vania-janet/multiturn-rag-retrieval-data huggingface dataset:
Also, many brokers usually charge you much more commissions and fees to exercise an option than to buy/sell options, so there's that as well! Always remember: when you exercise an option contract, you immediately give up all the extrinsic value it has. So it's never optimal to do an early exercise of option contracts and individual, retail investors. (institutional investors doing HFT might be able to spot price discrepancies and make money doing arbitrage; but retail investors don't have the low commissions and the technology required to make money out of that!) Might also be interesting to think about the other side of this: have you noticed how, in the example above, the option started with $2.30 of extrinsic value, and then it had less, $1.90 only? That's really how options work: as the market changes, extrinsic value changes, and as time goes by, extrinsic value usually decreases. Other factors might increase it (like, more fear in the market usually bring the option prices up), but the passage of time alone will decrease it. So options that you buy will naturally decrease some value over time. The closer you are to expiration, the faster it's going to lose value, which kind of makes intuitive sense. For instance, compare an option with 90 days to expiration (DTE) to another with 10 DTE. One day later, the first option still has 89 DTE (almost the same as 90 DTE), but the other has 9 DTE - it relatively much closer to the expiration than the day before. So it will decay faster. Option buyers can protect their investment from time decay by buying longer dated options, which decay slower! edit: just thought about adding one final thought here. Probabilities. The strategy that you describe in your question is basically going long an OTM call. This is an extremely bullish position, with low probability of making money. Basically, for you to make money, you need two things: you need to be right on direction, and you need to be right on time. In this example, you need the underlying to go up - by a considerable amount!
"I'm not downvoting you because I can relate, in a way, to your post and I think this is a good topic to have on this site.  We had a question a couple weeks ago where someone, like you, took some friend's money to trade with but didn't know how to give the money back or calculate the net-return.  It is not smart to take and invest other people's money when you have zero industry experience and when you do not understand the legal requirements of handling someone else's money. Within the first 12 months of my brokerage account I had returned something like 150%, I doubled my money plus a bit.  The next year was something like -20%; if I remember correctly the next year was worse, then up again for year four.  Year 1 I thought I was a genius and had figured this whole thing out, year 2 put me in my place and year 3 kicked me while I was down. You have 6 months of pretty solid returns, good for you.  I don't think that means it's time to set up shop.  Really, I think you need to sit down and think long and hard about the implications, legal and otherwise, of holding other people's money.  Running a fund is significantly different than trading your own money.   Retail investors don't, typically, have a good memory.  Great, you made me 17% last year, and 25% the year before but right now I'm down 10%, so give me my money back because I would have been better off in an savings account this year.    This is why index funds are in vogue right now.  Lots of people have had money in active funds that have trailed or matched the ""safe and passive"" index funds, so they're angry.  Retail folks get jittery the instant they lose money, no matter how much.  You need to be ready to contend with ""What have you done for me lately?"" the instant something turns negative, no matter how positive your returns have been. At your stage in the game you should get a job and continue putting your own money in to your own system and be ready to lose some of it.  I doubt there is anyone outside your immediate family who will hand a random 18 year-old kid any significant amount of money to trade their system based on 6 months of success; certainly not more than you have in there currently."
vol shouldn't matter if you're looking at the long term. I get all the other things, to me people just don't like bear markets.   I think retail is also scared for macro reasons. Shitty economy, total clusterfuck politically. Europe is clearly a mess. And all those things don't have any resolution in the near-term future. So sit on cash/fixed income and at least you're not losing.
"Institutional investors are the ""elephant"" in the room. When they ""sneeze,"" everyone else ""catches cold."" They're fine, if they're buying after YOU do. They're not bad, if you want to buy after they sell en masse. But when you read about moves of 10 percent, 15 percent or more in a single day, it's because a bunch of institutional investors all decided to do the same thing on the same day.  That's more volatility than most people can stomach. Fewer institutional investors in a stock mean fewer chances of those things happening."
tl;dr: Unfortunately, there is little available to the retail investor that fits your description. Institutional investors can use swaps to gain leverage on the above trade.  A bank will build a basket of long MSFT and short SPY and then quote a rate against LIBOR (London Interbank Offered Rate) and a margin requirement.  So at the end of the swap the bank will pay the difference in total return between MSFT and SPY and the investor will pay some amount of cash back.  The nice thing for the investor is that the margin requirement will often be fairly small if their credit is good so the investor can lever the trade up significantly. A retail investor could call up your broker and try to get the above but on the off chance they let you the margin requirement might be higher than just going short the SPY. If you aren't a retail investor, you might be able to do something like be long a 3X tech ETF and short 3X SPY ETF.  If you are very clever you might be able to combine multiple levered tech ETFs to get something like 3X MSFT.  However, I would strongly caution against levered etfs for most retail investors as the fees are high and levered etfs tend to strongly drift away from the index against the investor over anything but the shortest time periods.
