[louprado]

The scariest WSJ headline the week prior to when volatility started was the following: "New account creation hits all time high at E-Trade, TD Ameritrade, etc".

The stock market engine has been hot for 5 - 6 years now and we just threw a can of nitro into the engine by way of massive tax cuts and deregulation. And then pundits and our President brag about how awesome this ride is as if managed growth is somehow anti-American. The retail investor masses heard that message and have arrived. The masses that don't know the difference between an income statement and balance sheet or how a market cap relates to the stock price. Historically they have been a catalyst of instability and trade solely based on the chart and trends.

So volatility seemed obvious two weeks ago. But when an obvious thought arises regarding the market two quotes always come to mind:

"Far more money has been lost anticipating the correction than in the correction itself". P. Lynch

"The first person you must not fool is yourself and you are the easiest person to fool". R. Feynman

[utnick]

The real gem of that WSJ article was that 10% of daily trades on E*Trade were either pot or cryptocurrency related

[tedmiston]

I don't get why so many people pay $7 fees to E*Trade when there's no commission on Robinhood.

[goldenkey]

The amount of money saved with Robinhood is often lost in the less than desirable order routing that Robinhood internally provides. This is how they can provide "free trades."

Often they are executing lousier order prices than are available on other exchanges (the actual market.)

Other brokers, that make you pay for trades, send your order out to all exchanges.

Example: save $7 to end up paying 10 cents extra per share on 1000 shares. Looks like you actually got Robbedinhood for $93...

Other brokers take a fixed $7. Robinhood takes a percentage of your orders. Even for an order as small as $300, you can expect to get Robbedinhood for $7 or more (a couple percent.)

https://startupsventurecapital.com/robinhoods-exceptionally-...

[benjanik]

I think its a combination of things. One is that they were using etrade or another broker before robinhood came out. Two is that $7 on a typical trade is pretty small. Anecdotally, my trades are $1k-$5k, so $7 is maybe only a tenth of a percent, or the amount that I could lose or gain within a few minutes after the trade. Third, "if you aren't paying for it, you're the product." It is well established that your order flow is sold to larger institutions. I know it probably doesn't affect me in any meaningful way as a small fish, but I still don't like my investment decisions to be data for someone else's front running strategy.

[matt_wulfeck]

> The retail investor masses heard that message and have arrived.

The retail masses showed up many many years ago in the form of retirement accounts. And we’ve also benefited tremendously from this bull market. This last correction is nothing if you’ve been in the market for a few years.

Also I really doubt retail investors are the catalyst for anything here. Normal people don’t move a trillion dollars out of the market in a few minutes.

[aphextron]

>Also I really doubt retail investors are the catalyst for anything here. Normal people don’t move a trillion dollars out of the market in a few minutes.

Sure they do. Robo-advisor services like Betterment have exploded over the past few years. They alone have over 10 billion under management right now. When everyone's money is following the same algorithms, it's natural to assume that any market movement will be magnified now.

[jsoc815]

>The retail masses showed up many many years ago in the form of retirement accounts.

The size and composition of the mass is often over-estimated, particularly w/respect to retirement accounts.[1] And they've mostly been sitting on the sidelines. Over all trading volume has been lower since the 08/09 crash, the retail side in particular. (Don't have access to the tool that tracks this anymore, but there are lots of articles/videos, etc... talking about this.)

>Also I really doubt retail investors are the catalyst for anything here.

Generally correct, but I caught an interview on CNBC the other day where the speaker said that retail flows accounted for 80% of the volume on one of the US exchanges for that day. So, sometimes retail investors can have an some impact on market movements.

*[1]: https://finance.yahoo.com/news/fewer-americans-retirement-ac...

[dynamodispatch]

> The scariest WSJ headline the week prior to when volatility started was the following: "New account creation hits all time high at E-Trade, TD Ameritrade, etc".

The WSJ, marketwatch, cnbc, etc writes this every year. # of accounts, margin/debt exposure, etc. They also write how retail investors are missing out.

"As Dow Tops 25000, Individual Investors Sit It Out"

https://www.wsj.com/articles/as-dow-tops-25000-individual-in...

I wouldn't put too much stock in finance newspapers' headlines. They aren't there to give you advice. They exist to sell you ads.

