading
;
-SubCulture
;
BASICS/EQUTIES Skip if you understand basic stock stuff
Okay, so what is an equity/stock? An equity is essentially what you’d think of as your “vanilla” trading tool. They move up or down depending on market forces, and can range from pennies to thousands of dollars per share. To explain how stocks work, let's define a few terms.
Volume: The number of shares of stock traded during a particular time period, normally measured in average daily trading volume.
Spread: The difference between the bid and the ask price
Bid Price: The current price in which someone wants to buy at
Ask Price:The current price in which someone wants to sell at
Volatility: The WSB favorite. Volatility is referring to the price movements of a stock as a whole. The higher the volatility, the more the stock is moving up or down. Highly volatile stocks are ones with extreme daily up and down movements and wide intraday trading ranges.
Margin: A margin account lets a person borrow money (take out a loan essentially) from a broker to purchase an investment. The difference between the amount of the loan, and the price of the securities, is called the margin. Margin is one of WSB’s popular instruments of wealth and destruction.
Dividend: This is a portion of a company’s earnings that is paid to shareholders, or people that own hat company’s stock, on a quarterly or annual basis. Not all companies do this.
PPS: Acronym for “Price per Share”
Moving Average: A stock’s average price-per-share during a specific period of time.
Bullish: Expecting the stock to go up
Bearish: Expecting the stock to go down
Any raised hands can redirect themselves to here:
http://www.investopedia.com/articles/investing/082614/how-stock-market-works.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186
Now that these terms are defined, let's move into the details of why this is even useful. Most people know what a stock is, but how and why stocks move is a different story. The stock market is essentially a big virtualization of supply and demand - meaning that usually high positive volume creates upwards movement in the PPS, where high negative volume does the opposite. This creates a trader’s opportunity; Generally, the most effective time to buy or sell is where the candlesticks (volume data) are thinning out. When you are ready to take an entry point or execute an exit point, waiting till the volatility (candlesticks) thin out is one method to give you best trade possible.
WSB FAVORITE EQUITIES: Of many equities, WSB favors the riskier ones - but avoiding penny stocks is a policy.
AMD - CEO Lisa Su, Next Gen Processors, chips, graphics. It’s the gamers gambit. Up roughly 1400% as of 2/7/2017 since WSB first mentioned it
NVDA - AMD’s sister? Mother? Daddy? Who knows. NVDA has been a sexy semiconductor leader. Is up 400% since gaining traction on WSB.
FNMA / pfds - Mnunchin, Trump, Big fat fannies. Get your self deep in the fannie. We all want it. WSB 10 bagger candidate for reforming the housing market. WSB holds a large cumulative position that can be seen below. Also a good read is the beginners guide to FNMA. Any post by u/NOVACPA is very often VERY informative on FMNA/pfds.
https://www.reddit.com/wallstreetbets/comments/5oissp/results_wsb_fnmafmcc_holdings
https://www.reddit.com/wallstreetbets/comments/5t7gba/beginngers_guide_to_fnma_fmcc_read_this_before/
ARRY - A biotech champion that prevailed after a lot of failures and huge losses in the biotech sector. Dark times for WSB. Up ~300% since getting traction on the subreddit.
TWTR - WSB likes to buy put option contracts on her. Exemplary of a social media platform that is unable to monetize itself.
TSLA - Maybe not unanimously a favorite, but loved for it’s sexy volatility, Elon Musk, and ridiculously expensive options.
GILD - A Shkreli pump and dump? The greatest large cap pharma recovery of all time? Who knows. Martin took the time to make a post on this reddit and it is up $5 dollars since.
ETF'S
Welcome to the world of investing made easy. Exchange traded funds (etfs) are devices that can be traded like stocks, but often track the value of many companies by investing in their listed assets accordingly. Specifically, An ETF, or exchange traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors.
