>The nice thing about options is that there isn’t just one way to lose money. No, you can lose money in many different ways – far more than I can write on this page.
This is the most important lesson of options. It's never just a coin flip. You have an unimaginably huge number of factors riding against your success. It's not even remotely close to a 50/50 win/lose scenario. There are a million ways to lose, and just a few narrow ways to win. You literally have better odds going to the roulette table and placing a bet on red.
E.g. If I am net long in my portfolio and I fear some headwinds I can buy a put or two for the peace of mind. Now those puts should be always considered as worthless, and it is just the price to pay for the peace of mind.
Similarly you sell options. Trading options on the other hand is just pure gambling. Even if you get the direction right you likely won't get the timing right (or the volatility).
> E.g. If I am net long in my portfolio and I fear some headwinds I can buy a put or two for the peace of mind. Now those puts should be always considered as worthless, and it is just the price to pay for the peace of mind.
Why don't you just change your allocation?
If you can't sleep at night because of your current portfolio, and gyrations that are occurring, or that you are worried could occur, I would say it's obvious that it's not suited towards your risk profile.
You're burning up some of the potential upside by spending money on the options, so why not simply take some money off the table instead and have a less complicated setup?
Year ago when we were reading the news about what is happening in Wuhan, some of my friends bought SPY puts as an insurance against the potential crisis.
The best outcome for them would be if those puts expired worthless. When you insure your house, you don't usually wish for it to burn down.
I haven't acted and my portfolio took a -30% hit right after.
Your suggestion (to change the portfolio allocation) would mean temporarily selling stocks and holding money. That strategy has an unlimited loss potential[0] if the stocks rise before you buy them back. With puts you are limited to whatever you pay for them.
edit:
[0] unlimited loss potential provided you want to keep the same stake at the companies
Rebalancing is a thing, though generally for risk reasons. It would/could have saved one's returns during the so-called Lost Decade of the 2000s with the S&P 500:
As your equities dropped, there's a good chance bonds would have at least stayed neutral, or even risen: so you'd sell some of those (sell high) and pick up equities at a discount (buy low).
There are even products available that do this automatically for you:
>When you insure your house, you don't usually wish for it to burn down.
You're leaving crucial information. You don't buy insurance (or puts) at any price. It has to make economic sense, and the person on the other side presumably has the same information.
Of course, being safer (more conservative) brings lower profits. I'm for sure not suggesting to be puts-insured all the time! It is just a useful instrument when one wants to hedge.
The person on the other side is likely a market maker selling both kinds of options. The price is dictated by market.
It's unlimited opportunity loss. If you sell at say $100 and it goes to $1000 while you're in cash, you "lost" $900 vs your original position. However if you hold at $100 and buy a put for $2 that hedges you, you can still participate in the upside while limiting your downside. Also, downside risk has been historically undervalued (this may be changing though) which is why tail risk funds exist.
everything has an unlimited opportunity loss though. if I put all my money in SPY, I'm forgoing the "opportunity" to buy a bunch of OTM gamestop calls at the perfect time and 10x my net worth.
The strategy forces you to time the market. You might get unlucky by holding cash during a market rally, then buy back for a dump.
An investor who sells when they think the market is going to go downhill, with the intention to buy back later is not acting as an investor but as a trader.
That's why hedging with options is less risky (and less profitable in the best case).
edit: My use of word 'unlimited' applies if you want to keep the same stake at the companies. In money terms you cannot lose more than the value of your holdings.
Yep, then I agree. I'm not advocating for trying to time the market, or holding cash instead of being on the market.
But selling your position simply does NOT mean you take on "unlimited loss potential". It's simply being outside of the market, which means you're missing out on gains. It's not like selling stock is suddenly the same as shorting the same stock. I think the terminology here is clear-cut and well established.
I get what you're saying and I think your terminology makes sense.
But the way to understand this is to reframe your view of "money" from being some special, neutral thing to just being another asset.
At any given moment, you could own $1000, or some gold, or some bitcoin, or whatever else. There is nothing special about the fact that it's $ you're holding rather than DOGE or SPY.
So imagine a 2-asset world, that has SPY and $ in it. You are holding $1000 right now, and the market goes from 1 SPY = $1 to 1 SPY = $1000. That is a loss. Denominated in SPY, you just lost 999 SPY.
It’s unlimited because in the time he is holding cash there’s no limit to the amount the stock market could increase. If he sells a stock for $10, and then it goes from $10 to $10,000 he’ll only be able to buy back 1/1,000th of what he had. He lost $9,990.
It’s the same as writing call options. There’s defined upside and unlimited downside.
> How does holding money have an "unlimited loss potential"? You just buy back at whatever value the stock is at the time.
It does not have unlimited loss potential, I'm not sure why the poster said it did. It's the opposite - holding has unlimited upside potential(however slim).
People don’t realize you have unlimited loss potential on every stock you are not holding right now, and that’s why cash is not a great position. When you sell and wait for a dip, you are basically in a short position except you’re not borrowing stock.
I had SPY puts expiring in April at the same time, but as a hedge against Bernie Sanders doing unexpectedly well on Super Tuesday. He didn’t, but my timing was still good against a factor that I had been entirely ignoring.
You can also write them in a low risk way for the benefit of others. If you hold some stock write options for people to buy it off you for twice what you paid, or if you are thinking of buying a stock write options for people to sell it to you at lower than the current price. But yeah trading can be iffy.
The problem with covered calls is you take on all the downside risk of the stock collapsing and get none of the upside gains if the stock rockets. Writing way OTM covered calls will not net many proceeds unless the stock is super volatile which means you likely have a lot of downside risk.
A good example from recently is Ford. Was trading at around $6 a few months ago and not too volatile. OTM calls were pretty cheap that were a few dollars up and essentially worthless at double the price. Anyone writing those was getting almost no premium. But then the stock took off quickly and hit over $12. Anyone who wrote those calls enjoyed none of those gains.
So even a stock like $F can move in very unpredictable ways.
Why would an option ever be 50/50? You are getting the odds you pay for...
On a double zero roulette wheel, you have about a 47% chance of hitting red. There's options I'd buy at that price, and options I wouldn't. With options in particular you also have your various calculations regarding time, volatility and so forth.
But you can be pretty sure if an option is being bought and sold, that the buyer and the seller are pretty happy about the price of it...
I think the OP is pointing out that many people think of options as a bet on stock price movement with the probability of success being the probability of the stock moving.
When in fact volatility, time decay and many more factors are really shaping the success probabilities.
Agreed all those factors go into the value and it's important to understand what you are purchasing.
At the same time it is a leveraged position. If winds tilt in your favor you have the option for 100 shares of the underlying for only the cost of the premium.
> It might also be true that neither the buyer not the seller, in any transaction, are happy about it as such.
"Happy" here is used in a very specific sense: If two parties engage in a transaction without coercion, it must be because they are both made better off by the transaction or they would both be less happy without the transaction.
This is where "gains from trade" come from.
The ability to make this statement disappears the moment either or both parties are required to participate in the transaction or are required to engage in different transaction.
The argument of the grandparent is that just like in any transaction, there are two parties to an option being traded at a given price. One party believes it's a good deal because they think the price they paid is low enough to accept the risk-reward balance and the other part believes the price they received is high enough for the certain payoff to cover the reward-risk balance they are giving up.
They might both be right because the reward you seek and the risk you can bear is a function of your current endowment in human and financial capital.
"If two parties engage in a transaction without coercion, it must be because they are both made better off by the transaction or they would both be less happy without the transaction."
That's is about as accurate as physics homework you do in school, two objects collide without friction and air resistance, no energy is lost to sound, heat or deformation of the objects, calculate their resulting velocity.
As soon as you enter the real world and those objects are cars, equations aren't remotely accurate.
Any layman can come up with examples where this statement doesn't hold, drugs, etc.
