Someone turned 80k into like 1.2 million betting on Tesla calls or something and hedged with a Kamala win bet it was like 50k tesla/30k Kamala and they turned it into 1.2 million via Tesla somehow

Is it like

  • bet 1/2 on unlikely thing
  • bet 1/2 on likely thing
  • rely on gains on either side averaging out to at least ++
  • Churbleyimyam@lemm.ee
    3·
    3 days ago

    Hedges are a good investment because once it has matured a hedge provides food and shelter for many species of birds, animals and insects. There are government subsidies available for establishing and maintaining them. They also provide returns for people in the form of wood and in some cases edible fruit.

  • rbn@sopuli.xyz
    1·
    3 days ago

    From my perspective you can’t bet both sides and still expect gains on average. Sure you can be lucky that the one bet wins more than the other loses but typically that doesn’t work if you bet on two opposite outcomes. There are no magical and safe ways to multiply money other than maybe being super rich and already too big to fail.

    • cheese_greater@lemmy.worldOP
      1·
      3 days ago

      So how does hedging prevail at the instititional level it does or it seems like it does as a viable tool in the investing toolkit? Does it consequently hard require insider info and basically its just investing uncertainty theatre?

      • Tar_Alcaran@sh.itjust.works
        1·
        3 days ago

        Hedging is done in many different ways. One of the easiest, that requires zero insight is a future hedge.

        Say I hold 1000 shares worth 5 bucks each in company Bob. If the price goes up, that’s great, but I’ll need to replace my car in three years, and I’ll need at least 3000 bucks for that.

        So, I’m going to spend some money now on buying an option in 2 years 11 months to sell 1000 shares for 3 bucks per share. That way, if Bob company completely collapses, I’ll always have at minimum 3000 bucks.

        Of course, those options cost money to buy, so I’ll have to pay to reduce my risk, but I don’t need any real insight into the market to use this kind of hedge.

    • Cephalotrocity@biglemmowski.winEnglish
      0·
      3 days ago

      From my perspective you can’t bet both sides and still expect gains on average.

      Statistically you can. Firstly, when you invest you can limit how much that could be lost right off the bat by how you invest and via what amount. For example: BUYing $20k in 2 opposing stocks, split 10k each. Max possible loss? All $20k.

      Let’s say the Index goes up 10% which suggests on average that $20k is now $22k, or $11k/stock.

      In actuality stock A loses 50% but stock B gains 60%. Had you luckily invest solely in the right stock (B) with all 20k you would have made $12k. Badly (stock A)? Lost $10k. By hedging you dilute max potential gains to mitigate catastrophic loses.

      • degen@midwest.socialEnglish
        0·
        3 days ago

        It’s not so much about estimating odds as it is limiting the potential downside. Hedging is the rational part of things lol

        • cheese_greater@lemmy.worldOP
          0·
          3 days ago

          Can you give me a really classic and rational/prototypical example or hedging? Like is it be stretegically cynical/ Thinking in Bets?

          • Tar_Alcaran@sh.itjust.works
            1·
            3 days ago

            The classic non-stock example is the apple farmer. Apple trees take a long time to grow, years before they produce any significant amount of apples.

            Suppose I plant an orchard of the new Awesome Amy Apple trees. I’m betting those will really take off in two years, so they’ll be really profitable. But since these apples are my entire income, and I’d rather not eat an entirely apple-based diet by then, I’m going to hedge my investment. I’m giving up some profit to reduce my risks.

            I’m making a contract to sell half my apples for, say, 20 dollars per bucket. Now, they might be worth 40, but they might also be completely worthless if the Perfect Pete Apple becomes more popular. So I’m giving up some potential profit in exchange for certainty by hedging.

            Another type of hedge would be me planting 75% Awesome Amy, and 25% Perfect Pete. I’m still assuming the alliteration will win the day, but by spreading my investment around, I’m reducing my risk.

            To translate this to the stock market, the first examples would be to buy options for the future. The second example is simply spreading your investments.