YouSaid · the spoken record

Imran Lakha

lines on the record: 91
first: 2022-03-17
most recent: 2022-03-17
sittings or episodes: 1
sources: podcast

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“Make you loads of money relative to what you paid for them, basically, right? So the motivation to buy those puts might not be that you actually think they're going to work. It's just you need to be able to sleep at night that if something crazy happened in the world and stocks dumped 20-30%, you'd be covered, basically, right? And people have mandates where they kind of have to buy those options because they need to make sure in all unforeseen circumstances they're not going to drop more than X amount due to kind of capital requirements and tier one ratios and all these things, all these fancy terms that are thrown around. But basically it's insurance companies, right? They need to make sure they're going to be able to service their liabilities and therefore they need to have those puts in place.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“And then also you could think of it as like, well, how much of my actual exposure do I want to neutralize? If I buy 25 Delta put in the same notion as my portfolio holdings, that's going to neutralize roughly a quarter of my delta exposure because it's a 25 delta put, 0.25, right? If I buy a 50 delta put, it's going to neutralize half my exposure. So if that's the way I want to risk management my book, I can then decide what delta options I want to buy based on how much Delta I want to neutralize basically Other things to think about is like leverage the more downside you go if you go to 80% put or a 70% put they're going to cost you next to nothing but all they're gonna give you is crash protection right they're not gonna make you any money in a down five or ten scenario but in a down 30 40 they're gonna bail you out”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Of the current spot price, 95% of it, yeah. So that's one word, one very simple basic way people think about it, right? Like, okay, where do I want protection kicking in? Down five, down ten, whatever it is. It's a very sort of basic way of thinking about it. A more sophisticated way of thinking about it might be what delta put do I want to own, right? So do I want to own a 10 delta put? Do I want to own a 25 delta put? And the reason to kind of look in delta space, right, in terms of determining which option I want is it allows you to measure different assets. If you look in delta space, so you can, that makes it a lot easier to make that relative value decision.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Sure So, you know, very, very bog standard typical hedging strategy is I'm nervous, I need protection, what can I do, or I'll buy a put. Number of considerations that go along with that Which strike push should I buy? Right, so typically looking at just that round number strikes like 95%, 90%, 85%, where do I want my protection to kick in?”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Let's talk about a protective put. We start at the beginning, you said, oh, I want to hedge my portfolio. I own Apple, but I want to buy put options on Apple. What were the different Greeks look like? And also maybe you can provide a little bit of color on gamma vega theta, because I kind of brushed over them”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“It's kind of variable. It depends, right? If a stop goes mental, you're going to have amazing leverage, right? If the stop grinds up towards the 10% strike in a week, you might make no money, right? So that's the problem with options, right? Don't get me wrong. Options are great in a lot of ways, but you can have situations where you were right about the stock rallying and you made no money with the call option because the rally happened too slowly, right? It didn't happen soon enough and the option didn't pick up any value for you or it didn't go intrinsic where it had some intrinsic value, right? So that's the thing. You've got to consider all these factors. So just to answer the question, what's my leverage ratio on that call? It's not black and white like that, unfortunately, with options.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Are priced to have any reasonable likelihood of being up 10% in a week. Only super high volt stocks are. So if you did that, you can pretty much say most of the time you're just writing off that money, basically. You're not going to get paid for that. But on the off chance, there's this piece of news on that stock that makes it go up 20, 30 percent. You literally paid basis points, right? You might have paid, let's say you paid 10 basis points and all of a sudden the stock's gone 10% through your strike. How much leverage have you got? 100x, right? You spend 10 basis points times 10 times 10. That is 100x leverage. Now you don't know you've got 100x leverage up front because you don't know how much stock's going to move, right?”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Yes, so I mean, look, yeah, it definitely depends on the expiry of the option, right? Because if the option expires in a week, the premium is going to be very small, right? If the option expires in a year, premium is going to be much, much more. So the premium that you spend effectively determines the leverage that you get, basically, right? But like when you leverage a future's position, you know exactly what your P&L is going to be if the market goes up by X amount or down by X amount right the thing about options is whilst they give you that access, that leverage to the position and the more out of the money and the more short dated, the more leverage you get basically, right? Because the more short dated means the cheaper premium, the more out the money means cheaper premium. So you can have a one week, one 10% call in most stocks and it will cost you basis points, right? Because not many stocks.