We should focus on discussing real-life effects of options trading rather than spouting free-market theory clishes, everyone knows them, there are at least 3 such statements in every HN thread and I don't feel they contribute much to the coversation
I can support my point with decades of data that average retail investor only looses money. I can support it with recent barrelrolls that GME price was doing, with 2008, etc.
Our societies literally have enshrined in law that most people cannot be trusted with financial instruments.
I think I understand where you're coming from now.
You're saying that even although both parties are happy with the trade they made, when one party is a professional and the counter-party is an amateur, the amateur is likely misguided and has a much higher chance of getting the worse end of the deal.
That seems very likely to be true and applies to much more than just stock market options. Salary negotiations have that imbalance of knowledge/power as well. Probably even dating follows that pattern if one partner is much more experienced than the other.
Is that a fair characterization of your argument?
I don't actually see a problem here though - I mean it's pretty obvious professionals beat amateurs at just about anything. I don't think we would want to make rules to prevent the amateurs from playing the game. There are already some rules to restrict access to e.g. margin, naked options trading by amateurs - are you saying we should have more regulations and restrictions on the little guys for their own protection?
Earlier last year around May, when the stock market seemed to pick up after the COVID crash, I purchased a number of deep OTM LEAPs (long expiry options; until early this year). They were incredibly cheap. I often had trouble finding a market maker for those.
I only chucked about $2000 in, but these options have grossed $15,000 in realised returns and $25,000 in unrealised returns.
Options allowed me to make a “bet” that stocks would go crazily up. Options can be a valuable tool if you know how to use it.
Of course money is made. Likewise the same amount of money was lost by the people on the other end. You won this one.
However, long term you’d also lose some and in the end you’d probably be about even in terms of cash won and cash lost. Unless you’re an options guru which I don’t know exists. The market maker who gets the contract fee and hedges the contract is the only guaranteed winner long term.
Saying that I trade options when I sense opportunity and have had some outsized winners compared to my losers. However taxes need to be considered too, especially when you have a year with a net realized loss that’s greater than what the IRS let’s you deduct.
The way I’ve seen people get wiped out with options is not managing their bankroll. They’d have just too much of it spread across numerous options bets thinking they were diversified. And then the bottom falls out of nearly everything and the whole thing goes to 0. It happens.
I've been looking into 12 / 18 / 24 month calls for Tesla, AMD, NVDA, AAPL and there is nothing cheap available anymore, even the really OTM stuff.
There was some stories about 12 / 24 month sub dollar OTM Tesla calls that printed between march and the split, but alas, no such things anymore. There are some deep ITM prices that sell for around the delta, but then might as well buy the shares.
I think it is rather well known since Taleb's book came out that deep OTM options, including LEAPs tend to be mispriced as there's just not enough data to model better pricing.
Might also be one of his other books like Black Swan (I haven‘t read them all), but I think Antifragile mentions using options to mitigate risk in a portfolio.
Congrats! I sometimes will do what I should not do and do regret day dreaming of if I had done more than just think about what you actually did back around same time.
My original thesis was that the coronavirus may continue to grow and impact meatspace businesses for years (like until 2023), and hence tech stocks like Google, Facebook, and Shopify has huge upside.
I also reinforced this viewpoint with “momentum”: academic studies over centuries show today’s winners are more likely to be tomorrow’s winners.
It really depends on how you use them. My favourite strategy is to identify a stock I want to own, enter the market by writing a put at a price I want to own the stock at, and then if executed (and the stock price hasn't crashed), write covered calls at an inflated strike price. If the price goes down you can buy back your call and lock in your return, and write another call. I only do this on European style options to limit risk.
Assuming your stock selection criteria is sound, you can make money when the market is moving sideways or going up. When markets are down you wait it out. If your stock selection was sound, your stocks will recover when market sentiment becomes rational.
Having said this, you have to stick to the trading plan. You need to know when your trade assumptions are wrong and what to do prior to having to deal with a trade that goes against you.
That's the reason why it's "hard" and people loose money... it's not options per se, it's the personalities that trade them that are the problem.
No, but I will. Thanks for the recommendation! Currently I'm reading Mark Jeavons -
The Equity Edge: A complete guide to building wealth through the stock market. It so far has helped me improve my stock selection.
Even though I agree options is generally a losing game, it does serve a purpose. You can actually even hedge your risk with options -- there are many usages, just because SOME people use it as a casino, it doesn't mean it is.
A lot of hedging companies do to raw materials, oil etc follows a similar pattern.
The author doesn't mention anytime that, he seems clueless, just use it to play like casino and complain about the losses.
People often think of options as a cheap shortcut to wealth. They end up losing everything with that strategy. No one becomes wealthy in trading with one-off trades.
Trading options effectively and sleeping at night starts with studying and monitoring 30-50 underlying securities across different sectors, understanding their price action, liquidity, binary events, current volatility (both relative to their own volatility range and to their markets’ volatilities), the effect of that volatility on expected prices, and how these underlying selections balance a portfolio’s risk and expected moves. Of course there’s a lot more to it beyond that, but having that list helps you pick an underlying to play with at a given moment.
There are many strategies of options trading out there for managing risk while making money in every kind of market. If you’re intellectually curious about options, don’t take tips and lessons from people on Reddit, twitter, or hn.
Why do people spend years honing a craft like software development yet spend no time vetting symbols they hear about online before dumping money money into trading them? How is that acceptable?
If anyone is intellectually curious about this, I suggest they go to YouTube and start by watching tastytrade’s videos as well as basic introductory videos on option definitions, mechanics, and strategies.
Correct - some options have a more than 50% chance of winning and some much less. They are priced accordingly. In theory, options are priced such that you’ll break even (minus contract fees) long term in terms of money in and taken out. Of course bankroll management is a concept I’m not sure the YOLO crowd is too cautious about.
What people can't accept is that there IS some people who have made consistent gains on options. You just don't have play all the time and you should always have many factors lined up to you.
tbh, the problem with options is that you can loose a lot of money that you don't have.
People start to play with strategies without fully grasping how they work, and especially how exposed you are if you sell naked options. It's very easy to fall into the trap of creating an option strategy that even if it has good odds, will require a massive amount of margin.
If this happens to you on a regular retail account, you're going to get crushed.
This is easily avoided by not writing option contracts. If you're new to options and are ready to start exploring with real money, you should only be buying them and then selling them, not writing new ones.
The exact same thing can be said for shorting stocks and, to a lesser extent, buying stocks on margin. I'm happy to say after getting margin-called in 2008, I haven't been since! Writing options and shorting makes you way more likely to expose the rest of your portfolio to that risk.
You can write spreads and not have infinite downside risk. Iron condors are designed to collect premium and you’re covered (at a loss, but a fixed loss) if the stock goes one way or another too far. Of course at that point we are already more advanced than a YOLO casino roller.
But yes, in general it’s wise to avoid bets with infinite downside and limited upside. You tend to win these bets frequently (and make small gains) but when you do lose it’s catastrophic.
I would like to add that even with a spread you can bankrupt yourself if you are assigned to one side of the leg on expiration day after hours, stock moves against you, you aren't notified in time and therefore can't exercise the other leg.
>There are a million ways to lose, and just a few narrow ways to win.
I'm not sure I understand. You can take either side of the trade you want, so if you think you've determined how lopsided it is, why aren't you doing the opposite trade?
I'm not sure how that is relevant. The price of the option will decay to zero or to its intrinsic value and if it ends in the money one side will give $X to the other at the end. Someone also paid a premium to the other (ignoring the bid-ask spread and transaction costs). Peter's gain is Paul's loss. You have 50/50 probability of being Peter or Paul.
This is good advice. I wrote a bunch of novels, got a degree - a Ph.D. in philosophy to make sure I'll never make any money and people who have money wouldn't want to give it to me -, and did some Internet advertising. Not very surprisingly, I'm fairly poor. However, I've still managed to save a little bit of money so maybe I should start trading now.