ETF’s come in beautiful and delicious varieties, often with a BEAR form and a BULL form of each; but the most delicious to WSB are the 3x etf’s. A 3x ETF is one in which the underlying movement of the ETF is leveraged 3:1. Meaning for every movement within the underlying index or stocks, the 3x ETF moves well.... 3x as much..
WSB FAVORITE AND USEFUL ETF’S:
JNUG - 3x Gold Miner Bull - A hit or miss, has extreme intraday movements and essentially tracks GDX (gold miner’s index). Jnug will usually move with a pretty strong correlation to gold, which is affected by the mentioning of rate hikes (negatively), movement of the US dollar (inversely), uncertainty (positively), and supply and demand.
NUGT - Jnug with a different price tag
JDST - The inverse 3x etf of JNUG - or the bear etf. It does almost exactly the opposite movements of JNUG by the tick. Moves for the same reasons, but obviously opposite directions.
DUST - Jdst with a different price tag.
UGAZ - Natural Gas 3x Bull ETF - essentially tracks the price value of the commodity Natural Gas, but more specifically the S&P GSCI Natural Gas Index ER. The index comprises futures contracts on a single commodity and is calculated according to the methodology of the S&P GSCI Index. Natural gas is most affected by Weather temperature conditions (use your brain), petroleum prices, and broader economic conditions.
DGAZ - Inverse of UGAZ
UWT - Crude Oil Bull 3x ETF - extreme intraday movements, closely follows the price of oil. More specifically, it tracks futures. UWT seeks to replicate, net of expenses, three times of the S&P GSCI® Crude Oil Index ER. The index tracks a hypothetical position in the nearest-to-expiration NYMEX light sweet crude oil futures contract, which is rolled each month into the futures contract expiring in the next month. The value of the index fluctuates with changes in the price of the relevant NYMEX light sweet crude oil futures contracts.
DWT - Inverse of UWT
FAS - Financial Bull, specifically FAS seeks daily investment results, before fees and expenses, of 300% of the performance of the Russell 1000 ® Financial Services Index. The fund creates long positions by investing at least 80% of its assets in the securities that comprise the Russell 1000 ® Financial Services Index and/or financial instruments that provide leveraged and unleveraged exposure to the index. Can be used when bullish on US financial services - so banks, lenders, etc.
FAZ - Inverse of FAS
UPRO - S&P500 Bull 3x ETF, essentially tracks the S&P500 and multiplies it’s returns by 3x.
BRZU - Tracks Brazil (in its most basic form). It creates long positions in the MSCI Brazil 25/50 Index.
LABU - Tracks the Biotech sector, or specifically 300% of the performance of the S&P Biotechnology Select Industry Index ("index"). It should be noted that LABU has doubled since just before the election of Donald Trump.
LABD - Inverse of LABU
RUSL - roughly creates 300% of the performance of the MVIS Russia Index.
RUSS - Inverse of RUSL
SPY - Tracks the S&P500, but is not 3x.
OPTIONS:
Alright, so half you are going to understand this, and half of you are not. Pull up an options chain now on any stock (penny stocks and specific stocks do not have chains because of their market cap). Options are truly the ultimate way to achieve maximum risk/reward.
An option is a contract that gives the buyer the right to buy or sell 100 shares of a stock at a certain price, on a certain date. This concept makes options a commodity themselves.
KEY TERMS:
A CALL - is the right to buy. Buying calls is taking a bullish position in its most extreme form.
A PUT - is the right to sell.
The underlying - is the stock that the option is covering i.e. AAPL, GOOG, AMZN
Strike Price - the price at which a put or call option can be exercised.
ITM, In the money - In the money means that a call option's strike price is below the market price of the underlying asset or that the strike price of a put option is above the market price of the underlying asset. Being in the money does not mean you will profit, it just means the option is worth exercising.
OTM, Out of the money - a call option with a strike price that is higher than the market price of the underlying asset, or a put option with a strike price that is lower than the market price of the underlying asset.
