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97soryva t1_j2aok4n wrote

On net, options are just stimmy checks being redistributed to hedge funds lmao

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lispyfriend t1_j2b6jh2 wrote

Are options just fundamentally under priced? They give extreme upside potential for a relatively small price.

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97soryva t1_j2bae0p wrote

The vast majority of money is made selling options

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lispyfriend t1_j2br0lx wrote

Interesting. That intuitively makes sense to me for commodities. The option is purchased to reduce volatility even though it costs a little more (basically an insurance product). So in aggregate the insurers win for taking on the risk.

I guess I'm just surprised that's the case with stock.

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Idbuytht4adollar t1_j2c1zfn wrote

No because that's priced into to the option. Your logic works with a lottery ticket as well or a low probability sports bet. Even if the upside potential is huge the odds would still be in mm side in the long run their side will profit

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lispyfriend t1_j2c52be wrote

Understood. I just wonder if that pricing accurately measures probability of these events. Of course the market encouraged it to, but people also still measure stock risk as standard deviation of price, so idk.

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[deleted] t1_j2d9ace wrote

[deleted]

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lispyfriend t1_j2e5xcu wrote

> Supposed to.

Well stddev is nice for their mathematical model. The critique is that the model is not really measuring risk in the business. It sounds more plausible for options though.

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