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Right, so if I own a call option of Apple that has a delta of 50, I own 50 shares. And that's why I can sort of you get that risk-free leverage, or not risk-free, but you get that leverage, right? You get 50 shares because the option is a right to buy 100, one contract is the right to buy 100 shares. So if I bought that from you, Imran, a market maker, when you sold that contract to me, let's say it's a 50 Delta option of Apple's at $170, if the price of the spot price goes from $155 to $170, the delta is going to be greater because it's going to go more in the money. So you're going to have to buy more delta by more Apple to hedge your position.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“50% 60 70 30 whatever it is right so that delta is not continuous that delta is a function of how in the money the option has become when an option is at the money i.e. the spot is trading at the strike then the delta is typically around 50 Which is 0.5, so half. So it participates. The idea is that if the stock goes up a dollar of 50 delta option will participate in half of that upside. So the stock goes up by a dollar, but the option will only go up by half a dollar because it's only a 50 delta option, right? As that delta changes, that participation that the option premium has to moves in the spot price can go higher if we go in the money or it can go lower if we go out the money.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so just think of it as the option is a product that is priced depending on where the asset goes, right? So your sensitivity of the option premium to the asset going up or down, that is your delta. And that's why people delta hedge their options using stocks or futures. Because the idea is you are trying to replicate how many stocks or how many futures contracts I would need to achieve the same change in price or change in value as the option, right? So the option delta determines that. We're an option way out of the money. It has very little delta. We're in options fully in the money. It has the same delta as a stock or a futures position. Wherein it's somewhere in the middle, then that's when the delta is more variable, right? The delta might be.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, well, I would have rephrased it and said you're short Vega, not short convexity because convexity gets thrown around a lot by options players and it's got multiple meanings, right? So I'd rather just use the word Vega. When you're short option, you're short Vega, right? If you invite all of that option goes down, you're going to make some money from that Vega component, basically.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Yes, Risky versus collars are hedging structures primarily, right? So remember I said people buy puts to hedge their portfolios, right? Well, they basically often don't want to spend the premium of those puts, right? The premium of those puts is expensive. You're buying them every month or every three months. It starts to grind away at your portfolio performance, right? Especially if market doesn't do too much. So often what they do is they sell call options to get some premium back to cheapen the cost of their hedging. They can afford to sell those call options because it's like a covered call because you own the stocks anyway. So if you sell at 110% call against your stock holdings, you're only going to have to sell out your stockholding up 10% in a matter of months. You might be comfortable with that. If you're comfortable with sacrificing that upside, then it makes sense for you to sell those calls, which allow you to then buy the...”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“The motivation to do it is, I don't know which way we're going, I just know we're going, right? I just know we're going to move. And the way I get exposure to that view, and if I'm right, I make money is by owning the straddle or the strangle, basically.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Great, great, yeah. So straddles and strangles are just buying options of different, like buying two options, buying the call and the put. If it's a straddle, you're buying the same strike. So you're buying the same strike call and the same strike put. If it's a strangle, you're just buying out of the money options. You're buying it out of the money call and an out of the money put. But you're buying both, right? And you can see from that those payoff diagrams on the straddle and the strangle, you don't really care which direction the asset goes. The asset can go up, it can go down, but the only way you're going to make money and be above zero in the y-axis, which is your P&L or your payoff, let's say, that's your P&L in this case, the only way you're going to be there is if we move. We need to move a lot. We need to move enough, right? So if you're a buyer of straddles and strangles, you're a buyer of volatility, right? It's a volatility strategy.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“If for whatever reason the market expected the asset would just sit here until expiry, then that would be zero, right? That volle would be zero in the extreme case. So then there's no need for the option to have any time value. Because if the volatility is zero, we know where we're going to be at expiry. We're going to be right here. So whatever the intrinsic value is what the option is going to be worth. So we wouldn't have any time value if vol was zero. right if vol on the other hand was 100 and the stocks winging around you know eight to ten percent a day whatever it is then there's so much time value in that option because there's so much uncertainty and we could be miles away from strike When we get to expiry, because the asset moves around so much.