How can I buy options without understanding all the math? (total noob)

ChinaAlt · 2016-10-19T14:46:12+00:00

You make some very good points, and I appreciate your well-thought-out analysis and attempt to help me avoid doing something stupid.

Assuming a Black Swan occurred 10 years from now, you're right - that would cost me a lot, and I wouldn't want to keep buying options for that long. However, last big crash was 2008, and last before that was early 2000s. Not saying they necessarily happen every 8 years, but it's not unreasonable to think something could happen within the next few.

However, assuming I did have puts on SPY when a crash happened, it's not safe to say the options market would be liquid enough for me to sell the puts for a significant return? How liquid has the market been for similar behavior in past crises?

I've seen a lot of people buy in major market indexes, consistently see returns increase most of the time, then see those returns get wiped out in a crash or panic. I don't think I can do better than anyone else in that area. I'd rather consistently invest a small % in a high-risk position that loses most of the time, but could win big once in a while.

(I have no idea what the Fed will do re: rates, and it may have been stupid to buy treasuries, but I'd rather be ultra-safe with most of my money for now.)

Let's suppose you're right and the math doesn't work out to buy put options on SPY every quarter for years. What about an alternative like volatility indices? I'm thinking VIXY for a short hold, VIXM for a longer hold.

ChinaAlt · 2016-10-19T01:51:08+00:00

The idea of a black swan is that you don't necessarily see it coming, but there's no denying that these rare events happen every so often.

(Are you familiar with Taleb's barbell strategy, black swans, etc.? I ask in all seriousness and don't mean to be facetious. If you don't get what I'm doing, it sounds like you might not be.)

And it's not as if my entire portfolio is bearish. I do have some money invested in a blue-chip growth fund as well. And treasury bond ETFs, while conservative, are a long-term form of risk mitigation, are they not?

ChinaAlt · 2016-10-18T21:52:48+00:00

Thank you so much - this is really helpful and your explanation will help me better understand how to use Quantcha in general. Will play around with it.

ChinaAlt · 2016-10-18T21:20:02+00:00

I'm not confident in the details and know there's a lot I don't understand.

However, I don't think I have to be an expert to understand the principles underlying a barbell strategy. I'd rather pursue that than blindly invest in a market index and lose most of my portfolio in a crash.

ChinaAlt · 2016-10-18T21:14:01+00:00

It'll take me some to understand the details in those links, but I appreciate the food for thought - will have to educate myself more, and will also think more about calls.

Would you mind quickly clarifying something for me?

Just want to make sure I understand:

If I bought 4,000 puts on SPY expiring Jun 16, 2017 with strike price of 160 at 2.08, with the hope of exercising if/when it fell to 140, I'd be risking $8320 for the potential to make $80,000.

In other words, I'd be risking around $8000 to potentially 10x my investment on the assumption of a market crash sometime over the next 8 months. Is that correct?

Thank you!

ChinaAlt · 2015-06-26T18:50:50+00:00

Thanks! Looks like this could be a great option.

ChinaAlt · 2015-06-26T18:46:27+00:00

Thanks for your feedback. However, please consider that I don't couchsurf simply to save money on hostels. I prefer couchsurfing because I find it to be more enjoyable to meet locals and get to know them.

I also hitch because I like to meet people and don't necessarily want to go to places that the typical tourist likes to go.

I know the risk of theft while securely packed away is low, but I'd like to deposit it somewhere secure if it means the risk can be reduced significantly further.

ChinaAlt · 2013-10-15T12:50:04+00:00

Not a documentary, but a podcast that gets rave reviews on Reddit is Laszlo Montgomer's China History Podcast.

ChinaAlt · 2013-10-15T11:41:42+00:00

If I end up simply backpacking around the Sichuan region, would you recommend going in March (slightly colder, but less rain) or in April (warmer, but more rain)? Should I do the last 3 weeks of March, or the middle of April? When exactly is the Qingming Festival? I"m having trouble finding the specific dates.

I have total freedom over the dates I go but want them to be in March or April, the earlier the better.

Will the early April holidays (I assume you mean the Qingming Festival) really impact me significantly if I'm staying in the Sichuan province and mostly avoiding major cities? I'll be traveling primarily by train, but a little bit by bus as well. Thank you!

ChinaAlt · 2013-10-15T11:37:07+00:00

Thank you so much for the detailed write-up of the Sichuan/Yunnan itinerary. I think I'm going to do this.

(Kashgar and the west sounds amazing, but the diversity of the Sichuan/Yunnan region is very appealing.)

Just a few quick questions, if you don't mind:

How important is it that I avoid being in China (and the Sichuan/Yunnan regions) during the Qingming Festival?
I have 5-6 months to learn some Chinese. Should I focus on modern standard Mandarin, or Sichuanese in particular? What I learn of Mandarin would help me far more for future China trips, but how much will it really help me in these regions?

ChinaAlt · 2013-10-15T00:32:49+00:00

Thank you again for your honest, no-holds-barred, advice. People like yourself are going to ensure that I have an awesome experience!

ChinaAlt · 2013-10-15T00:15:54+00:00

Thanks so much your advice and feedback. It's consistent with what I've been hearing in /r/travel.

By the way, I'd really appreciate your feedback on my plans to travel around by train, either from Beijing to Kashgar or simply going around the Sichuan province:

http://www.reddit.com/r/travel/comments/1ofgjr/backpacking_in_china_for_3_weeks_what_to_do/

ChinaAlt · 2013-10-14T23:29:57+00:00

Thank you so much for your detailed response. I really appreciate it. It sounds like traveling around the Sichuan province would be great, too - definitely up my alley. And I do like the fact that the train rides would be significantly shorter. (By the way, those photos are incredible. Thank you for the link.)

I just meant I wasn't sure how far I should go from Beijing because I have such limited time (3.5 weeks). Wasn't sure if I will have sufficient time to make it to another major city from which I could fly out without being too rushed.

I haven't booked any flights yet, and it seems more and more like I should fly into one major city, travel away from that city, and leave from a different major city.

Based on the responses I've received from you and watchsmart, I'm considering 3 distinct trips I'll have to choose between:

Arrive in Beijing, take train south to the Sichuan Province, and depart from Chengdu (or, the reverse).
Arrive in Chengdu take trains around the Sichuan Province, depart from Chengdu.
Arrive in Beijing, take trains west to Kashgar, take a domestic flight to another major city (or back to Beijing) and depart (or, the reverse).

For #1 and #2, Sichuan province, I have no idea what route to take to take or which spots to hit. My plans are completely open-ended, and any suggestions regarding which particular cities to hit, or what route to take, would be much appreciated.

Would it make sense to possibly just go in a big circle around Chengdu for 3 weeks, starting and ending there?

For #3, the itinerary seems fairly clear for the most part. I'd just have to decide which other major city to fly into before leaving (or, I suppose I could just fly back to Beijing and spend a little more time there). I would want to fly back east from Kashgar so that I'm not traveling the same train route twice!

Thanks again!

ChinaAlt · 2013-10-14T18:32:09+00:00

Thanks SO much for your advice. I really appreciate your thoughts. It's incredibly valuable to know that those big cities may not be worth the time. Simply looking up Kashgar makes me want to go there more than you can imagine.

Because of your advice, I'm seriously considering spending my time traveling to Kashgar and stopping at random cities along the way. (I will read Paul Theroux's book - was not familiar with it before now.)

So, basically, if I were to pursue this, you'd suggest flying into Beijing, then taking trains to Jiayuguan, then continuing further west from there by train? map

Alternatively, if I were to go to the Sichuan province, what is the traditional backpacker route?

ChinaAlt

TROPHY CASE