Wei_Dai(Wei Dai)
I’m now selling at-the-money call options against my remaining SPAC shares, instead of liquidating them, in part to capture more upside and in part to avoid realizing more capital gains this year.
Once the merger happens (or rather 2 days before the meeting to approve the merger, because that’s the redemption deadline), there is no longer a $10 floor.
Writing naked call options on SPACs is dangerous because too many people do that when they try to arbitrage between SPAC options and warrants, causing the call options to have negative extrinsic value, which causes people to exercise them to get the common shares, which causes your call options to be assigned, which causes you to end up with a short position in the SPAC which you’ll be forced to cover because your broker won’t have shares available to borrow. (Speaking from personal experience. :)
Gilch made a good point that most investing is like “picking up pennies in front of a steamroller” (which I hadn’t thought of in that way before). Another example is buying corporate or government bonds at low interest rates, where you’re almost literally picking up pennies per year, while at any time default or inflation could quickly eat away a huge chunk of your principle.
But things like supposedly equivalent assets that used to be closely priced now diverging seems highly suspicious.
Yeah, I don’t know how to explain it, but it’s been working out for the past several weeks (modulo some experiments I tried to improve upon the basic trade which didn’t work). Asked a professional (via a friend) about this, and they said the biggest risk is that the price delta could stay elevated (above your entry point) for a long time and you could end up paying stock borrowing cost for that whole period until you decide to give up and close the position. But even in that case, the potential losses are of the same order of magnitude as the potential gains.
At this point, it is very clear that Trump will not become president. But you can still make 20%+ returns shorting ‘TRUMPFEB’ on FTX.
There is a surprisingly large number of people who believe the election was clearly “stolen” and the Supreme Court will eventually decide for Trump. There’s a good piece in the NYT about this today. Should they think that the markets are inefficient because they can make 80% returns longing ‘TRUMPFEB’ on FTX? Presumably not, but that means by symmetry your argument is at least incomplete.
I can think of various other ways to easily get 10%+ returns in months in the crytpo markets. For example several crypto futures are extremely underpriced relative to the underlying coin.
This sounds more like my cup of tea. :) Can you provide more details either publicly or privately?
Thanks for the link. I was hoping that it would be relevant to my current situation, but having re-read it, it clearly isn’t, as it suggests:
It’s much less risky to just sell the stocks as soon as you think there’s a bubble, which foregoes any additional gains but means you avoid the crash entirely (by taking it on voluntarily, sort of).
But this negates the whole point of my strategy, which is to buy these stocks at a “risk-free” price hoping for a bubble to blow up later so I can sell into it.
Anti-EMH Evidence (and a plea for help)
Now I’m curious. Does studying history make you update in a similar way?
History is not one of my main interests, but I would guess yes, which is why I said “Actually, I probably shouldn’t have been so optimistic even before the recent events...”
I feel that these times are not especially insane compared to the rest of history, though the scale of the problems might be bigger.
Agreed. I think I was under the impression that western civilization managed to fix a lot of the especially bad epistemic pathologies in a somewhat stable way, and was unpleasantly surprised when that turned out not to be the case.
You mention “defenses will improve” a few times. Can you go into more detail about this? What kind of defenses do you have in mind? I keep thinking that in the long run, the only defenses are either to solve meta-philosophy so our AIs can distinguish between correct arguments and merely persuasive ones and filter out the latter for us (and for themselves), or go into an info bubble with trusted AIs and humans and block off any communications from the outside. But maybe I’m not being imaginative enough.
By “planting flags” on various potentially important and/or influential ideas (e.g., cryptocurrency, UDT, human safety problems), I seem to have done well for myself in terms of maximizing the chances of gaining a place in the history of ideas. Unfortunately, I’ve recently come to dread more than welcome the attention of future historians. Be careful what you wish for, I guess.
Free speech norms can only last if “fight hate speech with more speech” is actually an effective way to fight hate speech (and other kinds of harmful speech). Rather than being some kind of human universal constant, that’s actually only true in special circumstances when certain social and technological conditions come together in a perfect storm. That confluence of conditions has now gone away, due in part to technological change, which is why the most recent free speech era in Western civilization is rapidly drawing to an end. Unfortunately, its social scientists failed to appreciate the precious rare opportunity for what it was, and didn’t use it to make enough progress on important social scientific questions that will become taboo (or already has become taboo) once again to talk about.
This ended up being my highest-karma post, which I wasn’t expecting, especially as it hasn’t been promoted out of “personal blog” and therefore isn’t as visible as many of my other posts. (To be fair “The Nature of Offense” would probably have a higher karma if it was posted today, as each vote only had one point back then.) Curious what people liked about it, or upvoted it for.
There’s a time-sensitive trading opportunity (probably lasting a few days), i.e., to short HTZ because it’s experiencing an irrational spike in prices. See https://seekingalpha.com/article/4379637-over-1-billion-hertz-shares-traded-on-friday-because-of-bankruptcy-court-filings for details. Please only do this if you know what you’re doing though, for example you understand that HTZ could spike up even more and the consequences of that if it were to happen and how to hedge against it. Also I’m not an investment advisor and this is not investment advice.
Lessons I draw from this history:
To predict a political movement, you have to understand its social dynamics and not just trust what people say about their intentions, even if they’re totally sincere.
Short term trends can be misleading so don’t update too much on them, especially in a positive direction.
Lots of people who thought they were on the right side of history actually weren’t.
Becoming true believers in some ideology probably isn’t good for you or the society you’re hoping to help. It’s crucial to maintain empirical and moral uncertainties.
Risk tails are fatter than people think.
Speaking of parents obsessed with getting their kids into an elite university, here’s an amazing exposé about a corner of that world that I had little idea existed: The Mad, Mad World of Niche Sports Among Ivy League–Obsessed Parents, Where the desperation of late-stage meritocracy is so strong, you can smell it
Another detail: My grandmother planed to join the Communist Revolution together with two of her classmates, who made it farther than she did. One made it all the way to Communist controlled territory (Yan’an) and later became a high official in the new government. She ended up going to prison in one of the subsequent political movements. Another one almost made it before being stopped by Nationalist authorities, who forced her to write a confession and repentance before releasing her back to her family. That ended up being dug up during the Cultural Revolution and got her branded as a traitor to Communism.
Upvoted for the important consideration, but your own brain is a source of errors for which it’s hard to decorrelate, so is it really worse (or worse enough to justify the additional costs of the alternative) to just trust Zvi instead of your own judgement/integration of diverse sources?
ETA: Oh, I do read the comments here so that helps to catch Zvi’s errors, if any.
A tale from Communist China
My grandparents on both sides of my family seriously considered leaving China (to the point of making concrete preparations), but didn’t because things didn’t seem that bad, until it was finally too late.
Writing a detailed post is too costly and risky for me right now. One of my grandparents was confined in a makeshift prison for ten years during the Cultural Revolution and died shortly after, for something that would normally be considered totally innocent that he did years earlier. None of them saw that coming, so I’m going to play it on the safe side and try to avoid saying things that could be used to “cancel” me or worse. But there are plenty of articles on the Internet you can find by doing some searches. If none of them convinces you how serious the problem is, PM me and I’ll send you some links.
Here is his newsletter archive and subscribe link if anyone wants to check it out.
In addition to jmh’s explanation, see covered call. Also, normally when you do a “buy-write” transaction (see above article), you’re taking the risk that the stock falls by more than the premium of the call option, but in this case, if that were to happen, I can recover any losses by holding the stock until redemption. And to clarify, because I sold call options that expired in November without being exercised, I’m still able to capture any subsequent gains.