ATM - At the money - Strike price at the same price as the underlying
Expiration - Expiries for options are every friday of every week usually, with exceptions such as every month, or every other day - depending on the underlying. SPY and SPX are great examples of very active option chains with expiries every other day. On the expiry date or any time before (with american options), an option can be, but doesn’t have to be exercised, meaning the holder of the option can use it to buy or sell shares of the underlying stock at the strike price. Most people on WSB do not exercise the contracts, but merely flip them for increases in value as the underlying moves.
For example, when AAPL was at 120 before its earnings report, Joe Shmoe Yolo buys 10 FEB 17th CALLS at strike 127 for .60 , each. Now .60 cents is really 60 dollars each, because the contract is multiplied by 100 (the right to 100 shares). In total, Joe Shmoe Yolo spends $600 dollars + commision on this trade. The next day, AAPL leaps to 130 upon great news. These same option contracts are now worth 3.50 each. $350 dollars per contract, times ten contracts is $3500 dollars. Joe Shmoe Yolo just turned $600 into $3500 dollars. MAGIC. Spoiler alert: Joe Shmoe Yolo was me.
That same Joe Shmoe later buys FEB 17th XOM calls at 90, hoping for similar results. However, XOM ends up never reaching anywhere close to the strike price, and the options expire worthless. Get it?
Now what determines the pricing of options?
OPTION PRICING:
Below is sourced from investopedia
Intrinsic Value: The intrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors. This value may or may not be the same as the current market value. Additionally, intrinsic value is primarily used in options pricing to indicate the amount an option is in the money.
Time Value: Time Value = Option Price - Intrinsic Value. The more time an option has until it expires, the greater the chance it will end up in the money. The time component of an option decays exponentially. The actual derivation of the time value of an option is a fairly complex equation. As a general rule, an option will lose one-third of its value during the first half of its life and two-thirds during the second half of its life. This is an important concept for securities investors because the closer you get to expiration, the more of a move in the underlying security is needed to impact the price of the option. Time value is basically the risk premium that the option seller requires to provide the option buyer the right to buy/sell the stock up to the date the option expires. It is like an insurance premium of the option; the higher the risk, the higher the cost to buy the option. Makes sense, right?
Time value is determined by the expiration date. An expiration date in derivatives is the last day that an options contract is valid. When investors buy options, the contracts gives them the right but not the obligation, to buy or sell the assets at a predetermined price, called a strike price, within a given time period, which is on or before the expiration date. If an investor chooses not to exercise that right, the option expires and becomes worthless, and the investor loses the money paid to buy it.
Volatility:
In an options pricing, you see IV. This stands for implied volatility. The higher that is, the higher the options will be priced Volatility is the extent to which the return of the underlying asset will fluctuate between now and the option's expiration. Volatility, as expressed as a percentage coefficient within option-pricing formulas, arises from daily trading activities. How volatility is measured will affect the value of the coefficient used.
Decaying Nature of Options:
Decay refers to derivative trading (i.e. options). When you sell or buy a call/put (using those two for simplicity purposes) you don't get an infinite time frame to make your dreams come true. Time is your enemy; the further out the expiration date, the less time decay there is. Time decay really hits the worst the week of expiration. Sound confusing? Say you're buying options of the stock WSB (I hope you're seeing what I did there) - and the option costs $1, the expiration is this Friday. Say today is Monday. You buy a call expecting WSB to take you to the moon and beyond. Each day the stock doesn't move closer to your strike price or remains stagnant/drops, you lose value on your option + the time decay. Meaning if it finishes closer to your strike price, your option could be worthless because of that time decay. Questions? Ask away.
A great example of these factors in action is TSLA.
TSLA’s options are among the most expensive for companies in its price range, why?
An in the money TSLA call expiring this week is worth around $1100 per contract. Insanely expensive. But for a reason. TSLA has extreme intraday movements and calls have an implied volatility of 40.92%. Which is fairly high. In addition to that, it holds high intrinsic value / price per share, and a week of time value.