GME was just done for laughs. A hedgefund lost 53% of its investment in the process. That's the reward you got when you bought GME.
If you want to earn money then you should never trade, and always invest. That means putting in your money with the expectation that a specific company or a specific portion of the market is growing. Think of stocks like Apple and Amazon or ETFs that mirror the S&P 500 index.
Bitcoin has established itself and has staying power so don't be shy to put some (not all money) in there.
Also, never trust random internet people (including me) when it comes to investment advice.
I would venture that a cadre of "senior" WSB redditors were at least partially behind the pump and dump to get the mob going, and then sold when it hit $300+
Building an online course[1] has been one of the easiest ways to make money in my personal experience. Other things I've tried building: SaaS, Trades business, Freelancing business.
I've made over $8k since I launched last month and it's been a great stepping stone into other ideas. The main problem I see going forward is getting consistent traffic. Building the course was the "easy" part and now I'm focusing hard on SEO to keep consistent traffic going to my page. Long term I think I can make $100-$300 a day with it.
I floundered trying to build SaaS and other types of business for years before making some money online. Selling a one time purchase can be a game changer for those looking to go independent. Look at the stairstep approach[2] for reasons why this works so well.
Overall, if you invest a few days and put something out there, I think an online course can be a great way to build some income.
Please correct me if I'm wrong, but you got to the frontpage of HN the first time you posted your site which presumably generated the bulk of that 8k, right?
If you hit the jackpot (I.e. front page of HN) on your first try, yes it's going to feel like it's super easy to make money off building a course.
The frontpage of HN seems to be a sort of 'holy grail' for some HN readers, but you always have to remember that it's only a good thing if "HN readers" are your potential customers. If they're not then it's just a distracting spike in traffic that will do very little for your sales. And HN readers are a pretty diverse bunch (geographically, financially, and as far as interests go) so it's unlikely that many of us are likely to be buying unless your product has a weirdly broad appeal.
It's far better to get 50 page views from potential customers than 50,000 page views from people who aren't truly interested in buying what you're offering.
If you're selling a product related to vim I think HN is probably one of the best places on the internet to advertise your product, don't you?
In practice, I think that if you're posting to HN then HN readers are likely to be in your target audience. Because why would you be posting here if they aren't?
If you're selling a product related to vim I think HN is probably one of the best places on the internet to advertise your product, don't you?
I imagine most HN readers fall in to two groups - those who are greybeards who already know a lot about vim, and those who are much more familiar with VSCode and don't care to learn vim. If I was advertising a vim course I'd target places on the internet where junior sysadmins or Linux devs hang out long before I'd hit HN.
Seems like OP is focused on building a steady traffic source to sell his product. Combination of a good product + marketing focus.
I have a popular Spark blog where I sell Spark books: https://leanpub.com/u/MrPowers. Customers like the product and I have a steady traffic source. It's possible to build side hustles with SEO - don't need to hit the HN jackpot.
Honestly it isn’t too hard to hit the front page with something polished that’s of interest to hn readers.
I have not had anything to market to HN, but I’ve hit the front page with articles of my own a couple of times, with an ask HN once or twice, and with submitted articles at least twice.
The most popular article I wrote here was about how I tried not having home internet for a month (didn’t work, but was interesting). How can an article like that not hit the front page? You see 2-3 articles a day on that theme: wacky personal experiment + earnest well written personal narrative.
Not everyone can do that but it’s hardly some unique alchemy. If I’d done it once I’d say it’s the jackpot but it’s happened often enough without special effort on my part that I think anything reasonably interesting has a fair shot.
Assuming the submitter is a HN user, knows the community, has a track record of writing stuff people like, etc.
I’m pushing back because I think presenting fairly pedestrian accomplishments as jackpot level achievements has the effect of discouraging people from trying.
Obviously not everyone can write well enough to pull that off but most people making a course ought to have that kind of communication skill.
I have thought about making a course on Udemy or Pluralsight. Did you consider those options before building your own? I am curious because I don’t think I have the skills to create something as nice as you did and also would like to know the pros and cons you discovered.
Yeah I did consider those but didn't like the revenue share model. I think if you create a course you should keep the majority of the revenue.
I'm building an alternative for programmers to build and sell interactive courses directly to their audience.[1]
One thing I realized from the vim course was people loved the interactivity part. (you can check out a video of the lesson authoring tool here[2]).
It's currently just a lot of work to build something that looks nice, setup stripe, setup hosting, setup the interactive components, setup remote code execution, etc. I'm abstracting that away so people can focus on content creation and marketing/selling the course instead.
Demand is pretty inelastic for a course, especially if the company is paying for it. I believe that charging at lesat $400 is the sweetspot, volume decreases (so does customer requests) and profits skyrocket.
> I have over 40,000 students taking my online courses and they have generated a few thousand in gross revenues.
I have 400, and I made a living out of it for the past couple of years.
Sure, I was earning more when I was a freelancer. So, I guess his point stands, I am losing money in that sense. And if money was the only metric, he would be spot on. But money is not the only reason.
It's also true that most people just wing it, thinking they will make easy money online. And then, fail.
But well, guess what. Business is hard work. Any business. Creating educational material is not any different. A lot of work goes into positioning, copywriting, marketing, and sales. I would like to see his.
I know many people making excellent money with online courses. A couple of them are in the bi-weekly business mastermind I attend. Heck, if Apple didn't introduce SwiftUI two years ago, forcing me to re-do my courses from scratch, I too would be doing great, instead of just OK. But well, that's just "cost of doing business".
So, saying "you are going to lose money with online courses" is the same as saying "you are going to lose money if you start a business". I don't think that's a sentiment shared here on HN.
Not OP: Probably a monthly membership program, $25 per student per month would be $10k gross.
Ionic Academy is a good example I can think of, I was a member for just under a year, super helpful and regular content and probably doesn’t need huge amounts of members to be viable
I guess that's true. I didn't really consider monthly fees for a course from one person. But then I would say that he/she probably didn't have 400 students in total, but instead 400 subscribed students at all times. Unless each student stayed subscribed for several years, which I find unlikely unless he/she releases new high quality content every week.
i actually hate subscriptions like those, both as a customer and as a seller.
I prefer to buy/offer a high value course with a price that matches it. I bought several of such corses myself in the past years.
I do offer payment plans for people that can't pay a big lump of money at once, but that's not a subscription they can stop. They still have to pay all installments.
that is awesome! Are you using a platform like Udemy or something on your own? I'm also curious if you are publishing courses in areas you are genuinely interested in or strictly doing for income?
If I did it strictly for income, I would have gone out of business long ago. I am an iOS developer and I teach iOS development.
I obviously don't love every aspect of it, but still. Income is not a good motivator, especially when you are on your own. You have to like most of what you do, including the business side. I do write code, but most of my time is spent on text for articles, courses, emails, sales pages and video transcripts.
Regarding the technology, I use Wordpress with a couple of plugins. On Udemy you have to compete with a ton of low-priced low-quality stuff and you have no way to differentiate yourself from that.
Options are effectively Zero Sum - meaning that whoever is on the other side of the contract is predicting the opposite of whatever you're thinking.
Successful long-term options traders don't trade options 'directionally' (like buying 50K of GME calls), they manage a whole portfolio of options, and then take directional portfolio risk. This is sort of like diversifying, then running risk analysis, then figuring out where there is money to be made ie dummies who priced contracts incorrectly.
And, to run an option portfolio, professional options traders run risk management software like Blackrock Aladdin and Goldman Sachs SecDB. These cost a LOT of money (close to 6 digits a year)
Now, remember the zero sum part? No matter how smart you think you are, if you don't have these tools, you don't have the data or analysis that is available to the big boys. It's like playing poker with someone where they know the exact odds every second as cards appear, but you only have the vaguest idea.. Sure, you could get lucky once in a while but in the long run, not knowing the odds is going to hurt you and you are likely to lose all your money.