Primarily because they don't want big price movements when they are in the market. If they spook the markets, either they have to buy at a higher price, or they sell at a lower price or they decrease the price of their holdings(which isn't always a big factor). The 3 situations they didn't want to be in the first place. And the most important thing is most analysts are dumb bozos, whom you should ignore. They tout because they want to increase their exposure in your eyes, so that they may land a job in one of those big investment companies, or they might be holding stocks and want to profit from it. Frankly speaking if you take advice from the so called analysts, be prepared to say goodbye to your money some day, mayn't be always. One near case maybe Carson Block from Muddy Waters, but he does his homework properly.
Foreign Exchange (Forex) trading is extremely difficult to do profitably over time – for retail investors and institutional investors alike. Many Forex traders enter the markets with hope of a profitable trading adventure, only to find themselves overwhelmed by the complexity of the markets. Binary options trading enables traders who have experienced difficulty in the Forex market to trade options.
Excellent Question!  I agree with other repliers but there are some uneasy things with index funds. Since your view is death, I will take extremely pessimist view things that may cause it (very big may): I know warnings about stock-picking but, in imperfect world, the above things tend to happen. But to be honest, they feel too much paranoia. Better to keep things simple with good diversification and rebalancing when people live in euphoria/death. You may like Bogleheads.org.
"How often do investors really lose money? All the time. And it's almost always reason number 1. Let's start with the beginner investor, the person most likely to make some real losses and feel they've ""learned"" that investing is no better than Vegas. This person typically gets into it because they've been given a hot stock tip, or because they've received a windfall, decided to give this investing lark a try, and bought stock in half a dozen companies whose names they know from their everyday lives (""I own a bit of Google! How cool is that?""). These are people who don't understand the cyclic nature of the market (bear gives way to bull gives way to bear, and on and on), and so when they suddenly see that what was $1000 is now $900 they panic and sell everything. Especially as all the pundits are declaring the end of the world (they always do). Until the moment they sold, they only had paper losses. But they crystallised those losses, made them real, and ended at a loss. Then there's the trend-follower. These are people who don't necessarily hit a bear market, or even a downturn, in their early days, but never really try to learn how the market works in any real sense. They jump into every hot stock, then panic and sell out of anything that starts to go the wrong way. Both of these reactive behaviours seem reasonable in the moment (""It's gone up 15% in the past week? Buy buy buy!"" and ""I've lost 10% this month on that thing? Get rid of it before I lose any more!""), but they work out over time to lots of buying high and selling low, the very opposite of what you want to do. Then there's the day-trader. These are people who sit in their home office, buying and selling all day to try and make lots of little gains that add up to a lot. The reason these people don't do well in the long run is slightly different to the other examples. First, fees.
"I agree that retail looks for orderly markets, but orderly markets have really never existed. Really study market history, and you'll see that markets are more orderly today than they ever have been. The stuff that used to take place was just insane and happened before computers--let alone HFT.  Let me state that, while it may seem like I'm defending HFT, my algos are actually much longer-term and wouldn't be hurt by any of your proposals. I think many of the HFT guys are no better than those three-card monte sharks who used to fill Times Square. But they're just playing the game. They're not good, but they're also not bad; they're just another segment of players. In orderly markets (up and down), they really do add liquidity. When things go awry as they tend to do in the markets, the HFTs step aside. But don't fool yourself--market makers have always done the exact same thing. And also remember that many markets don't even have market makers; traders provide all liquidity.  Here's the thing. Retail investors swarm to the markets when everything is going up and up. They believe they can do no wrong and that prices will go up forever. Then the market gets a bit tougher, retail investors (and most ""pros,"" by the way) start to lose, and then retail investors cry foul. Markets were never intended to be a nice, safe playground for the masses. They were designed for those who dedicate their lives to understanding them. I don't pretend that I can litigate a legal case, operate on someone's brain, or build a bridge. Experts have studied those areas for decades and are quite good at those things. But retail investors have always thought of Wall Street as some sort of ""safe Las Vegas."" In reality, it's survival of the fiercest.  I'll say to you what I say to every one of my friend's who wants me to ""show them a few things about trading"": If you aren't going to really commit thousands of hours to understanding the markets, then stay out. Invest money that you don't need for some time in a few good mutual funds. Keep your debt to a minimum. Don't chase quick profits if you don't understand the game."
