Again, I understand the risks. I about 15xed my starting principal from bottom in march 2020. My approach is to put all of my eggs in one basket and then watch the basket closely. While your post is rational, I can only say that OOM call buying continues to work out extremely well. And thats the point, it goes against every reasonable investing rule, but works extremely well. In some ways it is the truly rational decision to combat wage debasement (precipitated by asset inflation and fed money printing). The typical profile of what is too risky (OOM call buying), simply no longer applies when there is a FED backstop. People need to understand this, as surely many wealthy people and traders in NYC do.
During the last FED meeting, when they double downed on transitory inflation, it was a heavily dovish outlook. Right then and there I went all in, and made a massive profit. The markets continue to hang on their every word, theres no reason to overthink it, when the FED speaks dovishly, believe them and buy calls.
Yes, but if the market goes south 20% the way it did just recently in 2020, they call you up and ask you to put in $5M more or they will liquidate everything that day. So it's not risk free.
In my particular case, I had worked in the telecomm industry before and had a good understanding of the alternatives and felt that I understood where things were going and my prediction - still yet to be proven - was that they would win.
But you are right, it is yet another risk. At Twilio, the pay was awful but I felt the longer term risk/reward was worth it.
If I was with $startup and the strike price was $texas-sized, I wouldn't do it while the shares were still illiquid because executing would be so much.
Thanks for the view. In that light, one upside to my plan (no investment other than sweat from me and maybe a couple of others), is that if I take on the risk, all I'd be risking is lost time/opportunity cost, rather than venture cash.
I didn't say it was high risk, I said it was a safe withdrawal rate to plan for. I don't think market conditions allow for a 5% rate anymore, which used to be the recommended level.
Also you've ignored everything else I said just to harp on one thing - which is rude considering the time I took to reply to you.
I acknowledge the risk and the hindsight. My belief is that with so many playing this game and a precedent of too big to fail any hint at a correction will be met with even more QE to counteract it at this point.
It's a gamble on policy and could go wrong but it does have some thought put into it.
This is one of the oft-repeated pieces of advice on HN that happens to be completely wrong.
Let me know if you are willing to sell any options that you have at $0 from YC-backed companies. I’d be happy to buy as much as you have :)
It is true that there is risk, but there is also more upside if things go well. Make some educated guesses on outcomes and adjust by probability. The important thing is to revise your model periodically as you have materially new information.
Of course, this is just the economic consideration. There are many more important considerations.
Shit happens and even the smartest people can get fucked, just look at the LTCM blow up. So of course it's possible.
It's impossible to eliminate all risk, regardless of the leverage ratio. I'm just saying that leverage isn't a reasonable proxy for risk. You have to dig deeper.
What many people don't understand about the relatively low-risk options strategies like the wheel or basic covered call selling is that, because they are low risk, they are less lucrative than many simpler strategies.
The financial industry would not just leave that much risk-adjusted return on the table, after all. Just because a strategy is complex does not mean it is lucrative.
Yes, the bets are risky. It is an opportunity to rethink your portfolio like a VC where few investments could return 10x easily and a lot will lose the capital allocated to them.
I think this is better than buying IPO stock in public markets which are so bad these days that only zombie companies are being listed and investors are being screwed very regularly.
During the last FED meeting, when they double downed on transitory inflation, it was a heavily dovish outlook. Right then and there I went all in, and made a massive profit. The markets continue to hang on their every word, theres no reason to overthink it, when the FED speaks dovishly, believe them and buy calls.
reply