> whoever is on the other side of the contract is predicting the opposite of whatever you're thinking.
If you are a retail options trader, the person on the other side is a professional market maker who doesn't have a "prediction" the way you'd think about it. He made his money at the moment you did the trade, because you traded at a disadvantage relative to the fair value of the product.
> And, to run an option portfolio, professional options traders run risk management software like Blackrock Aladdin and Goldman Sachs SecDB. These cost a LOT of money (close to 6 digits a year)
No, options desks run (usually proprietary) models whose job it is to price options and strategies along the curve in a self-consistent way (i.e. via no-arbitrage arguments) relative to some more liquid instrument like futures.
OR on a bank exotics desk, they run custom models that try to price exotic products from first principles (monte-carlo simulations of cash flows, basically.)
> (close to 6 digits a year)
Way more expensive than this, the quants and developers who build these proprietary models are paid a lot of money.
> Sure, you could get lucky once in a while but in the long run, not knowing the odds is going to hurt you and you are likely to lose all your money.
This is both accurate and not, it depends what you are doing. I believe sophisticated retail traders can find mispricings, especially in less liquid products. If you are not looking at the vols and building curves, (or you don't know what that means), this is not you.
Love this comment, it is the epitome of Hacker News. It points out all the ways the OP is wrong, while simultaneously confirming the OP's point in the first place: don't be a retail trader because you're not properly equipped.
For myself, as soon as I realized that retail trading doesn't make much sense, I personally haven't bothered learning an exactly specific mental model of why. You almost need to be a professional finance person to even understand the specifics here. For now my model is: "making money in derivatives markets is really complicated and hedge funds invest large sums to counter this risk, so unless you're willing and able to match their investment you're unlikely to see their returns."
Glad someone rebutted. I'd like to add the person on the other side of a retail long options trade can be a market marker or people like me that sell to retail for the same reason. :)
That is not completely true, options a by-and-large used for hedging purposes to mitigate losses in the event something goes wrong with your principal. Of course, there will also be long plays in options, but that is not the majority.
This is evident from the fact that there is generally higher implied volatility for puts rather than calls, which implies more contracts on the put side than on the call side. That would not be the case in any other zero-sum investment - say, forex. Also generally the stock market is by nature a long market so the options market should have been long-heavy.
The reason for this is because the options market is saturated with huge portfolio holders are using it merely to hedge against their long investments.
But the truth is all the awesome analyses with those programs still cannot actually predict the STOCK PRICE right? If I truly believe I have a better guess about whether a stock is going to go up than the general market conensus (which is what I'm assuming is powering options pricing), then I do stand a chance of making money right?
None of what you say seems to change anything about how a regular investor looks at an option as - it's just a magnifying glass on how much you can make or loose by betting on a stock. Either you get lucky or you are actually insightful in some stocks, that's the edge you have (if any) over the career traders who don't want to rely on this luck to make their money.
> If I truly believe I have a better guess about whether a stock is going to go up than the general market conensus (which is what I'm assuming is powering options pricing), then I do stand a chance of making money right?
Yes [1]. But a one-way single-leg options bet is far less likely to make you money, in that case, than just going long or short the stock.
[1] I am going to parse “truly believe” as have an information edge, i.e. you have seen something nobody else has acted on. Which happens surprisingly often to individual investors.
Makes sense. My limited understanding is that with options I don't just have to guess that the stock will go up but also by how much and when. Agreed that many amateurs (like me) don't realize this well enough.
>If I truly believe I have a better guess about whether a stock is going to go up than the general market consensus then I do stand a chance of making money right?
Yes but options aren't just about direction, they're about timing too. The thing about holding a stock is you only have to be right about one thing but with options you have to be right about two.
It depends on the situation. For example, if you believe that the FDA approval for Moderna vaccine will be revoked next month, using an option could be a good way to make money on what would obviously be very bad for the stock next month.
On the other hand if you just generally like company you could buy that stock directly and not worry about finding a 3rd party to take the other side of the bet. That 3rd party is trying to make a profit and even though you may be right and that 3rd party may be wrong you are still introducing a 3rd party into the investment.
Just to add to your point which covers speculation, options can also serve as an insurance policy (hedge). Have a large exposure to the stock market and are not looking to sell? Buy puts and receive a payout if the market drops (simplified explanation, of course).
Shorting call options also has a nice feature: there is no limit to how much you can lose.
But really, what this article misses is a tip about leverage!
Whatever your plan to lose money is, make sure you're leveraged. So that you can lose X time the amount you would lose if you only put your own money on the line. Eventually, you'll quickly lose much more than you had in the first place!
He's missing optionality too. Most of things he picked have a non linear upside. On the one side you write internet articles about books being unprofitable and on the other you're Stephen King.
Damn, am I the only one who does adequate research before I dive into things? I mean, buying patents for a dog alarm before knowing your customer? Really?
Losing money on trading i understand because it's a very seductive venture and it's mostly just gambling that you can hedge slightly with some smart info. Otherwise, yeah, some of these things can only happen when you already have too much money to play with. Someone who understands what it's like to have virtually no money will never casually toss it at random ventures, they probably don't have the time to anyway.
> seductive venture and it's mostly just gambling that you can hedge slightly with some smart info
I think part of it is the populist meme that professional investors don't really know what they're doing and accidentally make money hand-over-fist. Yes, it has been shown that free stock tips are on average no better than monkeys throwing darts, and most hedge funds under-preform the S&P 500 in risk-adjusted returns.
It was an eye-opening experience when I asked a good friend of mine who was a portfolio manager if he beat the S&P 500 on a risk-adjusted basis. His reply was "I hope that's not how I'm being evaluated". He went on to explain that he was attempting to maximize expected returns while remaining uncorrelated to the market... so that an investment basket containing a bunch of ETFs plus investments in his portfolio maximize risk-adjusted returns. (See portfolio optimization and (post-)modern portfolio theory as to why maximized risk-adjusted return isn't just a basket of 100% the highest risk-adjusted-return asset.)
No, he didn't beat the S&P, but holding some investment in the S&P and some in his fund beat the S&P in risk-adjusted returns (Sortino ratio, Shapre ratio, etc.).
As I mentioned, look up portfolio optimization in Post-Modern Portfolio Theory or Modern Portfolio Theory for details, but the gist is that
His fund was essentially uncorrelated with the S&P, so Cov(X,Y) was approximately zero. MPT uses Var(aX + bY + ... )^0.5 as its risk measure, and PMPT uses downside_variance^0.5.
My wife is a financial advisor at a name you've heard of. Maybe I can translate a bit ;)
The idea with an advisor is that you create wealth targets, and use the market to optimize your saving to hit those targets. Then other stuff like college savings accounts, taxes, what happens when you die, various financial vehicles to optimize your saving while limiting your downside.
You don't really care to beat the market, because all you need is, for example, 8.5% returns to hit your wealth goals.
It's really complicated, and hard to do alone. Just by the sheer knowledge required in so many different areas.
Right. I shouldn't have assumed it was obvious why many people would prefer to maximize risk-adjusted returns over maximizing expected returns.
One reason, as you mention, is that most people have some goals in life. The amount of happiness gained by having $500,000 more than enough to put the kids through college, pay off the house, and retire at age 60 is less than the unhappiness of being $500,000 short of these goals. Most people's happiness isn't a linear function of their money, and it's perfectly rational to maximize happiness instead of maximizing money.
But, even if you're just trying to maximize money, the amount of leverage (loans, etc.) you can get should be related to your probability of being able to pay the loan back, so better risk-adjusted returns should allow you to get more leverage, leading to better expected returns if you're the type to maximize leverage.
This seems to be a very one-sided view. I personally know a guy who makes ~3000 USD month with a book about worldly wisdom. I know about it because he pitches his book on every occasion. And I guess that's true for everything: Just writing a book is not enough, pitching and selling it actively afterwards is key.
