> someone whose life-savings he presumably gambled away on options
It’s a stupid line. But nobody with any sense has more than 5% of their portfolio in a single hedge fund.
It’s a stupid line. But nobody with any sense has more than 5% of their portfolio in a single hedge fund.
The problem seems to come from selling your shares and then the stock unexpectedly (to you at least) rising so that buying back N shares costs you more money than you necessarily have.
As far as I can make out the way people make “huge amounts” from options is going down that path.
Are you saying that another common approach is to buy your options and instead bank on the value of the options themselves increasing?
This is a legit non-sarcastic question as it literally never occurred to me to do this :)
You can indeed make a lot of money just holding the option until it is worth more, and it can jump several multiples of the original price, especially on unexpected price movements.
As the option cannot have a negative price, your losses are capped at whatever you spent on them.
People go broke in casinos as well. Doesn’t make it immoral to be run a (“fair”) casino, or a smart idea to bet all your life savings.
This population tends to select itself out of the hedge fund LP investor community. (Into, for example, cryptocurrencies.)