The vig is so tiny that they are playing blackjack for almost free. So the variance will swap the neg edge, encouraging winners to delude themselves that they are good at investing.
And from POV of giving the people what they want, it's working. Cheap casino.
Is this complex "blackjack" a good use of time? Probably as good a use a time as video games I guess.
If the entertainment we know as "markets" gets teaches you skills that's like getting comped by the casino host so much that you might come out ahead.
If you feel your time spent "playing the market" is not leading to durable personal growth (returns are not a proxy for that btw, that's called "resulting"), then consider re-allocating time to skill up in higher SNR domains. Where you are sure you are getting better.
Otherwise recognize it as entertainment and don't rationalize it with the more virtuous sounding endeavor of "investing".
Then compare that with other forms of entertainment you dig.
Do you still want to gamble?
For some of you this might be a helpful way to look at it.
People who make this a real hobby have processes. They have ways to measure if the output map to the inputs. They have clear thinking about risks, scenarios, how they will act over at least categories of outcomes.
Results are very noisy and invite so much self-delusion.
If you're process doesn't feel like one to you. If you couldn't at least do. A simple flowchart of your plan you are probably gambling.
And yes, the bid/asks are tight and the vig is small (not in options btw. If you pay .51 for an option worth .50 you've incinerated 2% edge)
But taxes are a big vig regardless of how cheap trading gets.
I expect this thread will have a pretty annoying "getting nagged to clean my room" energy but not wasting your time accidentally (again if it's entertainment, just own it) is low hanging fruit.
I hear markets are expensive and prospective/implied returns are pretty low. The opportunity cost of ignoring markets is therefore also low.
The flip-side is of expensive markets is the cost of capital is low. The market is doing what it should. Begging for issuance.
Begging for ideas. Begging for new places to put money. It's out of ideas, so jpegs are now getting funded.
Your human capital is competing with jpegs.
You can chase the jpegs or you can take the other side and do stuff to attract some of that $$ flowing into jpegs.
This is adjacent to the difficult task of separating skill from luck.
I've always thought the "mind your inputs" thing to be a useful guide here. Are KPIs of your learning and skills and things you are building going up and to the right. Eventually it will take care of itself.
The inputs have way less noise than the output of the process. Mind the inputs, and the outcomes take care of themselves.
Sometimes those great outcomes take a form that you didn't anticipate. You may never get rich but you might attract the person who saw You with a capital Y
...while you were on your more honest, self-aligned journey.
I started off a bit neg but it's really because I suspect better things await those who snap out of being a customer and get on with what they really need to be getting on with.
Fortune cookie end.
Stay groovy
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There's so much that can be explained about what a mm thinks about and what tools they use when they handle a show. After so many reps the mental checklist and "feel" of the call is automatic but dissected it's prolly interesting to the corners of fintwit.
A really simple example would be someone soliciting a quote for a risk reversal. Take a symbol like URBN.
You are thinking about the class of customer the broker represents, where you are in the brokers pecking order.
Then you think about the stock itself.
What's the liquidity in the shares? What term do they want to trade? Are they looking to collar stock or disguising a skew trade? Well is it delta neutral or live?
How's the borrow? Confident in div dates? Are the screens stale or a good indicator of the fair vols for the name?
I feel like I should make a video describing exactly what happens when a broker calls a desk with an option show.
Might be NSFW.
Seriously the signal chain from phone call, to the print on an exchange floor is not widely understood.
Announcement, crossing and blocking etc
The adverse selection of your order not being blocked. How the floor traders free roll off that moment. Why prop shops have people on various floors so they can block orders from crossing without getting their tribute.
Something important to realize is that anything represented by a broker on the floor of an exchange is considered "public" info since anyone can access that info by hiring a broker
Phone negotiations that result in an order/ trade are private until they are "announced" on floor
Anyway, if you'd you'd like to check it out, here's what it covers:
1. Why I found Jensen's Inequality to be interesting in the first place (hint: it's a tool that helps you make better off the cuff predictions without crunching numbers)
2. Jensen's Inequality ELI5
This part includes a discussion of convexity/concavity and how this flips the direction of your predictions
3. I made up an example of trying to predict how long it would take to get somewhere in traffic.
I think everyone will have actually shared the same thought, but Jensen's formalizes the intuition
A reminder that evaluating any performance requires comparing to a relevant control investment. That control should incorporate rebalancing and have the right vol scaling.
Some things you should wonder...
Does the manager have security selection edge, sizing edge, timing edge?
How do you test for these 3 edges...you need a sensible dummy benchmark.
Lots of room for details but you can listen to this pod to get your bearings
Is it inconsistent to be more compassionate to "horrible" people than to animals?
Animals that suffer seem to be a big monkey wrench in trying to hold together some worldviews.
A winding observation in the past week got me there...
I was at an exhibit in a museum in Danville that dealt with the opening of the US western frontier including the fate of native Americans.
It gets you thinking of course about how human cultures could evolve so differently.
But one of the ideas that I fixated on was...
The view to some tribes that owning land made no more sense than owning the air or water.
And the only thought that occurred (actually recurred, because I have it a lot) is how made up everything is. I mean rules and laws (not say physics...I mean we can build bridges and cars)