Saying that he earns a lot of money with his book means that it's a succesful book, which is part of pitching it correctly. But you won't know whether that's true unless he gives you access to check his actual sales.
The US is composed of a heap of immigrants that migrated to the US and to a point intermingled culturally to come up with a new country / culture.
The Anglo-Saxons were a people made out of immigrants from Germanic Europe that migrated to what is now England and mingled with indigenous British groups, tracing back to the 5th century. It's often used to refer to the language spoken in England and eastern Scotland until the mid-12th century, also called Old English. The culture and language were pretty much defunct after the Norman Conquest.
Something I found out / realized not that long ago: the Norman Conquest wasn't actually vikings, but French from Normandy. Mind you, vikings from Denmark and Norway were also a thing around the same time.
They were a mixed people, partly descended from Vikings. Not only people descended from Vikings invaded England. You had non Viking French in there too.
There was a lot of Norse cultural influence in the North of England, but of course they had a lot of linguistic crossover with the Anglo-Saxons. In some recent historical TV shows the cultural differences between Anglo-Saxons and the Danes are exaggerated for narrative reasons, but they could actually understand each other's languages reasonably well.
The influence of Anglo-Saxon culture is the main reason why English culture isn't the same as French culture, so I don't think you can really say it's defunct. The influence of French is stronger in southern 'BBC' English, but England has a lot of regional dialects that still retain a lot of quite ancient linguistic influences.
Every American cited in this section, Anglo-Saxon in modern usage, is dead.
The only remaining usage of Anglo Saxon in the contemporary USA is as part of the already antiquated “WASP” term.
Anglo Saxon in reference to the US is in my very-online anecdotal experience roughly ~70% French speakers, 15% continental Europeans, and 15% race based nationalists.
Americans usually just say “white”, even when specifically referring to classic WASP cases, especially after the Germans, Italians, and other ethnic groups were absorbed over the last century.
Thank you for the replies with respect to my usage of the term 'Anglo-Saxon', which I had not really reflected upon.
In Germany the term is used to refer to the germanic tribe of the same name, which settled in Britain, and its asserted descendents, i.e. a somewhat loose collection of Great Britain, the US, Canada, Australia and New Zealand.
I'm not from the US and I got "free" education where I live, and I still feel like I've lost money. If I've started working 4 years earlier I would've gotten more experience and more money, and surely wouldn't be as miserable in the meantime as I've been in the Uni. I don't feel like I've learned anything substantial that couldn't be covered by a short online course, but I sure spent much more than working hours stressing out and torturing myself with absolute garbage topics.
Which means it's paid by your taxes. It comes out of someone's pockets. Almost ANYONE can go to college in the US. You can be a complete idiot and still get in somewhere. You could argue that's a bad thing but countries that pay for higher education via taxes typically have much stricter standards on getting in to school. IF I'm going to be paying for other people's higher ed then there better be something in place making sure they actually finish or deserve to be there.
Doesn't change your parent's point. It's still a luxury consumption good, just maybe it's other people's parents paying for you to drink and party instead of your own.
Yes and no.
A Comp Sci./Eng. degree is pretty much guaranteed to get you a decently paying job.
My ROI has been > 20x.
Learning a 3-5 yr curriculum on your own is a surefire way to get you demotivated and/or depressed.
In the 1980s/90s, a medical degree was the “sure bet” way to a six-figure income.
The result was a huge flood of doctors that were...not the best, and some fairly dodgy medical schools.
Of course, this also ended up pushing malpractice insurance (and tuition) into six figures, so I guess we achieved balance.
We’re starting to see some similar stuff, going on, now, in software development. There’s some...not the best, engineers, out there.
I know that E&O insurance isn’t cheap, but it’s a tiny fraction of medical malpractice insurance.
That may change, as Big Data, terrible security practices, and ML/AI are starting to make the old adage ”To err is human; but it takes a computer to really screw things up.” kick into overdrive.
No there hasn't but historically there haven't been that many graduates to begin with. I'm trying to make the point that we're finally approaching a stage when the supply of graduates will be higher than the demand in the market. The growth in tech from the past 20 years won't last forever and the advice to just get a CS degree will be harmful in the near future.
I don't have first-hand perspective on this but my impression is that this is already happening in India to some extent with so many young people getting engineering/CS degrees because they see them as a way out of poverty only to realize that the demand just isn't there.
I just hope some of those engineers in India have a great idea and invent something that changes the world.
There are a number of "robots" that don't exist that I'd love to have. Something to do laundry. (we already have washers and dryers, but folders are just getting started, and nothing to pick my dirty clothes off the floor and put clean back into my closet). Something to do dishes (again gathering them off the table to clean in the cupboards)
There is also a lot of options in the medical field. Right now I know someone who was told that surgery is the normal path for his cancer, but because it is so close to a nerve they aren't willing to risk that - finding a better answer for his case is a combination of medical science and engineering. I know someone else who is going to die who if cancer was discovered sooner would have been treatable. I won't even mention the next pandemic.
The above is but a short list of things that an engineer can work on. I look forward to seeing what the rest come up with.
We're already not the rare, coveted unicorns we once were - immigration rules in various countries were stacked in our favour a decade back. Now, much less so.
>A Comp Sci./Eng. degree is pretty much guaranteed to get you a decently paying job.
What does this mean? "Decently" as in what? I left university last year with a master's in EE and I'm paid £26k/year before tax(!) to write C. Even for graduate jobs, that's not amazing.
"Decently paying job" as in higher than average wage (in the UK) at the least, and more often than not it's in top brackets.
It doesn't mean that you can't get a bad deal, but that wouldn't be the norm.
The average software engineer's salary [1] in the UK is much higher than the average electrical engineer's salary [2]. Since you're writing code anyways (within the realm of doing software engineering work), would it make sense to pivot over to a software engineering position?
> Yes and no. A Comp Sci./Eng. degree is pretty much guaranteed to get you a decently paying job.
This is not true in a lot of countries according to my experience. I would not suggest this path for anyone that might start college in a couple of years. Unless you manage to get into a big company you'll probably find it easier to get a job and a good salary in many other sectors. I know pre-school teachers that had a 30% higher entry level salary than me, and they didn't even finish their education before getting jobs thrown their way.
The supply of Comp Sci./Eng. people has increased A LOT. And there will be an explosion with all of the new graduates that have been told exactly what you're saying.
In this case it was Sweden.
Now, you could argue that the max salary for a developer is higher, but only if you get into a good company. Most devs get stuck at around $4k to $5.5k per month from what I know.
You don't need that to find a decent job. Most developer/programmer jobs have very little to do with comp. sci (which is math) and a lot more with practical application of few select skills.
While you don't need it, it definitely helps you throughout your career.
Not the degree per se (the piece of paper), but the breadth of what you learn.
I find most people who have "really made it" without a degree to be exceptionally bright and wouldn't have needed the push/discipline of a college education anyways.
This may be true for some degrees, but I feel like my engineering degrees were worth it and would still be worth it online. I feel like I could have gotten at least 75% of the value of my education online, especially with my Master's degree (both in Electrical Engineering). For me at least the value of my engineering degrees was in learning the fundamental approaches to solving problems, and most of my classes were lectures anyways without much interaction.
For engineering at least I think the other 25% of college should be building things, and unfortunately that is much harder online!
Electrical Engineer w/o a lab to practice is rather hard - I guess nowadays people can start with microcontrollers instead but that's a far cry from EE.
Yes, labs are definitely helpful to do in person as well, even with just other students and a TA there. I think they would go under the category of "building stuff", so maybe I should revise 75/25 to 60/40!
I've been wondering, what most degrees from a good school provide to you, and prospective employers, is just a guarantee that you know your stuff and are probably smart. Nowadays you can pretty much teach yourself anything online and from books. Why is there no institution that just does the testing and provides a certificate? You get a syllabus for a few years, and then come back at the end, or in some interval, to be tested on the material. Sure, the tests would have to be pretty comprehensive, but that's not really a problem. If they're done well and cheat-proof, I'm sure employers would start to trust those degrees pretty quickly. Then the benefit would be similar to paying for a full university education, but much cheaper. Of course this only works for people who can teach themselves well.