-Futures 101 - The Ultimate YOLO Guide (thanks to u/IncendiaryGames)
Okay, a lot of you have been YOLOing on faggot delights on SPY options. How would you like to trade something with the same or more leverage, 1.0 delta, and no time premium costs? Have you considered futures? What are futures? Unlike options, futures is a contract where both the buyer and seller is obligated to perform the transaction by the expiration. Conversely, in options, only the seller is obligated to perform. That means you can lose more than your investment. Originally they were used by farmers to sell future crops early and guarantee some amount of sales. Since then futures have expanded not just to commodities but currency and equity indices like the S&P 500. Why the heck would I want to trade futures? Here are the advantages: Leverage $5k is the margin requirement for most contracts. For example with the E-mini S&P 500 with 5k you're trading $120k worth of stuff. 1 contract = 500 spy shares. Some brokers offer intraday daytrading margin rates too - TD Ameritrade is 25% of the overnight margin rate($1,250.) Some brokers go as low as $500 an /ES future. SPAN Margin If 24x overnight leverage and 240x day trade leverage didn't give you a hard on there is also SPAN margin, which is like portfolio margin on steroids. The beauty of SPAN margin is you don't need a $125k+ account to be eligible. SPAN will greatly reduce your margin requirements if you hold uncorrelated or inversely correlated positions (up to an 80% discount, here is a list of groups that give discounts) and if you hedge with options. Hedge with the right option or asset and now you have up to 500x day trading margin. 23/7 and day trading Ever get in and out of an equity only to have your broker yell at you to stop doing that or deposit $25k? There is no pattern day trading restrictions on futures. Feel free to day trade and blow up your account as often as you want! You can also trade 23 hours a day. Get trading on how the S&P 500 index will react to news from China right away. Taxes No matter how long or how short you hold you always get taxed under the 60/40 rule. 60% of your profit from futures will be taxed as a long term gain and 40% will be taxed as short term gain. No wash sales. Trade your hearts out. Just remember holding past Dec 31st will treat you as if you closed all your positions that day and you'll be taxed on unrealized gains. Long/Short No need to pay interest or borrow shares as being short a future contract is being a writer, just like an options writer. Options Of course there are options. What fun would it be without options? Unlike stock options each contract gives different number of future contracts. Research what you're trading.
Ok. I'm convinced. I want to strat trading futures! What are some good strategies?
YOLO Strategies
Swing trading Trying to guess/predict/ride sudden market momentum. A low volume average day in the S&P 500 (/ES) for one contract can swing +- $500. Get it right and you can see a huge appreciation of value. /ES is usually highly liquid during regular hours with average volume of 1 million trades and usually bid-ask spreads of one tick. One approach is to buy or short in your direction and put in a stop loss to an amount you're comfortable to lose (say $200.) Since it's so liquid you'll likely be filled at or near your stop loss during the day if your trade goes against you. If you can guess the direction 50% of the time and have trades like this: trade 1 - gain $800 trade 2 - lose $200 Then you may profit over the time period. If you have a 50% chance of being wrong and losing $200 or 50% chance of being right and gaining $800 then over time you'll gain more than you lose. Also, since the present value of your futures contract is included in your margin calculation then if it goes strongly in your favor your position can quickly grow to cover its own margin and you can let it ride for a while. You'll want to be sure you enter a combo buy/short order along with a stop loss order simultaneously, like this for Thinkorswim. Futures can move suddenly and a sudden movement can make you lose a ton of money. Exploiting outdated SPAN margin guidelines There are several out of date correlations between popular futures like oil and say things like wheat that SPAN gives you margin credits on. Take whatever position you want in oil (/cl) then take the opposite in something that doesn't move much day to day with less volatility such as /w (wheat)) and your /cl and /w positions will get a 75% credit, giving you 50% more buying power on crude oil. (2 positions * .25 = 0.5). Trade your heart out on the more volatile future then when you're done close your safer future pair. SPAN is constantly changing but such a complex system definitely has its exploits. Automated/algorithmic trading For you programmer geeks out there it's really hard to algorithmic trade on small accounts due to pattern day trading rules and economies of scale with broker fees. Futures is probably the best way to get your feet wet. Join us on /algotrading if you want to explore more!
