Hacker News Reader

Comment by nradov | Hacker News Reader

This is one reason why the current high stock market valuations for large, profitable tech companies are crazy. Eventually the corporate culture rots from the inside and they're overtaken by a disruptive competitor. Unfortunately there's no practical way for retail investors to take a short position on those stocks for 30 years in the future; regular options only go out about 3 years.

View on HN

True, but if you can identify both the winner and the loser, say AMD and/or TSMC vs INTC, you could sell puts/spreads on the loser and sell calls/spreads on the winner in similar at-risk dollar amounts. If the market itself booms or busts through your strikes, gains on one side will cancel the losses on the other. While you're right, you make double money by winning on both sides. But you lose double if you're betting the wrong way.

My friend, whether you're trading naked or spreads doesn't matter on timescales of corporate rot are ~30 years; the contracts available to retail traders are like ~2 years out.

> Unfortunately there's no practical way for retail investors to take a short position on those stocks for 30 years in the future; regular options only go out about 3 years.

You don't, not if you're a small investor. You go index and hedge your bets that they're not all going to rot at the same time.

TL;DR: The market can stay irrational longer than you can stay solvent.

Reply on news.ycombinator.com