Why your dumb PUTs aren’t as dumb as you know they are

by lubujackson

I’ve seen a lot of boom/bust cycles and I have some sage advice for you fresh 🌈🐻 bandwagon doomsday whispers: you are all fucking idiots.

But you’re not wrong. The career day traders spend all day watching the thetas and the gammas and sifting through indicators of investor sentiment, trying to sniff tiny opportunities they can exploit. When shit goes cray, they miss some of it because they know too much about how things are supposed to go and how the numbers are supposed to look. They see crazy pricing and crazy volatility and get worn out by it.

A lot of really, really smart investors get blindsided because their noses are too deep in ticker tape. “You can’t time the market,” they say. Except when you can. And right now, you can. It is a once a decade (at best) market situation and we are in the middle of it.

After the market tumbled 4%, people said the drop was over. After it bounced up then went down more, people said it was done. Now some obvious stocks have been chopped down and experts are saying the bears are being irrational and that the risk is priced in. But these things take time. And unlike 2008, there is a clear, uncontrolled external force coming. Recognize that there hasn’t been a global event like this before in the modern stock market. This is an economy staller. Even in 2008, when you knew shit was primed to drop, you couldn’t time it exactly. For once, to a decent degree, you can time this virus. Not just the virus, but the closures, the cancelled travel and the increasing fear. That is insider-level knowledge! And everyone can see it right there in front of them. Just like 2008, once you see the problem you know how it has to unfold. But it takes the market a while to believe it.

So my sage wisdom of experience is here to confirm that yes, people are being blind to obvious shit. And yes, they won’t believe it until it is beaten over their heads for a few weeks. And YES, shit will bottom out more than it has. Even if beer virus muddles along and goes away in two months or gets miraculously cured somehow, a bunch more tanking is going to happen over the next couple of weeks. Why?

Because the real downturn doesn’t happen until Grandpa sells down his precious nest egg. Right now, Grandpa might be skipping a cruise this year but he is still LONG on them stonks. Them stonks have been very good this last year, so a little haircut doesn’t hurt. But Grandpa is starting to get worried. And the news is going to be relentless. More deaths, more infections, more closures, more prepper shopping… and all the while, Grandpa sees those red numbers rolling up. When the herd finally moves, THEN it’s time to stop buying those overpriced PUTs. Until then, they are only expensive if you are betting on businesses instead of human nature.

 

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.

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