For one, for a lot of the “useful” degrees, getting a hands-in learning experience just isn’t possible without equipment your average person can’t afford or likely even purchase if they could afford it. Outside of that is CD, which is already reasonably easy to break into without the credential.
Degrees, etc., are better described as positional goods [0], than as more basic luxury goods, but you are right that that largely leaves them as the preserve of the rich (in places where financing is required). I would highly recommend "The Social Limits to Growth" by Fred Hirsch (linked in that page), on the subject.
The author is joking. The article is tongue in cheek.
You can get a MS in CS from Georgia Tech for roughly $7,000 US dollars total cost... if you can get accepted and complete the work. GT's CS program is consistently ranked in the top 10 CS programs world wide.
Today, you can easily earn a six figure salary anywhere in the US with this degree (provided you have good work ethic and are reasonable to get along with).
The "fastest" way of losing money - which the author says is trading options, is naive. Even with a margin account, your purchasing power is 4:1, at best! Now - if you have _enough_ money, you can write uncovered(aka 'naked') option contracts and open the possibility of unlimited losses at least, but that won't afford you any more leverage.
IMHO...that "fastest" method to lose money(in the markets) is the commodity futures market. You get 200:1 leverage there, almost no rules, and it's open 23 hours a day, 6 days a week. The securities market and derivatives within are small fish by comparison. If commodity futures don't scratch your itch for losing(or gaining) money very quickly, you can also trade forex with similar leverage. Both of these market types make securities and options look like the kiddie track at the go-kart park.
>Even with a margin account, your purchasing power is 4:1, at best! [...] IMHO...that "fastest" method to lose money(in the markets) is the commodity futures market. You get 200:1 leverage there
Shouldn't margin be weighted against volatility? Part of the reason why they give you that much margin in the first place is that commodities are presumably less volatile.
Commodities are infinite more volatile than stocks - mostly due to the sheer [large] volume of market participants. For example, today the nasdaq 100 future moved 22 points in the first 60 seconds of the day session. That's $480 gain/loss, per contract - in the first 60 seconds. Within 180 seconds, it moved a further 50 points. To recap...within the first 3 minutes, the futures market moved 72 points, or $1,440 per contract.
Some extra information (in case you are curious)... the symbol I mentioned above is "NQ", it's the commodity future for
the Nasdaq 100. Margin requirements are (on average) $15,000 to $20,000 per contract, which will vary by the broker. There is a catch though...during the hours of 9:30-4:00p EST, those margins drop to $500-600 per contract. These are "day margins", ie for "day trading". So in those first 180 seconds, you could lose 3 times the margin required for a small(1 contract) position.
edit: updated margin requirements to include day margin
NQ is based on the collective value of the nasdaq 100, which themselves are classified as a commodity by the NFA. I'm not sure if you are being pedantic or not... 75 years ago, the commodities you listed were the only type available on the futures market - but since then, it's no longer the case.
Not pedantic just confused, I've never heard stock index futures referred to as commodity futures, that's all. If you told me you're a commodity trader and all you trade are stock indices I'd be puzzled. But maybe that's just me.
An acquaintance of mine used to be a professional options trader. A fairly successful one, too. He retired from the job in his early 30s.
After that, he tried doing a little options trading on his own behalf, for old times' sake. The look on his face as he recounted how that went down was a sight to see. I don't know exactly how much money he lost, or how quickly, but my take-away was, roughly, "Here is a person who, having first traded options with great success as a professional, and then traded them with great failure as an amateur, became more convinced than anyone that options trading is best left for the pros."
It would seem that there's a reason why Bloomberg terminals, broker-dealer licenses, exchange membership, a spot in the exchange's colo, and all that good stuff are such expensive commodities.
I would think it can also be a bit easier playing with 'other peoples money' as you can hold for longer, double-down and so on, whereas with your own money, the risk is even more real and the pot usually much more limited.
However, a trader that doesn't do well and makes losses won't last long in the job either.
Luck could make or break either type of trader too.
> it can also be a bit easier playing with 'other peoples money' as you can hold for longer
As a former options market maker (granted, not buy side master of the universe), I saw practically every one of my former colleagues do the above. (I chose the messy path of going all in on a start-up.)
Practically everyone lost money or furiously broke even. Options live in a multidimensional space that is tough to recalculate real time without the tools. You can get everything right and then a stock borrow rate shift or rate futures curve bend wipes out your capital. They are designed for hedging. They are total shits outside that context to the point that I’m surprised they’re available to the general public.
Certainly sounds like one of the most risky areas for trading, if not using options to hedge other positions - which is what I thought they were intended for.
Not something I get involved with, I must say. Far too many 'financial instruments' that I could lose money on!
I have worked on trading room systems software before, but that's mostly about presenting the data, not choosing what to do with it. Automating trades, even worse
depends on the strategy. if you have fairly good predictions about the future, you don't need any of those things. If you are into HFT, you need exchange colo. etc
My experience with Options was pretty frustrating. I had a couple of big wins, but those mostly evaporated by a couple of bad trades. So while I haven't lost money (yet), I've fared much better with simply investing (buy and hold).
Now with so much volatility in the market, I'm trying to take advantage of it by using a backtesting tool to become more consistent. So far it's been worth the fees. The gains aren't as outsized as I imagined when I started trading Options, but I definitely have more consistent wins.
The problem with back testing is you can never know if or when the conditions change such that it no longer works. A useful tool, but more for figuring out what not to do than what to do.
I thought I was very smart and did a DCF analysis of TSLA for myself. Looked into the assumptions, and convinced myself that even in the most bullish case, the revenues and profits generated by TSLA would not justify a valuation above 500B dollars.
I have now lost about the price of a TSLA Model S on paper, and still have not closed out my TSLA short. I should have just bought a TSLA instead of shorting TSLA.
The saddest part is, even if TSLA corrects I'll only make a few tens of thousands of dollars ... and I have in jeopardy hundreds of thousands.
Stupidest move of my entire life.
If my crypto portfolio had not 4Xed this year I would be in real trouble with my wife. Sometimes I feel like its the same trend in the market blessing me and cursing me at the same time.
One of the harshest lessons people who aren't already in the financial industry learned this past year is the financial markets don't have to be tied to reality, like, at all. Companies don't have to be providing the value that justifies their stock price (TSLA, even Elon thinks it got too high), companies in dying markets can become wildly profitable investments because a bunch of people collectively decided to throw money at it (GME, AMC, BB, BBY, etc), the stock market as a whole can soar while the lower and middle class are facing the worse crisis they've ever faced, etc.
Only thing that is making sense (to me, at least), is crypto's recovery. It's 2+ year bear run didn't make any sense to me. Glad to see it roaring back.
I think your mistake wasn't doing the DCF and putting on the position, that is a reasonable move (short interest in TSLA has been huge, a lot of funds thought the same as you ).
Your mistake was bad position management once you had it on the wrong way.
I don't know what % of your stack you had on that bet, but if it's money your wife would get mad about it's too much. Definitely don't want more than 2-5% of your chips on a flyer like that.
I'd say keep trying to make smart bets, but cut the size down and do more of them, and take them off if they are bleeding.
The market can stay irrational longer than you can stay solvent and all that. Read/watch The Big Short if you haven't. (Most/all? of the people in the movie made out but almost didn't.)
I wonder how many noticed that the article continues with 5 points for "How to make money" after the image with broken savings.
"4. Stop quitting" resonates the most with me, in hindsight. And I'm not sure if I would have persisted with my current work if I hadn't got lucky with encouraging sales at the start.
I tried to convince people it was a good idea to have a general purpose bytecode VM as part of web browsers in 1994 - quite glad I was ignored by my employer as they would probably have patended the idea!
