Is it possible to reduce risk to zero?

Discussion in 'Strategy Building' started by Norm, Jul 25, 2006.

  1. I haven't read this thread, but arbitration comes to mind...but sh** happens.
    #41     Sep 24, 2006
  2. sorry, no such thing on this planet for the retail option guy, not in a consistently worthwhile method anyway, unless you and i have a very different definition of risk.
    #42     Sep 24, 2006
  3. You still have the risk of those elves getting sick on you and miscalculating the skew :D
    #43     Sep 24, 2006
  4. very much so...
    #44     Sep 24, 2006
  5. To see what I was talking about you can look at GOOG and MAR 07 options where you can buy ATM puts, buy the stock and sell OTM calls for a net credit and therefore the risk/reward line is above $0. No loss possible.......

    But the return is like 7% and after commissions it is much less.

    So no risk in the literal sense, but no free lunch either or fro that no risk you get a shitty return. Better off in t-bills.

    Only way to have a no risk position is to enter a risky position and adjust after underlying has moved in your favor!
    #45     Sep 24, 2006
  6. Pekelo


    You are too kind, I take it as a compliment. :)

    Sure you can reduce risk to zero or pretty much close to it. Just put an extra step between you and trading, like other people's money, selling trading advice/strategies/predictions,etc.

    In that case your cost/risk is just the money you invested in running your website, newsletter,etc. and your profit can be HUGE, because there are lots of people with money who like to follow the smart ones....

    Cost can be as low as $17 a month, that is pretty much zero, I would say...The price of a Starbucks coffee for every week...
    #46     Sep 24, 2006
  7. Cummon Phil, just use your "regular" alias!

    j/k! :D
    #47     Sep 24, 2006
  8. Phil,

    my math comes out to about 1.9% until march expiration, which is in line with the cost of carrying the goog longs. I will admit that a few years back when the risk free rate was lower there was a way to lock in a few points over that with some div capture plays, but it was far from being consistent to make a living off of and you still carried the rho risk. Totally agree on the edge lock in a positive expectancy trade.
    #48     Sep 24, 2006
  9. Sorry I think the 7% was one I saw using 2008 options. After commissions and taxes I am sure it is the t-bill rate. Lots of people discuss this no-risk trades and technically your capital is not at risk, but the returns are shit compared to the risk-free rate and inflation and the fact you have to wait so long.

    #49     Sep 24, 2006
  10. Shhh I already paid MACD......

    #50     Sep 24, 2006