Boring safer strategies
I'm including these for completeness but these belong on /investing. Scalping With high frequency trading scalping is less guaranteed. Basically scalping is using tiny momentum as usually there are small micro patterns in futures buying and selling activity where it will rise or fall a couple of ticks. Since the notional value of each tick is $12.5 it's profitable for retail investors and small accounts to act as a market maker after fees at the smallest bid-ask spread possible. Spreads Just like you can trade spreads in options, you can trade calendar spreads in futures. Futures have contracts with different expiration dates and the prices are different for each month of expiration based on the market's expectations. You can go long or short the near month expiration and the opposite for the far month. This will hedge out any sudden market moves as that would likely affect both months. Bull markets in general tend to increase the price of the near month faster than the far month. Basically with a spread trade you're making a long term bet on bull or bear for the underlying future. Pairs trading You can go long in one future say the dow jones (/ym) and short the S&P 500 index and profit off the relative growth. This is a hedged trade as any market ups or downs will likely affect both positions with the same % value. For the past 180 days /ym - /es has been really profitable. Even if you don't do a full perfect pairs trade it is still a great option to reduce the leverage too on whatever index future you're trading so you can stay in longer or overnight. Interest rate and optimal leverage plays Since the $5k investment is equal to $120k of the S&P 500 index currently then you'll likely beat out the market by buying one future contract and putting $115k in safe treasuries or bonds or uncorrelated assets. Some people choose to leverage their stock portfolio and you can get the exact leverage ratio of liquid investments to future ratios. In probability theory the max leverage you can gain is determined by the Kelly Criterion which modeling shows indicates the S&P 500 index to be leveraged to 1.40x. Yes, you could do the same with options but even on SPY deep in the money call leaps are illiquid and have a time premium. Even today they are so deep ITM that the options you would need to use have 0 open interest and a bid-ask spread of $5 per share (so $500 per contract.) You'd need ~5 contracts per 120k so you're already eating $2.5k/$120k - 2% interest rate a year for that leverage. SPX isn't better, it's bid ask is 22 so you'd be eating $2.2k/$120k - 1.83% interest rate. It's doubtful you won't get much past the ask as its only market makers providing liquidity and guess what the market maker will do if you buy/sell the option? They will hedge with the underlying futures until their minimum profit is the risk free interest rate. Hedging Going long and short in various non correlated or negatively correlated assets to seek out a high sharpe ratio and have a higher risk free return that is market neutral. Basic hedge fund stuff. The variety and price efficiency of futures makes things pretty attractive in this area.
SUBCULTURE
Wallstreetbets is a community that has become infamous for the most wild west, moon or cardboard box trades on the planet earth. WSB is a place where you can take out thousand dollar loans, refinance your homes, cash advance all of your credit cards only to put it all on JNUG, and we will still love you. Your mother won't. Your father will never understand your spectrum of autism, but we will always love you. It is a uniquely beautiful community focused on praising its biggest losers as much as its biggest winners. To begin on the subculture, we should define some key moments in the sub's history.
