![]() ![]() ![]() Leveraged instruments usually can lose you more than you put in (i.e. (Not having done math, I think expected return can grow as long as your stock is a random walk with positive drift, but it should look like “1/100 chance to make 130× 99/100 to lose”) As the leverage grows, you can tolerate increasingly tiny downturns, and your probability to survive falls. To reap profits tomorrow, you need to weather the random walk of today without hitting 0. I’m obviously misunderstanding this egregiously, so what am I getting wrong? If you have $2000 and are willing to wait two-ish days, it sounds like you have a strong expectation of making infinite money. down today, and I’m leveraged an infinite amount, then if it goes up I make infinity money, and if it goes down I lose some finite amount like $1000. ![]() That seems…unfairly good? Like, if there’s a 50-50 chance oil will go up vs. So it seems like as you increase the amount you’re leveraged, the potential profits go up a lot, but the potential losses stay fixed at “all your investment”. I’m pleased to announce the publication of my first book, Jesus Was a Less Wronger, a work specifically designed to annoy an incredibly small number of people. Fair.īut if oil goes up $50, you make $5000, and if oil goes down $50, you already lost all your money at the moment it went down $10 so you can’t lose any more. slatestarscratchpad: nostalgebraist: slatestarscratchpad: Reading Worm is depressing, because I feel like I’ll never be as good as Wildbow at most facets of writing. If oil goes down $10, you lose $1000 (all your money). If I understand this right, if oil goes up $10, you make $1000. Suppose you buy $1000 of oil futures leveraged 100x. All right, more really stupid finance questions for Tumblr. ![]()
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