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Other two Greeks or the other two parameters vol implied vol and time, they're the ones that feed into the time value. Now the time one's pretty straightforward. The more time the option has to expiry, the more time value it's going to have, right? That should be fairly intuitive to understand, right? The implied volley is slightly less intuitive, but think about it like this. The implied vol is the market's expectation of how much the asset's going to move.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“So the spot price movement really determines the intrinsic value, right? So we've got that spot price feeding into the forward price feeding into the option price, right? So if spot goes up a lot, the option is going to have loads of intrinsic value. If spot goes down a lot, it's going to have none if it's a call option. So, really, it's just the spot that determines the intrinsic value. Where is the spot in relation to the strike?”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Levels of spot. So when we're near strike, it's got a lot of time value, right? That distance is quite wide. And when we go away from strike, that distance goes down.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“But the reality is that's not the price at which options are trading today. Today, if I'm buying an option that expires in three months and it's got some intrinsic value and the spot is above the strike, it's worth something if it was expiring today, but it's not expiring today. Well, it's actually worth more today than it will be if we stay here until expiring. And that distance that it is above the intrinsic value that's what we call time value. So in that graph, you can see that the blue curve is reflecting not only the intrinsic value, but also the time value, right? And it's the different, that excess gap that that blue curve sits above the black hockey stick, that's what reflects the time value of an option. And you can see that that time value of the option is different for different...”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“So, every option can be broken down into two components intrinsic value and time value. But what do those mean? Intrinsic value in the simplest sense is just how in the money is the option right now. If it was expiring today, what would it be worth? So from a call options perspective, that hockey stick that we talk about, if the stock is anywhere from strike down, right, or anywhere strike or below, then what's the intrinsic value going to be? Nothing. Because if it was expiring today, it wouldn't be worth anything. If the stock's above the strike price, that's when it will have intrinsic value, which is because we'll be riding up that hockey stick, that 45 degree line, right? So your intrinsic value is just whatever the option would be worth if it was expiring today.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“The true payoff is actually has to reflect the fact that the option costs you something to buy. So you then shift that payoff down by the amount of the premium. Yeah, but these are all things, obviously, that are in the course and you're kind of showcasing.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“So the put option is just the flip side, right? So it's the right but not the obligation to sell the asset at the strike price at expiry. So this time because you have the right to sell, you'll exercise that right to sell if the stock goes down because then you'll get to sell it at the higher price of 100. So that's why it's a bearish position. It points to the P&L is on the way down. You don't make any money on the way up, but you make money on the way down, right? And you can think of it puts as an insurance, right? We talked about hedging. So they're like a way of ensuring your portfolio. And the premium that you pay, because we were talking about payoffs before being that blue hockey stick line, that's what they call it, the hockey stick shit.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Your option expires worthless, but the idea is the reason you don't lose money in the payoff, which is the blue line, the blue discontinuous line that you're sharing, the reason you don't lose any money is because you didn't buy the stock at 100 because you had the option not to, basically. Now, if the stock then rallies to 120 in that time, then obviously you're going to exercise the option. You're going to buy the stock at 100, which is the right that you had to buy it. and you're going to make that $20 from the difference between $100 and $120, right? So that's why we have this discontinuity, because at that strike price, which is 100, you have a choice. You have a choice that you can buy it or not. And whether you exercise that choice or not will be determined by where the stock actually ends up being expiry.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“I'll just buy the stock at 80 if I want to buy the stock, right? So the payoff of that option is zero because you don't end up making that choice to buy the stock, right?”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“So, like you said before, right, the definition of a call option is that it is the right to buy, but not the obligation to buy an asset at a fixed price at a given maturity date. And so because of that optionality, because you have the choice, you don't have just the 45 degree line, which is what you would have in the payoff of just being long the stock. So for example, if I bought the stock at 100, then I would just have a 45 degree line through 100. And if the stock went up, I would make $1 for every dollar that the stock went up. And if the stock went down, I would lose $1 for every dollar that it went down. Now having the option to buy at $100 is different because if the stock goes down between now and maturity of the option, let's call it in three months time, and it's now trade, it went from $100 the stock to maybe $80, well, I'm not going to exercise my option to buy it $100 when the stock's currently trading at $80.