HISTORY: (As made by u/digadiga) + my additions
2012: Jartek [+1] creates /wallstreetbets, and word slowly starts to ooze out. 2013: americanpegasus discovers pennies. AP has seen the light, and is a penny stock evangelist. Jartek & AP have an epic options vs pennies battle - they both lose a couple of hundred bucks, but we are entertained, and WSB is officially born. AP blows up his retirement, swears off pennies and moves onto bitcoins. 2014: fscomeau [+3] discovers options. He repeatedly bets five figures on AAPL calls before earnings. FS claims a supernatural clairvoyance of AAPL. FS then posts about his chest pains and ER visits. He finally suffers an epic loss. Is he dead? Is he alive? Is he is mother? Is he banned? Who cares? 2015: Photos from the 3rd annual meetup are posted. Where a bunch of dudes hang out on the romantic beaches of Guerrero Mexico. In a completely unrelated event, the wsb banner is changed to thousands of ejaculating dicks. Modpocalypse occurs. Hundreds of random users are added as moderators for a few months. None of the new mods can change the CSS. The constant whining about how "wsb isn't what it used to be" continues. Someone attempts to show how selling covered calls is idiot proof, but gets lazy, bets all six figures on Apple, and suffers significant losses. Robinhood gets popular. Should you buy one share of AMZN or one share of GOOGL? Who gives a fuck. 2016: Everyone starts saying "go fuck yourself." Except me. Because I am what I am. And if you don't like it, you can all go fuck yourselves. u/World_Chaos performs one of the more impressive yolo's of the sub, starting with 900 dollars, and turning it into 55k. https://www.reddit.com/wallstreetbets/comments/414blh/yofuckinglo_900_to_55k_in_12_days/?ref=share&ref_source=link 2017: u/fscomeau preforms what he calls "The Final Yolo", a 300k trade against AAPL before earnings (that I, u/thor303456 inversed), supposedly supposed to net fscomeau 2.5 million or so, in which he will finally stop trading. FSC is featured on several market related articles and newspapers, showing up on yahoo, etc. Later we find proof during his livestream of AAPL earnings that he was paper trading. Even later, FSC writes a near 200 page book called "Wolfie Has Fallen" describing how he trolled the entire internet, some following him into that AAPL trade. Martin Shkreli visits the sub and proclaims that GILD pharma is worth over $100 a share and is deeply undervalued.
KEY FIGURES:
Donald J Trump - He is the Marmalade Manchurian, the Tangerine Tycoon, and our spray tan Stalin. Unbelievable night of election. WSB demographics show a primarily capitalist and right wing (or at least joking to be so) point of view, and thus we are generally pro trump. In actuality though, WSB is focused on pro-market, which Trump happens to be.
u/Jartek - Founder of the sub, original yoloer. Believe he has retired from reddit for the most part. Mostly inactive.
u/Fscomeau - The Canadian as some call him, and perhaps one of the most profound internet trolls of 2016-2017. A French-Canadian trader who deals with mostly options. The man has been called "The Great Inverse", and for a good reason. Nearly all of the trades or statements he made on WSB were completely wrong or mostly wrong. Truly the strongest technical indicator.
Martin Shkreli - An idol to many WSBers, Martin stands as the master of the biotech sector. A very debated character for very stupid reasons. Martin regularly tweets about the stock market, occasionally does a youtube channel, and livestreams fairly regularly.
u/theycallme1 - Educated trader, and mod of WSB. Roasts people often and roasts them good. Ask him the questions that aren't stupid. One of the most active mods.
u/world_chaos - some fucking college student with some real net worth. Sits on 100k or so (needs verification), and was an inspiring yoloer to all, with his 900 to 55k yolo with options.
Lingo, Terminology, and Nomenclature:
The Faggots Delights - Truly the most suicidal, yet clearest shot to the moon. This term is usually used to define either weekly, or daily option plays on the SPY/SPX. Some users trade them very profitably, such as u/MRPguy and many in the past.
Cuck - Truly the worst thing you could be. A cuck is a man who likes watching his wife/girlfriend fuck other guys. Weak, spineless, and a term often throw around here.
The YOLO - You only live once. This is something that is, and should be realized as undeniably true. Why are you sitting on a 5k emergency fund that is making you less interest in a year than what I just made in 10 minutes? Why haven't you used all of the credit on your 5 credit cards or used your testicles as collateral for a loan yet? YOLO or YOLOING is as much a psychological decision to embrace absurdism, and win with everything you have while risking it all. Yolo is what it means to be a WSB trader.