Remember that unless you participate in the actual fund that these individuals offer to the public, you will not get the same returns they will. If you instead do something like, look at what Warren Buffet's fund bought/sold yesterday (or even 60 minutes ago), and buy/sell it yourself, you will face 2 obstacles to achieving their returns: 1) The timing difference will mean that the value of the stock purchased by Warren Buffet will be different for your purchase and for his purchase. Because these investors often buy large swathes of stock at once, this may create large variances for 2 reasons: (a) simply buying a large volume of a stock will naturally increase the price, as the lowest sell orders are taken up, and fewer willing sellers remain; and (b) many people (including institutional investors) may be watching what someone like Warren Buffet does, and will want to follow suit, chasing the same pricing problem. 2) You cannot buy multiple stocks as efficiently as a fund can. If Warren Buffet's fund holds, say, 50 stocks, and he trades 1 stock per day [I have absolutely no idea about what diversification exists within his fund], his per-share transaction costs will be quite low, due to share volume. Whereas for you to follow him, you would need 50 transactions upfront, + 1 per day. This may appear to be a small cost, but it could be substantial. Imagine if you wanted to invest 50k using this method - that's $1k for each of 50 companies. A $5 transaction fee would equal 1% of the value of each company invested [$5 to buy, and $5 to sell]. How does that 1% compare to the management fee charged by the actual fund available to you? In short, if you feel that a particular investor has a sound strategy, I suggest that you consider investing with them directly, instead of attempting to recreate their portfolio.
Volume and prices are affected together by how folks feel about the stock; there is no direct relationship between them. There are no simple analysis techniques that work.  Some would argue strongly that there are few complex analysis techniques that work either, and that for anyone but full-time professionals. And there isn't clear evidence that the full-time professionals do sufficiently better than index funds to justify their fees. For most folks, the best bet is to diversify, using low-overhead index funds, and simply ride with the market rather than trying to beat it.
"private investors that don't have the time or expertise for active investment.  This may be known as every private investor. An index fund ensures average returns. The bulk of active trading is done by private institutions with bucketloads of experts studying the markets and AI scraping every bit of data it can get (from the news, stock market, the weather reports, etc...). Because of that, to get above average returns an average percent of the time, singular private investors have to drastically beat the average large team of individuals/software. Now that index ETF are becoming so fashionable, could there be a tipping point at which the market signals that active investors send become so diluted that this ""index ETF parasitism"" collapses? How would this look like and would it affect only those who invest in index ETF or would it affect the stock market more generally? To make this question perhaps more on-topic: Is the fact (or presumption) that index ETF rely indirectly on active investment decisions by other market participants, as explained above, a known source of concern for personal investment? This is a well-covered topic. Some people think this will be an issue.   Others point out that it is a hard issue to bootstrap. I gravitate to this view. A small active market can support a large number of passive investors. If the number of active investors ever got too low, the gains & likelihood of gains that could be made from being an active investor would rise and generate more active investors. Private investing makes sense in a few cases. One example is ethics. Some people may not want to be invested, even indirectly, in certain companies."