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Exactly, right? So that exposure to implied volatility is called Vega. That's the Greek that is Vega. And your Vega in an option grows in the more long dated that option is. So a one-week option has next to Novega in it. So that means the price change of that option for a move in implied volatility will be very, very low and it will be massively swamped by the other parameters like time decay and delta, which is your change in spot prices. But one year, two year, five-year option will have a really large chunk of Vega in it. And the Vega will actually be a large determinant in how the value of that option changes. So if you see a significant move in implied vol on a five-year option, that's going to have a really large impact in how that premium moves. And it may, like you say, it may overwhelm what the premium is doing because of changes in spot prices and things like that.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“And your exposure to the change in implied volatility changes with the duration of the option, right? So if you have a put on Tesla, or let's say you call on Tesla, you know, and it expires in January 2023 if implied volatility goes from like 50 to 60, that will make you a hefty chunk of change that may even offset a small fall in the stock. But if you own a colon Tesla that expires this week, it's not going to make you a difference because your exposure is primarily to the change in the actual price, right?”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Of the future volatility of the asset. And that in itself is a number that moves around on a daily basis. And that is a number that you are exposed to when you have an option position. So when you buy optionality, you buy whenever you buy an option on an asset, you are long, i.e. you want the implied volatility to go up, right? Because if the implied volatility goes up, the option premium will go up. Even if the asset doesn't move, if the market's perception of how much it will move goes up, which is what the implied volatility is, then you'll make money naturally through the repricing of the option to reflect that higher implied volt.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so we've mentioned the directional exposure an option has, right? Ultimately, whether it goes up or down in value, will be determined in a large part by the direction of the asset, where the asset goes up or down. But the beauty of options is you have the ability to take a view on other parameters. And those parameters are volatility parameters. So you might not have a directional view on the underlying of the asset where it's going to go. But what you might have a view on is that the volatility of it is going to go much higher or much lower. So the beauty of options is you can take a view, you can isolate your view. You can say, I don't have a view on the direction. I don't have to take a view in the direction, but I can take a view on the direction that the volatility will go, right? And when I'm talking about volatility, I'm talking about implied volatility, which is the market's expectation.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Right, and when you own a stock and you own puts on it, you create a blended exposure that's not just to the delta, not just to the stock, but it's to the volatility, it's to the timing, the path dependency of it. Can you speak to the value of just having different exposures that are not just pure exposure to the stock, but to other lesser understood financial exposures?”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“If all you've got to do is spend a couple of percent, that makes that worthwhile basically, right? It's really you're hedging the uncertainty. If you were certain the stock's going down, you'd just sell it, right? But you don't have that certainty. You want to own the stock. You like the stock for a number of reasons, but what you're doing is you're hedging the uncertainty. You're hedging the idea that something comes along that derails your macro view or your micro view in this case for Apple. you want to protect that outcome that you don't believe is high probability but just theme case you do it to protect your portfolio to protect your capital and and over the long run trading in that way and using options will make you a better investor because you're risk adjusted returns will be far greater than the average yeah”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, it's just different scenarios, right? Like, you can own Apple because you think it's got upside, but if you're wrong and it drops a lot, you don't want to get carried out, right? So that's what it is. By owning the stock and owning a put against it, you're just hedging that tail, basically, right? So you're willing to write off one or two percent premium, whatever it is, right? If the stock rallies another 10, 20%, you don't care about the premium that you tore up because it's still doing well. If it drops by 5 or 10% assuming you bought a 10% put, let's say, 10% out of the money put. Assuming it drops by 10%, that's a drawdown that you're comfortable stomaching, let's say, because a long-term trade and you believe it will recover or whatever. But if it dumps more than 10%, you don't want to be in a situation where you've dropped 30, 40% on your holdings, right? And to eliminate that possibility.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Like indices, because you just want broad macro market exposure, you're not trying to buy puts on every single name that you own in terms of single stocks because it's just cumbersome. You might as well just buy the index puts. And that's a large part of the flows that go up in the market, right? Index options are dominated by portfolio hedging flows.