Bagholding or a Bagholder - When you're stuck with the most ass trade of your life, because you know it'll go back up. A bagholder is the 59 year old guy at the grocery store who won't quit his Job because he knows he only has to wait another year until he gets a return on his investment (of his life). Anyone holding SUNEQ is the definition of a bagholder.
Autists - Something we embrace, something we call each other, something we all are. Autism isn't used in an offensive way as much as it is a generally accepted term that defines us. The best traders have autism because of their distance from emotion. I bet you never made it to this part of the reading because you're such a damn autist.
Tendies - Tendies are what you get after you make a small amount of money. "I SOLD AMD TODAY FOR A $13 DOLLAR PROFIT, GOING TO MCD's TO GET MY TENDIES". Tendie money is usually shameful and insignificant, but at least it got you tendies. Chicken tenders at McDonalds are the least expensive for the most cholesterol.
I know some of the writing was half ass, full of errors, or otherwise not the best explanation. But I believe this will serve its purpose, and maybe help to promote new ideas from moderately educated traders. WSB has very strong traders, and the most uniquely risky trading styles on the planet. Hopefully this can serve to better the overall community.
You guys are all faggots, upvote this so we can get the noobs to stop trying to bite on our cocks.
Also I'd really appreciate input on anything to add to this overall. It took my over 3 hours to write up, so I eventually grew tired and probably have missing spots.
Enjoy your time here at WSB.
EDIT: Added a shit ton of stuff, fixed errors. THANKS FOR ALL OF YOUR INPUT, ACTUALLY MAKING WSB GREAT AGAIN
MODS: Can we make this editable by others mods or something? My fingers aren't enough. Seems like this could serve as a good "official" thing. Paging u/theycallme1 u/CHAINSAW_VASECTOMY etc
submitted by Thor303456 to wallstreetbets [link] [comments]

What is Leverage in Stock Trading? Difference between Leverage and Margin (Hindi) Investopedia Video: Short Squeeze Stocks & Mutual Fund Investments : Buying Stocks on Margin Definition What is Margin Trading?  Fidelity - YouTube What is Margin  Margin Call Explained - YouTube

Margin trading involves buying and selling of securities in one single session. Over time, various brokerages have relaxed the approach on time duration. The process requires an investor to speculate or guess the stock movement in a particular session. Margin trading entails greater risk, including, but not limited to, risk of loss and incurrence of margin interest debt, and is not suitable for all investors. Please assess your financial circumstances and risk tolerance before trading on margin. Margin trading refers to the practice of using borrowed funds from a broker to trade a financial asset, which forms the collateral for the loan from the broker. Margin is the difference between a product or service's selling price and its cost of production or to the ratio between a company's revenues and expenses. Sign in Investopedia between margin trading and the casino. Margin is a high-risk strategy that can yield a huge profit if executed correctly. The dark side of margin is that you can lose your shirt and any other...

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What is Leverage in Stock Trading? Difference between Leverage and Margin (Hindi)

Investopedia Setup and Trading by Drew Patterson. ... SBO33 PRESENT Leverage Ratio Definition Investopedia.mp4 ... Investopedia Video: Contribution Margin by Investopedia. Stock Margin is when you borrow funds from your broker to buy more stock. Margin can amplify your returns, but it can also hurt them if an investment turns a... Have you always wondered what it means to trade on margin? In this video, you’ll learn what margin trading is and if it is a strategy that could help you ach... Buying on margin is borrowing money from a broker to purchase stock. You can think of it as a loan from your brokerage. Margin trading allows you to buy more stock than you'd be able to normally.... What is Leverage in Stock Trading? Difference between Leverage and Margin is mostly not known to the investors and traders. The leverage and margin are loosely defined terms and used interchangeably.

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