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this post was submitted on 11 Apr 2024
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No Stupid Questions
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The rich capitalists haven't made money the traditional way for about a generation now. The majority of wealth is made on the real estate and stock market which is based off of speculation and expectations of perceived value that have little to do with actual value.
So they'll just keep making money off their own money.
A little secret, if you want to see how this works, look into how to make LEAP Options calls on the SPY ETF. Basically you can leverage some money by buying an Options Call on a safe bet like betting on the top 500 US companies via an Exchange Traded Fund. A LEAP just means that bet is LONG term,over the course of years. Unlike Stocks, Options require you to either cash out (exercise) your Options after a certain amount of time (weeks to years) with the option to "roll over" your option call by putting down money for more time if it didn't do well in that allotted time, essentially doubling down on your bet should your bet not turn as much of a profit as you wanted.
This bet can be risky, but if you place your bet on say , the S&P 500, you bet on the top 500 companies. And you're basically betting on them doing well over a certain time period (say the next 3 years). The key to this is that Options call allows you to acquire say 60% more stock than you could technically afford, but you can only hold it for 3 years. If those 500 companies do well over the next 3 years (highly likely, pensions, retirement accounts, 401Ks, IRAs all rely on the S&P or some variation thereof), you get the returns of those stocks, and you got to leverage 60% more stocks than you could technically afford all because you were willing to make that bet within a certain time limit.
Worst case scenario is the US goes into a recession that lasts those 3 years and you either lose your entire investment or you invest some more money (but not as much as the initial bet usually) to extend your Option call out for another period of time.
It's one of the many ways even the moderately wealthy can earn a hefty profit over legalized gambling. The strategy I've just described to you is considered one of the safer bets amongst stock bros I've talked with, and it's a real life Free Money Glitch that works as long as US economy line goes up.
Now imagine the insanity that goes on in actual Wall Street with actual dynamically changing algorithms and people who have devoted their lives to making more money out of existing money, and you start to realize that these rich fucks at the top can basically say fuck all to investing in companies that create actual value, they just need lower level investors to believe that paradigm still exists.
They don't rely on your pennies to stay wealthy, they've created the ultimate dream of capitalism, where money infinitely generates more money regardless of what's happening in reality.
Every trade has two sides. Someone has to sell you the options contract. No one is out there selling "free money" contracts. Why wouldn't they just give you the money and skip the song and dance?
To everyone else: please don't trade options if you don't understand them, there is no quicker way to drain your savings.
I agree. I'm not saying its not without it's risks, Options on individual stocks are pretty risky, but a call Option that follows the S&P500 over the course of 3 years? That's a pretty safe bet. It takes a multi year US recession to lose that bet, and while certainly not impossible (we've obviously had a few of them over the past couple decades), but it's the safest bet I've seen on Options.
And yeah, there's somebody on the other side of the bet, in this case usually a Brokerage Firm or other large Financial Institution, as they're the only ones I can think of that would consistently bet against the S&P. This part I'll admit does elude me somewhat, but generally there's always somebody who believes a US recession is coming, and occasionally they're right, just not as often as the person willing to believe US line go up. The amount of pensions, IRAs, and 401ks that rely on the S&P is massive, and because of that I think there's a strong incentive amongst the Fed and Wall Street to make sure that line generally always goes up.
I'm not advising people to buy Options, btw, I'm using this scenario as an illustration to point out how making money on the US stock market is usually based off of mass speculation rather than any actual value made by people actually producing goods and services on the ground floor.
You are encouraging random internet people to do this.
Most of them don’t have enough sense to pull off gambling on a scale like you are talking about, my self included
Ok so put it on black?
Hey man, the Internet has information, if you're not able to use it, that's not the information's fault
Don't be put off by my jargon and in depth explanation. It is actually STUPID simple to do this. Do a SMALL bit of research and then use a Stock Market simulator to simulate a small purchase Call Option on the S&P 500 for 2 or 3 years. Then leave it. Don't look at it don't think about it forget about it.
Come back in 2 to 3 years and look at your simulated account. If the US did not go into a recession in the last 2 to 3 years you will have at least doubled your simulated money. After that do it for real.
Or you could be like me and walk away in disgust. It just made me very jaded about US economics and modern capitalism.
I just invest in liquidity mutual funds and already made 30 dollars in a month. Way more than what my bank gave me as interests 😅
What i dont understand: These gains are calculated into the option premium, so how is this still attractive?
Basically betting the line goes up faster (or earlier) than the seller predicted?
Yeah that’s basically how leaps work. In this Calls example, you aren’t really betting that on expiry the stock will be near or slightly above the target price. You’re betting that sometime in the next 3 years, the price will be above the option price, or at least ahead of the expected rate of growth. Then you cash out on the additional extrinsic value at that point in time by selling the option.
This is a better explanation than I gave, thanks.
eyup. price to earnings ratio has not been normal since before 2000 and we all know how housing has been. The wealth disparity is so high now that whats left of the middle class and lower make little to no difference relative to the larger money pool. all gains at this point are people putting money in because its the only place to put the money.