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“That's right, so using option hedges around a portfolio enables you to do that, right? You have a budget, you have a hedging budget, you say how many basis points or whatever you're willing to spend on your hedge, knowing that that may well go to zero and you actually like the scenario where that goes to zero because it means the market didn't bother correcting and carried on going and your portfolio is doing well. But in the adverse outcome that the market sells off dramatically and your macro fears get realized, that's when your hedge comes into play, makes you a ton of money that you're then able to monetize against the losses you've taken on your broader portfolio. And that's the whole point of options hedging. And generally, well, it's put protection that you're buying typically, right? You buy puts, they are the right to sell. You typically use macro assets.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Next one to sort of talk about would be hedging. Okay, so you might have a portfolio with a bunch of risk to equities or whatever, and you don't really want to exit your exposures. You like your exposures. You've done a lot of research on those exposures. You've done some stock selection as well. For the next three months, the macro landscape looks horrible. So rather than just exiting all of your exposures that you've spent all this time researching in and on a five-year horizon, you love them, you want to manage your drawdown to the market because that's part of your day job, right? You kind of get extra credit for having a portfolio that doesn't have a 20-30% correction in it, basically, right? You navigate those types of moves, then that improves your sharp ratios, that improves your portfolio alpha that you're bringing to the table. And you'll get more AUMs over time and things like that.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Things like that, right? So these are risks that are associated with taking leverage bets in futures in a linear product like that, right? When you have nonlinear products like options, you know that even in that gap, yeah, the option price will go to zero. But I knew that up front and I paid the premium knowing it could go to zero. So my account balance is left completely untouched and unscathed, basically, right? So that's the beauty or the it's not like cheating death, but it's just the asymmetry. It's the asymmetry the options give you in their payoff that allows you to have that kind of comfort basically.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“Now, when I say Save Blairidge, I guess what I'm saying is when you take a leveraged position on an asset in a futures account, right, or a spread betting account or something like that, and you have to post a certain amount of margin and you can take quite large positions relative to your account size, there can be freak events, right? There can be freak flash crashes, random news events you weren't expecting that suddenly make the asset gap, right? It doesn't actually trade at the level where you might have a stop loss put in there, which you think is your safety cushion. I've got to stop. I'll get stopped out. It's fine. Well, if you carry that position overnight and the market gaps, maybe your stop is executed at a horrible level that blows up your entire account, right? And your account balance goes from X to zero or even negative because your execution was so bad, right? And the broker is asking you for more money.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“They made multiples of that premium, right? In some cases, maybe even 100x, I think, right? If we look at some of the GME stuff that went on last year”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“So you can then size your position according to what you're comfortable losing. Is it 10 basis points in my portfolio? Is it 100 basis points in my portfolio? Whatever it is. And that's really that safe leverage to take a directional view on an asset is what options give you, right? That's the first reason, right? There's other ones that we can go through. But for me, that's a big one. And examples of that have been a lot of retail people getting excited about these big trends in tech and stuff like that over the years. And the meme stock, the craze, the meme stock craze, right? Which was people buying weekly calls on things that they thought were going to squeeze. And yeah, I think it was a bit misguided and clearly a lot of these guys have lost quite a bit of money doing those type of trades, but they were profitable at a place and a point in time for certain people. And all they were ever going to lose when they did that trade initially was the premium.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT
“So the first reason I would say is leverage, but safe leverage, right? Because you can get leverage trading futures, right? A lot of people do, and then a lot of people blow themselves up. So what people can do with options is they can get exposure to an asset with a pretty limited amount of capital, which is just the premium. And if they get the move that they're looking for in the asset. So it's a directional view on an asset. You're taking a directional view just like you would if you bought a stock or you bought a future or you sold a future position, whatever it is, but you have a small amount of money at risk, right? And you know that between now and the expiry of that option, if you buy the option, that's the most you can lose. Which is pretty, you know, valuable, right, in terms of your risk management, you know with certainty, you're going to lose the premium and nothing more.”
2022-03-17 · Forward Guidance · Options Trading for Macro Investors | Imran Lakha · IDENTIFIED FROM THE TRANSCRIPT