It’s a shame that education has become so transactional. I was lucky enough to have a scholarship, but if I’m fortunate enough to pay full-ride for my kids when they’re old enough, and they’re at a place where they seem ready to get the most out of it, I’d spend that money in a heartbeat. Not because I think we’d see a dollar value return on the investment, something coldly transactional. But because I was lucky enough to see firsthand the value of that experience.
And it was lucky, because the vast majority of people are under a ton of financial stress for something that hasn’t provided a clear return on investment.
So what I would caution is this: don’t write off college. But also don’t write off the enormous financial burden you may be taking on. If you’re young and have a shot at a scholarship, really consider it! A lot of the negativity around college is financially driven, but the experience of getting a truly rounded education is invaluable. As well as the friendships you make.
eh, the 'truly rounded education' can generally be attained through the internet, and I've found those who aren't interested in them in the first place tend not to gain much from the classes anyways. Friendships are the main unique upside, but unless you go to an elite college the students who are genuinely driven in their field are hard to find. That's not to say your friends need to be "leaders" and whatnot, but it definitely differs from the narrative colleges put around their students and the price tag being worth it.
He forgot the best way to lose money on options - selling options! It's a great and effective way to lose money - sell out of the money options and get paid a premium, and feel smart! Until the unexpected happens and you go bankrupt. So you get to feel smart AND lose money!
This article is long and I missed the bottom half on my first read.
The top section is awful without the bottom section.
If you're going to do anything to make money you should make sure you charge by the hour.
If instead you enjoy doing your side project and it may be monetizable you'll be golden.
Because no project is guaranteed to make money, if you consider it fun then you should be able to just enjoy it.
Then when it starts requiring the things you may not love to scale you can decide if the money is worth the marketing, patenting, managing, etc that comes with turning a project to a business
> I’ve written four short books and they have literally grossed hundreds of dollars.
I hear this argument pretty often.
A book is not a binary thing: there is a book, and there isn't. It's not about the "book", it's about the contents of the book.
So in other words the author has gathered some knowledge and he didn't make much money off of it. Therefore, the knowledge you will gather will not allow you to earn any money. Does that make sense? I don't think so.
I will probably be downvoted, but maybe more important thing is the subject of the book, than the actual book itself?
Disclaimer: I did not write a book. I did write a chapter to a book, and I got some money off of it. I'm not rich because of it, but I see the potential.
Most books make money from the speaking fees "the guy who wrote the book" makes. I've had a couple classes at work where my company paid $5-20,000 (500-1000 per student depending on how long the class is for) for a guy to come in and give a one week class. As a student in the class I got a copy of the book (someplace on my bookself, I probably opened it a couple times, but never read it). The book is free with class.
I talked to several contractors who said the key to their high value contracts was the book they wrote. Write a book on X and you can make $500/hour doing X at other companies.
Without writing the book you don't get hired to give a class on the book. Without writing a book you don't get to consult on the subject. Once you write a book you are automatically an expert. You still need to sell yourself, the book is part of your marketing materials, but it isn't enough alone to get those high priced gigs.
It even applies if you work for someone else in my experience. The link isn't so obvious in that case. But I've written several books (both independently and though a publisher) and I'm pretty sure it's been reputationally valuable even though I've made very little money directly.
Writing a book alone isn't enough obviously. But it still sets you apart from others.
Obviously there are people who make very good money off books. And one advantage of books, compared to say stock trading, is that the "only" risk is your time. (There may be some costs but probably not a lot unless you go into large-scale promotion.)
That said, it's pretty speculative to make any significant sum though the right book may be helpful to very helpful to support professional activities in various ways.
this is a great point. writing doesn't have to be about getting rich at all...I think the point in the article was write about what you care about - then it will be a good outcome whether it makes money or not
Building an online course has been one of the easiest ways to make money in my personal experience.
The problem is that most people focus on what they know and spend hours creating the content for the course.
However, most of your success is going to come from building an email list of at least 1k people. And most of the effort should be here BEFORE you start building the course.
I've done that many times and have been profitable since, even after outsourcing most of the work.
You need to start by doing something interesting. There are lots of things that qualify. Most are hard work. People will follow you if you spends days or weeks learning about something and then giving the 5-30 minute summary of the interesting things. Interesting is in the eye of the beholder, so you can pick which parts you want to call interesting - the important part is to make it interesting to your readers. (Truth is not a requirement, though I would urge you to stick to the truth)
It's not a claim, it's a reference to a reddit trope which is funny because it's technically true (i.e. by construction most options do indeed expire worthless), but so incredibly stupid and naive.
Obviously the idea that it's generally better to buy or sell options (or any asset) is idiotic - if the asset is mispriced, you trade in the direction to take advantage of the mispricing.
I assumed this was the joke my parent comment was making as well.
> Do things because you have genuine interest in them... Don’t start out with a singular goal of making money.
I really hate advice like this. Have you ever seen a business before? Have you ever met a person? Pretty much no interests are monetizable and almost all companies are doing really boring work. I don’t believe anyone in the world is truly passionate about things like payroll software. If I followed my interests I would be homeless.
The whole “if you want to do X, you have to not be doing it for X” attitude is useless and doesn’t give any actionable advice.
> I don’t believe anyone in the world is truly passionate about things like payroll software.
I actually think that’s probably not a good assumption. I know you’re being pejorative, but imagine a scenario where someone has been working for years as a payroll administrator or someone who’s been a consultant working on implementing payroll systems for decades. People learn the market and get sick of the status quo and have tons of new ideas. I could easily see someone get excited about a way to make their job easier, more fun, more efficient, etc. and go and launch a new payroll software startup that just improves everything.
My point is: good entrepreneurs are passionate about solving problems. Sometimes those problems might “seem” boring but don’t assume they are.
But this assumes that the payroll administrator became that and liked that job in the first place.. and probably the person graduating college did not say “I want to work on payroll”, they probably said “I need to find a way to pay off my student loans.”
> imagine a scenario where someone has been working for years as a payroll administrator or someone who’s been a consultant working on implementing payroll systems for decades
These people hate their jobs and only do it for money. No reasonable person would ever do this for fun. Creating new payroll software is just a means to an end that you have to slog through to deal with the interesting problem of running a company, engineering, or making money. The idea that an entrepreneur should love payroll software is ridiculous
I'm sorry but this is just not true. I understand this is your perspective but "these people hate their jobs and only do it for money" is impossibly wrong. Sure, some people hate their jobs, but they're probably not the ones who are thinking about ways to make their jobs more efficient and almost certainly aren't the ones who are going and launching new companies.
I've seen a lot of entrepreneurs start a lot of companies (and started several myself). Many of which you'd think were "boring" -- log aggregation, devops metrics, auto parts retailing, CRM.
I can assure you that in every single case, the founders were truly passionate about the problems they set out to solve.
You are not even reading the comments you are replying to. When you are immersed in a field for a long time, and master it in and out, there's a good chance you'll be able to find something interesting about it. If you can't, you won't start a new company to solve some problem either.
I read the comment. He’s telling me that people are passionate about things that they’re obviously not passionate about. It feels like gaslighting. When I read job descriptions that tell me I’m supposed to care about some guy’s boring company that does nothing interesting I always thought we were just playing a game where we both pretend I care so everything runs smoother. Am I wrong? I genuinely can’t believe people like this think their employees care. He is either a troll or he’s delusional.
Payroll software is just a placeholder for the most boring thing I can imagine.
As someone who worked in this space for just shy of a decade, you're wrong. The problems often reduce down to challenges that are familiar to most people in large scale software (CRUD entry, redistribution of %s or #s, scaling and performance, testing, etc), and people who love their craft will enjoy solving those challenges. It's like saying no one could ever possibly enjoy math; just silly.
