> It seems trivially easy: buy out-of-the-money puts, based on today's price, > expiring shortly after that date.
Excellent! You would end up with sure money. However, in general, a security does not have necessarily an associated option market. Granted, you could (try to) implement your favorite option pricing model (e.g., a binomial model) to produce (in principle), directly or indirectly, the put options payoffs but that is tricky, particularly for an individual investor. Nevertheless, let us continue with the specific example of Tesla where there are associated options available but let me clarify that it is implicitly assumed that there is no certainty regarding the angel visiting you again; thus, the goal is to make the most of this potentially once-in-a-lifetime opportunity. To make it simple, let us pretend that you are single, with an income virtually matching your expenses and you have no significant assets appart from $0.5M in your brokerage account. Which would be the specific put options you would buy and how much would you spend in relation to the $0.5M? On Fri, Jan 31, 2020 at 7:12 PM Devon McCormick <[email protected]> wrote: > > It seems trivially easy: buy out-of-the-money puts, based on today's price, > expiring shortly after that date. > > On Fri, Jan 31, 2020 at 6:09 PM Jose Mario Quintana < > [email protected]> wrote: > > > > Yes, I lost a bit dumping it when it started to take off. > > > > Oh well, it could have been a lot worse. > > > > Incidentally, recent news confirm reports from last year that the legendary > > investor, Warren Buffett, which was mentioned in the thread, was (among > > other investors) conned and "invested" $340M in a shady "green" company, > > > > A couple pleaded guilty to scamming Warren Buffett as part of a $1 billion > > Ponzi scheme > > > > https://markets.businessinsider.com/news/stocks/couple-admit-scamming-warren-buffett-1-billion-ponzi-scheme-2020-1-1028844728 > > > > This is not the first giant "green" company that bites the dust (Solyndra > > and A123 come to mind); but, to my knowledge, is the only one so far where > > the upper management has pleaded guilty of criminal activity. > > > > Back to shorting securities... This is a tricky business. An ex-colleague > > illustrated some of the issues by posing what he called "An Angel problem." > > An (infallible) angel makes an apparition and tells you (and only you) > > today, for example, that the closing price of Tesla on July 31, 2020, will > > be exactly $345.67. What would you do? > > > > His point was that, even with (partial) exact information in one's > > possession, the problem is far from trivial. Then again, in principle > > (that is, if one does the homework properly), considering including short > > positions in one's portfolio cannot hurt. > > > > > > On Thu, Jan 30, 2020 at 8:03 PM Devon McCormick <[email protected]> > > wrote: > > > > > > Yes, I lost a bit dumping it when it started to take off. > > > > > > > > > On Thu, Jan 30, 2020 at 7:36 PM Donna Y <[email protected]> wrote: > > > > > > > > > > > >> Tesla short sellers lose more than $1.5 billion in one day as stock > > > > skyrockets on earnings > > > > > > > > Donna Y > > > > [email protected] > > > > > > > > > > > > > On Jan 30, 2020, at 7:22 PM, Jose Mario Quintana < > > > > [email protected]> wrote: > > > > > > > > > >> Full disclosure: I have a short position on Tesla. > > > > > > > > > > I trust you dumped your short position in a timely fashion: > > > > > > > > > > July 25 $222.82; today $640.81 > > > > > > > > > > :) > > > > > > > > > > > > > > > > > > > > On Thu, Jul 25, 2019 at 1:31 PM Devon McCormick < [email protected]> > > > > wrote: > > > > >> > > > > >> Actually, "Ponzi scheme" is inaccurate - it's more of an accounting > > > > scam. > > > > >> Full disclosure: I have a short position on Tesla. > > > > >> > > > > >> On Thu, Jul 25, 2019 at 1:23 PM Devon McCormick < [email protected] > > > > > > > > wrote: > > > > >> > > > > >>> Funny you should mention Buffet when Berkshire Hathaway has lately > > been > > > > >>> under-performing the S&P 500: > > > > >>> https://www.fool.com/in > > > > > vesting/2017/07/23/an-interesting-chart-about-berkshire-hathaway.aspx > > > > >>> . > > > > >>> > > > > >>> Musk is even funnier - he's basically running a Ponzi scheme with > > > > Tesla. > > > > >>> > > > > >>> On Thu, Jul 25, 2019 at 1:20 PM Raul Miller < [email protected] > > > > > > > > wrote: > > > > >>> > > > > >>>> On Thu, Jul 25, 2019 at 1:16 PM Devon McCormick < > > [email protected] > > > > > > > >>>> wrote: > > > > >>>>> In the Wikipedia article on Bill Miller, it says "[his fund's] > > > > >>>> ...after-fee > > > > >>>> > > > > >>>> You've heard of Warren Buffett, though? > > > > >>>> > > > > >>>> Or, for that matter Elon Musk? > > > > >>>> > > > > >>>> Thanks, > > > > >>>> > > > > >>>> -- > > > > >>>> Raul > > > > >>>> > > ---------------------------------------------------------------------- > > > > >>>> For information about J forums see > > > > http://www.jsoftware.com/forums.htm > > > > >>>> > > > > >>> > > > > >>> > > > > >>> -- > > > > >>> > > > > >>> Devon McCormick, CFA > > > > >>> > > > > >>> Quantitative Consultant > > > > >>> > > > > >>> > > > > >> > > > > >> -- > > > > >> > > > > >> Devon McCormick, CFA > > > > >> > > > > >> Quantitative Consultant > > > > >> > > ---------------------------------------------------------------------- > > > > >> For information about J forums see > > http://www.jsoftware.com/forums.htm > > > > > > > ---------------------------------------------------------------------- > > > > > For information about J forums see > > http://www.jsoftware.com/forums.htm > > > > > > > > ---------------------------------------------------------------------- > > > > For information about J forums see http://www.jsoftware.com/forums.htm > > > > > > > > > > > > > -- > > > > > > Devon McCormick, CFA > > > > > > Quantitative Consultant > > > ---------------------------------------------------------------------- > > > For information about J forums see http://www.jsoftware.com/forums.htm > > ---------------------------------------------------------------------- > > For information about J forums see http://www.jsoftware.com/forums.htm > > > > > -- > > Devon McCormick, CFA > > Quantitative Consultant > ---------------------------------------------------------------------- > For information about J forums see http://www.jsoftware.com/forums.htm ---------------------------------------------------------------------- For information about J forums see http://www.jsoftware.com/forums.htm
