The beauty of buying options is from the get go, we know the MAX we can lose.
Worst comes to worst, we just let the option expire worthless.... We lose the premium we have paid. Period.
Note: I'm talking about BUYING options.
If you are selling options, and you have not hedged your position, your losses can be unlimited.
Isn't this similar to buying Toto?
If you buy Toto system 8, you just pay $28. That's the max you can lose - $28.
But if you struck the first prize, its like buying deep out-of-the-money options and hitting the jackpot!.
Yet, even when the losses are limited and known in advance, we have people having their lives destroyed by "playing" Toto and options...
Do you know the reasons why?
Once you know the reasons, then its a matter of discipline in not going there.
And the self-awareness of knowing when you have crossed the line and need to seek help...
Smol,
ReplyDeleteDone right, it's usually more profitable to sell them than to buy them. Just ask the casinos and the Totalisator Board (now that's a cushy civil servant job!). ;)
Buying them should be seen as expenses, for entertainment or for insurance.
And like other expenses in our lives, we should keep them small or reasonable.
Spur,
DeleteYou are right. Its more advantages to be the seller than the buyer - most of the time ;)
That's why Singapore Pools is almost sure win when it comes to selling Toto - the prize money is from the pool after Singapore Pool got its cut.
The only time it can lose money - like this Friday's 5 million draw - is someone won but the total betting revenue received is below 5 million!?
Hence you need to have a monopoly!
As for 4D, in theory, Singapore Pools can go bankrupt if everyone bought the same 4 numbers and it won!!!
That's why Singapore Pools will limit the number of bets for any combination of 4 numbers as part of its risk management.
Illegal private 4D syndicates have no such limits. Its risk management is "run road"! LOL!
Punters can't go to the police anyway... Its illegal remember?
Having said that, casinos can go bankrupt too if their risk management is weak, or they get too greedy...
AIG has for years made good money selling CDS (credit default swaps) - pocketing the sweet, sweet premiums over and over.
That's until 2008 sub-prime struck... This small outfit (but super profitable) almost dragged the whole AIG empire down...
Despite being rescued, shareholders only got back 10 cents on the dollar.
No free lunch.
Safe can be very risky; risky can be safe.
Its not the sword; its the wielder ;)
The house will always win, the player will always lose
ReplyDeleteDaniel,
DeleteI wouldn't be so black and white...
I would agree the House should have its House advantage ;)
There are cases where the house has lost, and the player won.
One good example is when George Soros and Stanley Druckenmiller made 1 billion by breaking the Bank of England through shorting the pound...
Casinos going bankrupt in US is not exactly unheard of...
On the reverse, "safe" can be risky just like the AIG example.
Countries and banks have gone bankrupt...
REITs though rare, have their bankruptcies too. During 2009, if not for some white knights that came to the rescue, 1 or 2 of our local REITs would have gone under too...
Savings as rule, is a virtue. But in some cases, like those savers in Turkey today, and Venezuelans in the past have found out, its lose, lose...
Real millionaires are born from this simple and easy option trading - just buy!
ReplyDeleteWe can even trade as a team or group!
CW,
DeleteBuying Toto is the mirror trade of buying life insurance.
BOTH are flushing the premiums down the toilet.
The odds of me hitting the Toto jackpot versus me dying this Friday are about the same same? (I'm guessing)
One, if lightning strikes, I get to do my wine, song, and women while I'm still alive and kicking ;)
The other?
I "win", but I don't think I'll celebrate as I've gone "up lorry" :(
Lol!
I better stop. Wait I kenna blamed for being a bad influence to the community...
But one thing that's for sure, you can't complain I'm boring or lack imagination :)
I sure can "talk male-chicken"!
CW,
DeleteWorkplace shared Toto punting is a thing, isn't it?
Its all in good fun, provided we don't let small bets turned into an addiction...
Just like we don't want to become addicted to the stock markets too ;)