I think this is a theory of mind issue. People find motivation in various ways. I admit that payroll software sounds like one of the most boring things imaginable, but it's also one of the most useful and relevant things imaginable as well, since it has a direct impact on people and makes many things easier. I can definitely understand a specialized programmer taking pride in their craft. And why shouldn't they? They're solving real problems and not making superfluous flashy products or skinner boxes.
ONe project I was involved with (and still recall, 20+ years later) probably falls in the "as boring as it can be" bracket. We were working on a system that would transfer data between a bank and the tax office. This system would send files from the bank to the tax office, when someone paid "taxes due" and fetch files from the tax office to the bank when the tax office saw that taxes had been over-paid.
All it did was "shuffle files back and forth" (with some data conversion between different IBM formats thrown in, for good measure).
But, I still recall the project 20+ years later, with some amount of pride. Partially because it was delivered on-spec, on time (well, it was delivered on Dec 23th and the deadline was Dec 31st, but as there'd be no one at the customer between xmas and new year...) and just a fraction under budget, with an exceedingly happy customer...
I'd even say that payroll software could be a lot more interesting than many other fields. If done right, it shouldn't just be a boring tool that adds some numbers - it should educate its user about the current legislation (e.g. about employee status, tax optimisation), be useful for hiring and budgeting decisions, integrate with banking and accounting software,...
I bet tax software isn't too bad, either.
And at the end of the day, the dev hasn't leeched time and money away from some kids, but helped to make a real problem easier instead.
Do you have a list of interests that a reasonable person likes?
Based on my experiences people love wildly different things. I've met plenty of people loving things that I would avoid at almost any cost.
I would guess that your view of a reasonable person is what you see in the mirror. It's not even clear to me why payroll software is so bad. It's not what I spend time on, but it seems like something plenty of engineers would like because the requirements are pretty clear and stable.
I think you're contradicting yourself. Creating new (payroll) software ticks all the boxes you mention, ie running a company (I can run a company that produces payroll s/w), engineering (writing s/w is engineering, no?), making money (selling payroll f/w is making money). So why do you say that this cannot be fun?
The problem domain is only a means to an end. It could be anything, but payroll in this case might be where somebody sees an opportunity to take advantage of just for access to what they really want. I don’t understand why people (and the original article) act like it’s wrong to not care about the problems being solved or to hate the process. It’s just a pet peeve of mine.
That’s an opinion that could make the bearer pretty miserable in life.
I am an entrepreneur, and I make software in fields that you’d find super niche and dull, yet I am pretty excited about making quality software, making clients happy, and building a team that I can rely on in delivering our services.
The most lucrative jobs I've held are always working on boring, boring, boring, boring shit. The most interesting work is rarely all that well compensated, because supply and demand, and stories about the exceptions reek of selection bias or selective framing. Nobody wants to actually talk about the boring stuff or the non-spectacular failures, because they don't make for interesting stories. So we forget that Notch basically just won the lottery, except that he bought his lottery tickets with time instead of money.
But it's still worth picking something you at least don't mind, because then, even if you don't get rich, at least you didn't also hate every second of not getting rich.
This is most obvious in the gaming industry. Compensation for developers seems to be lower and hours longer within the gaming industry due to more demand.
This is way, way, way less true than it used to be. There are pro and semi-pro leagues in lots and lots of games, YouTube and Twitch make getting paid for entertaining rather than competing possible. Patreon, Instagram and TikTok makes getting paid for your lifestyle far far easier and more lucrative. Getting paid as an independent developer on open source projects is possible these days, sadly there's precious little there still for free software.
None of it is easy, but nobody promised anyone an easy life.
Most people trying to do this will make little or no money, and the sheer amount of competition and effort required to be the maybe 10% of the top people who can make a living on it is too much for most. And there are less and less structures in place to protect or mitigate risk for them; all Youtube has to do is change an algorithm or demonetize/ban you to tank your streaming business.
And the base assumption now for creative works is "free" and hope people donate to you. A lot of people would make more just working part time at mcdonalds.
What we're seeing is a first cohort of people who get in and build their careers while the niche is still young, and before everyone knows about it. Then there's a much larger cohort of second movers who see the work as aspirational and want to get into it. They have a much more difficult path to success. They have to compete with each other, and with the established players, for a piece of a pie that is no longer growing. Very few end up succeeding.
Jobs where I've previously seen this happen include lawyer, craft brewer, restaurantier, data scientist, academic, airline pilot, and games developer. I'm not sure I see any particular reason to think that it will be different for professional gaming.
When I was at university I would find all sorts of crazy passions/hobbies/interests - building a projection TV from parts, improving my mobile phone signal/look/battery life, figuring out how to get logos and ringtones into my phone for free. The first two turned into hobby businesses that made me drinking money for years and even rent some months, the logos/ringtines got me my first web job.
Years later I was determined to do something interesting with video, and ended up starting an interactive video company with a friend, that to a degree still runs today.
I turned my passion back to mobile phones (as I loved playing with them figuring out what made them fun, and how sites could b great or terrible on mobile) and got a great PO gig as a mobile PO before showing how what we built could run the whole desktop site far better faster and cheaper, and becoming CPO of the company.
Maybe I've been stupidly lucky (I can believe it) but I've always had an interest in the paying work that I do, and usually am able to link it to a passion of mine - either because that is what I set out to do, or because I am well able to find that in the role and the people I work with.
I'm really sorry if you don't have that passion, and/or have only worked with people who are the same. Try doing what you love or at least enjoy - you might like it!
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Edit - and on the payroll comment, I connected with the owner of SimpleTax years ago, and he totally had that passion. As a small business owner he was sick of doing his taxes and set out to make it easy for himself, the tool he made worked well so he dogfooded a basic site in Portugal, and then brought it to the UK where the tax system was similar and the market was bigger. When we met he was so passionate about what he was doing, why he was doing it and what it gave to his customers.
Whoa, your comments in this thread were already breaking the site guidelines but this kind of thing is really not allowed here, and we ban accounts that do it.
I like to code. It hasn't made me rich but I've made a good living. If I had my choice I wouldn't be coding to the whims of the publishing industry, but I still enjoy it. Much more than I would, say, the construction work that my father pointed me at. So the "genuine interest" advice has been good for me.
I read it as "you are unlikely to make money, so you might as well enjoy the process." The article is not about employment. It's about side projects, which are infamously hard to monetize.
fair point when it comes to employment...i think the point in the article is that when it comes to books/courses/etc they probably aren't going to be much good if you don't have much genuine interest in the subject/etc
I know, but it’s still useless advice. It reminds me of people who do competitive programming as a hobby then act smug when anyone complains about technical interviews.
Assuming writing tools and research such as computer, books, internet, etc are treated as freely available, you can still lose money if you are paying for professional services such as book cover, editing, etc.
Barring an understanding partner/very good friend who is a good writer who will put maybe a few dozen hours into at least copy editing, you're very easily looking at breakeven at best for many books. (Cover design is arguably less important if you won't be in bookstores.)
If a book is supporting some other activity, it can still absolutely make a lot of sense. It's tough to make a lot of money directly but it probably won't cost you a lot either unless it involves traveling for research etc.
"Enjoy" is a complex emotion in the context of writing an entire publishable book. Even if someone finds all the actual research and writing enjoyable, they probably don't love all the editing and copyediting and other mechanics all that fun.
Most people love having done something more than doing it. I like talking about removing that busted off bolt in my shop - but when I'm doing it, it just plain sucks.
Method 10: Write an absolute piece of shit article on revue.
I often wonder what motivates people to write certain posts. This piece is filled with opinion and subjective and obviously wrong information, followed by nonsensical motivational fluff. I have no idea what makes the author think that this is a good use of anyone's time.
This is the most important lesson of options. It's never just a coin flip. You have an unimaginably huge number of factors riding against your success. It's not even remotely close to a 50/50 win/lose scenario. There are a million ways to lose, and just a few narrow ways to win. You literally have better odds going to the roulette table and placing a bet on red.