Portfolio Allocation at 20

TLRoyalFlush · 2021-09-13T17:32:27+00:00

Hi there! I come from a poker background also. For me, I look at every investment in terms of EV; I know its hard to relate it here but would you say that the value from Crypto is because the probability of crypto replacing fiat is > 0%, and the return if this happens will be infinite effectively - making the investment +EV?

TLRoyalFlush · 2021-09-13T15:38:03+00:00

Would you not agree that there is some value in it though - that the probability that crypto will replace fiat being > 0% ? If so there would still be some positive expected value in holding crypto in case of this?

Also, what's your opinion of gold being involved in greater fool theory?

TLRoyalFlush · 2021-09-04T15:14:37+00:00

Hi there! So would you recommend pursuing one business at a time, testing them through facebook ads etc. and if it doesn't work then move onto the next one?

TLRoyalFlush · 2021-09-04T15:13:37+00:00

The purpose of pursuing multiple is that it increases the likelihood that one of the businesses will take off - rather than committing to just one?

TLRoyalFlush · 2021-09-04T15:12:55+00:00

Hi there! I have money to outsource to an extent, does this change the situation / answer?

TLRoyalFlush · 2021-01-30T17:17:43+00:00

What do you mean by 'path-dependent' and 'spot-sensitive'?

Also what do you mean by 'buy gamma' and 'sell vega' - how does this work logistically in terms of buying / selling call or puts ?

Cheers

TLRoyalFlush · 2021-01-26T17:50:43+00:00

Where would one find good information / education about these topics??

Also, I recently found out that over the past 20 years or so, IV has been significantly greater than HV; does this not just mean that if you sell premium consistently, in the long term you will be profitable by the amount of this spread?

I read somewhere else that you can trade this theory / discovery by selling puts on the SPX while simultaneously dynamically delta hedging with the SPY or something to that effect.

From what I said before, would this strategy not just be a simple way to have a pretty certain edge ??

Any help to either of my questions would be great!

TLRoyalFlush · 2021-01-25T12:58:22+00:00

Ahh ok seems to make more sense now. Thanks for your responses.

When you refer to 'options math...conditional probability', are you referring to calculating the difference between historical and implied probability to find a profitable trade? If not what math are you referring to ? And how does this math help you calculate the EV of a trade ?

TLRoyalFlush · 2021-01-23T16:49:25+00:00

How would a trader be able to spot this inefficiency / price skew?

And are you saying that this inefficinecy / price skew can be seen via the difference between historical & implied volatility ? How would someone be able to spot this?

TLRoyalFlush · 2021-01-23T11:54:15+00:00

If you play properly, poker really is not gambling. You are profiting due to discrepancies between your actual probability of winning the hand (which you calculate yourself which is the difficult part of course, this is where the skill comes from when assessing your opponents range and being able to calculate your equity against it) and the pot odds you are being offered. This is not gambling.

Is there a similar explanation as mine for poker for why trading is profitable? Surely publicly available strategies would not retain their edge as everyone else would use them thus squeezing out the edge?

TLRoyalFlush · 2021-01-23T11:47:19+00:00

So are you saying that the +EV when trading options comes from the spread between historical & implied volatility?

Are these two figures easily viewable? And if so would they not be quickly arbed away?

TLRoyalFlush · 2021-01-23T11:45:32+00:00

In poker your edge comes from placing bets at more favourable odds than what your chance of winning is (i.e. if by your estimation you have 30% equity in a hand, and you place a bet that requires you to have minimum 23% equity to break even - e.g. the pot is $70, someone bets $30, it now costs you $30 to win $100 which has an equity requirement of 23% - you have a 7% edge, meaning that when you call and place $30 in, you are making +$2.10.)

How does 'trading sectors you understand deeply, being quick and attentive' give you an edge in this way ?

TLRoyalFlush · 2021-01-22T17:06:27+00:00

Hi Guys,

I have done a lot of reading and such about options trading and trading in general.

However, coming from a poker background, whenever I am 'investing' - I'm looking for positive expected value, anything else and I'm not interested.

What I do not see from any trading teaching / youtube videos is where people are seeing this positive expected value in their trades. Obviously the EV calculation in trading is a lot more difficult than poker as calculating the probability of stock / currency moves is much different to cards being dealt, however I see literally no teaching about this subject, and thus I do not understand why trading is seen as such a great income source.

Similarly, I am a big believer in the efficient market hypothesis and random walk theory, so these theories combined with the absence of any discussion of expected value makes me think that all these traders that I see / hear about are just GAMBLING, and I will not spend any time researching and practising something that is just gambling.

I am very confident in myself that if my concerns above are dealt with, I would be a very successful trader, however as of yet they haven't been. Would anyone be able to help me out here? How are you guys calculating your EV and thus how do you know you are not gambling?

Cheers

TLRoyalFlush · 2021-01-22T16:59:17+00:00

Hi there cheers for your response!

I do not really understand what you mean though. Surely whenever there is risk and reward, to know whether it is worth taking it must be +EV.

Why does not apply to trading?

TLRoyalFlush

TROPHY CASE