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Options-Trader Bug
30 January 2021 09:15I've applied for permission to trade options via my play money account at Fidelity. I want to start making bear bets on individual stocks by purchasing put options. If I think specific stocks are gonna fall >90% I should try to make a bit of profit on the way down. Tesla and GameStop are doomed for sure :-) The only problem is how long until they fall ... I could still lose money while Wile E Coyote refuses to look down.
I don't play with my retirement account, though. My retirement account is quietly parked in the Most Conservative lot right now, at 23% equities, 5% bonds, 72% cash (the Lifecycle Income fund). I would only increase my equity percentage if we entered a sustained bear market.
This Pandemic Hypervaluation Bubble is unlike anything I've ever seen in US history. Usually a stock market bubble like this follows a long stretch of booming economic growth, and then the bubble pops when the inevitable recession hits. We've never had a bubble that got bigger during the recession before. So what's going to pop it? Does the bubble keep growing until the next recession? Until we have a "natural" business cycle recession?
Because usually recessions are caused by the Federal Reserve hiking interest rates to choke the money supply, to strangle inflation. This recession was caused by people hiding from a virus, whether voluntarily or due to government restrictions on activity, even as the Fed sprayed $5 trillion of additional cash into the economy (back in 2001 there wasn't even $5 trillion of cash in the entire economy, the size of this Fed cash dump is WW2-scale).
This Hypervaluation Bubble has got to be the result of the Fed's Hypercash infusion, plus people being stuck at home, nothing else to do with their cash. So will the economic recovery paradoxically kill the bubble, as people start spending their cash instead of speculating with it?
Timing the pop is always impossible. Maybe it started popping this week. Maybe we'll see the stock market go up another 50% over the next year. As K would say, it's all bullshit.
I don't play with my retirement account, though. My retirement account is quietly parked in the Most Conservative lot right now, at 23% equities, 5% bonds, 72% cash (the Lifecycle Income fund). I would only increase my equity percentage if we entered a sustained bear market.
This Pandemic Hypervaluation Bubble is unlike anything I've ever seen in US history. Usually a stock market bubble like this follows a long stretch of booming economic growth, and then the bubble pops when the inevitable recession hits. We've never had a bubble that got bigger during the recession before. So what's going to pop it? Does the bubble keep growing until the next recession? Until we have a "natural" business cycle recession?
Because usually recessions are caused by the Federal Reserve hiking interest rates to choke the money supply, to strangle inflation. This recession was caused by people hiding from a virus, whether voluntarily or due to government restrictions on activity, even as the Fed sprayed $5 trillion of additional cash into the economy (back in 2001 there wasn't even $5 trillion of cash in the entire economy, the size of this Fed cash dump is WW2-scale).
This Hypervaluation Bubble has got to be the result of the Fed's Hypercash infusion, plus people being stuck at home, nothing else to do with their cash. So will the economic recovery paradoxically kill the bubble, as people start spending their cash instead of speculating with it?
Timing the pop is always impossible. Maybe it started popping this week. Maybe we'll see the stock market go up another 50% over the next year. As K would say, it's all bullshit.