The same holds true for mutual funds/ETFs. Shop for low expense ratios aggressively. It is really hard for a fund manager to consistently beat the indexes especially when you burden the returns with expense ratios that skim an extra 1% or so off the top. The expense ratio/broker fees are among the very few things that you can predict reliably when it comes to investments, take advantage of this knowledge. 5) Have an exit strategy for every investment People are emotional creatures. It is hard to be logical when you have skin in the game and most people aren't disciplined enough to just admit when they have a loser and bail out while they are in the red or conversely admit when they have a winner and take profits before the party is over. It helps to counteract this instinct to have an exit strategy for each investment you buy. That is, you will get out if it drops by x% or grows by y%. In fact, it is probably a good idea to just enter those sell limit orders right after you buy the investment so you don't have to convince yourself to press the eject button in the heat of a big move in the price of that investment. Don't try to predict tops or bottoms. They are extremely hard to guess and things often turn so fast that you can't act on them in time anyway. Get out of an investment when it has met your goal or is going to far in the wrong direction. If you find yourself saying ""It has to come back eventually"", slap yourself. When you are trying to decide whether to stay in the investment or bail, the most important question is ""If I had the current cash value of the stock instead of shares, would I buy it today?"" because essentially that is what you are doing when you stick with an investment. 6) Don't invest in fads When you are investing you become acutely sensitive to everyone's opinions on what investment is hot and what is not. If everyone is talking about a particular investment, avoid it. The more enthusiastic people are about it (even experts) the MORE you should avoid it. When everyone starts forming investment clubs at work and the stock market seems to be the preferred topic of conversation at every party you go to. Get out!
The stock market's principal justification is matching investors with investment opportunities.  That's only reasonably feasible with long-term investments.  High frequency traders are not interested in investments, they are interested in buying cheap and selling expensive.  Holding reasonably robust shares for longer binds their capital which is one reason the faster-paced business of dealing with options is popular instead.  So their main manner of operation is leeching off actually occuring investments by letting the investors pay more than the recipients of the investments receive. By now, the majority of stock market business is indirect and tries guessing where the money goes rather than where the business goes. For one thing, this leads to the stock market's evaluations being largely inflated over the actual underlying committed deals happening.  And as the commitment to an investment becomes rare, the market becomes more volatile and instable: it's money running in circles. Fast trading is about running in front of where the money goes, anticipating the market.  But if there is no actual market to anticipate, only people running before the imagination of other people running before money, the net payout converges to zero as the ratio of serious actual investments in tangible targets declines. By and large, high frequency trading converges to a Ponzi scheme, and you try being among the winners of such a scheme.  But there are a whole lot of people competing here, and essentially the net payoff is close to zero due to the large volumes in circulation as opposed to what ends up in actual tangible investments. It's a completely different game with different rules riding on the original idea of a stock market.  So you have to figure out what your money should be doing according to your plans.
"A great deal of analysis on this question relies on misunderstandings of the market or noticing trends that happened at the same time but were not caused by each other. Without knowing your view, I'll just give the basic idea. The amount of active management is self-correcting. The reason people have moved out of actively managed funds is that the funds have not been performing well. Their objective is to beat their benchmarks by profiting as they correct mispricing. They are performing poorly because there is too much money chasing too few mispricings. That is why the actively managed industry is shrinking. If it gets small enough, presumably those opportunities will become more abundant and mispricing correction will become more profitable. Then money will flow back into active funds. Relevant active management may not be what a lay person is thinking of. At the retail level, we are observing a shift to passive funds, but there is still plenty of money in other places. For example, pension and endowment funds normally have an objective of beating a market benchmark like the Russell 3000. As a result they are constantly trying to find opportunities to invest in active management that really can outperform. They represent a great deal of money and are nothing like the ""buy and forget"" stereotype we sometimes imagine. Moreover, hedge funds and propreitary trading shops explicitly and solely try to correct mispricings. They represent a very, very large bucket of money that is not shrinking. Active retail mutual funds and individual investors are not as relevant for pricing as we might think. More trading volume is not necessarily a good thing, nor is it the measure of market quality. One argument against passive funds is that passive funds don't trade much. Yet the volume of trading in the markets has risen dramatically over time as a result of technological improvements (algorithmic traders, mostly). They have out-competed certain market makers who used to make money on inefficiencies of the market. Is this a good thing or a bad thing? Well, prices are more efficient now and it appears that these computers are more responsive to price-relevant information than people used to be. So even if trading volume does decrease, I see no reason to worry that prices will become less efficient.
&gt;you're fooling yourself if you think they don't have advantages over retail investors.  Well clearly they have resources connections, more clout when speaking to their investees, etc. but what I meant is it's not as big of an advantage as most people believe it is. Also with derivatives you're right its a whole different ball game. I'm a finance student and I invest my own money to learn, and to grow my wealth slowly and intelligently. The thing is I never touch derivatives(probably because I haven't studied them much yet). Also I come from a very Benjamin Graham value investing background so that is why I think that an average investor with a retail brokerage account can beat the institutions. This energy thing is not something that I think can be capitalized upon, however.