What's wrong with ordinary traders taking advantage of the flaws in dealers and big money bots? Aren't they (dealers and such) the ones who have been doing it forever?
Exactly. As someone who has made substantial profits over the years (including a six-figure profit on the recent TSLA and SPCE rally) thanks to WSB, it brings me great joy knowing I’m pocketing money straight off Wall Street institutions.
WSB tends to celebrate losses (aka “loss porn”) and it’s well-deserved - many tend to do really stupid things (like “YOLOing” 100% of their portfolio into a single position). But if you know how to manage risk effectively (Kelly’s criterion etc) it’s possible to consistently make profits.
Amidst the chaos of shitposts and degenerate gambling there is often quality DD hidden throughout. The odd thing is I suspect WSB has reached critical mass to the point where it’s achieved feedback loops and can actually move markets, thanks to algorithms misidentifying unusual options volume caused by wild speculation & shameless gambling.
Interesting you mentioned "Kelly criterion", I have been interested in it for some time and the articles I read seemed to point out that it works "best" only after the fact (after the trade has been executed). How do you deal with this?
It’s not foolproof, but generally the idea is to keep positions small (relative to portfolio size) and quickly take profits - which is critical when dealing with something as insanely volatile as options. With options one can also improve their odds with intermediate strategies (such as call debit spreads, straddles/strangles during earnings). I often will temporarily buy calls on something like TECS (-3X Inverse Technology ETF) when I’m speculating on multiple tech earnings plays within the same week - that way if my calls on Apple or Microsoft don’t pan out it’ll be offset by the inverse ETF gains. Options can be an incredible tool, and used properly can be excellent for managing risk effectively.