> Historically they have been a catalyst of instability and trade solely based on the chart and trends.

This is not true. Retail investors don't move markets. Pension funds, hedge Funds, large investors do. And they do so when the FED decides to moves markets ( aka raise or lower interest rates ).

[JumpCrisscross]

> Retail investors don't move markets. Pension funds, hedge Funds, large investors do

I used to make equity derivative markets. About thirty minutes after CNBC commented on something, a tsunami of stupid Charles Schwab order flow would hit our systems. It moved prices. Coördinated uninformed flows can dramatically move markets because markets are priced at the margin, not the bulk.

TL; DR If both institutions and retail are active in a name, the institutions will set the terms. But if institutions are inactive while retail is active, the latter can move markers surprisingly far.

[dynamodispatch]

> I used to make equity derivative markets.

By market, I was referring to the stock market. Also, are you claiming to be a market maker?

> About thirty minutes after CNBC said something about something, a tsunami of idiotic Charles Schwab and friends order flow would hit our systems. It absolutely moved prices.

It doesn't take 30 mins after the news breaks for stocks to move. And the move is usually orchestrated by the big boys and their algos. The herd can certainly follow the move of the big boys as they dump their shares on the late arriving retail investors. But the move is controlled by the big boys and of course the market makers as they tried to leech out as much off the spread as possible. Unless you are referring to lightly traded stocks or OTC stocks with no volume.

There isn't much retail trading derivatives. The derivative markets are almost exclusively dominated by hedge funds, banks, large investors.

[JumpCrisscross]

> I was referring to the stock market. Also, are you claiming to be a market maker?

I used to be a market maker of stock options, amongst other things.

> It doesn't take 30 mins after the news breaks for stocks to move

When it comes to markets, test every assumption. In reality, information diffusion is unpredictable and heterogenous [1]. This is due to, in part, the "effects of limited attention in at least part of the population of investors in the market, interacting with some more sophisticated investors with better access to information processing technologies" [2].

> The derivative markets are almost exclusively dominated by hedge funds, banks, large investors

Individual stock (versus index) options are actively traded by individual investors [3]. Individual investors also actively trade futures [4].

[1] http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.652...

[2] https://pdfs.semanticscholar.org/b180/3e674cc6be4de275cda1aa...

[3] https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2013.184...

[4] https://www.sciencedirect.com/science/article/pii/S156601411...

[dragontamer]

Options are great, even for individuals. The main issue is that everything is in size 100 lots, so a huge number of stocks are simply "too big" for me to regularly use options on as an individual.

If I were to do something like sell a put option on AAPL ($156.41 at the moment) would be $15641 into a single stock that I may have to put up. I'm closer to ~$5000 per trade as an individual, its not like I have as much money as those banks or hedge funds. In short: I'm only really able to buy and sell options on shares with $50 or lower prices. At least with my relatively conservative trading style.

But still, selling puts is a cool way to be "paid to be forced to buy a stock", and if you're worried about missing the upswing, you can always sell a put (at the money) + buy a call out of the money. Such a trade benefits from the volatility of the market, and is still strictly safer than owning the stock outright.

I mean, I'm a long-term buy-and-hold investor. Selling puts + buying a FOMO out-of-the-money call option is a really good trade most of the time. Given the tradeoffs and the decisions I've made on my portfolio. It basically allows me to benefit from market volatility.

[grahamas]

Could you recommend any resource for gaining that understanding of options? Not just technically, but in terms of the strategies you've sketched here (obviously I can and have googled the definitions).

[vitohuang]

I'm new to options.

Looking at the AAPL options on yahoo finance, I can't find any puts that cost $156.41, even those in the money 2020 options.

How did you get selling a put cost same as the underlying share price?

I thought one of point of options pricing is you don't need to put up the same amount as owing the shares.

[lodi]

Why would you sell a naked put though? Sell a put spread (e.g. short 155 put, long 150 put) and you can exert extremely fine control over your max liability. $500 per contract in the aforementioned case.

[m3kw9]

Yeah people timing the corrrection is as foolish as people trying to time a bottom. The short game is won by people with way more information than you. You beat them by going long as it is harder to predict for them. The game is more even at that distance

[dominotw]

How do you define " managed growth" ?