Gilch made a good point that most investing is like “picking up pennies in front of a steamroller” (which I hadn’t thought of in that way before). Another example is buying corporate or government bonds at low interest rates, where you’re almost literally picking up pennies per year, while at any time default or inflation could quickly eat away a huge chunk of your principle.
But things like supposedly equivalent assets that used to be closely priced now diverging seems highly suspicious.
Yeah, I don’t know how to explain it, but it’s been working out for the past several weeks (modulo some experiments I tried to improve upon the basic trade which didn’t work). Asked a professional (via a friend) about this, and they said the biggest risk is that the price delta could stay elevated (above your entry point) for a long time and you could end up paying stock borrowing cost for that whole period until you decide to give up and close the position. But even in that case, the potential losses are of the same order of magnitude as the potential gains.
Gilch made a good point that most investing is like “picking up pennies in front of a steamroller” (which I hadn’t thought of in that way before). Another example is buying corporate or government bonds at low interest rates, where you’re almost literally picking up pennies per year, while at any time default or inflation could quickly eat away a huge chunk of your principle.
Yeah, I don’t know how to explain it, but it’s been working out for the past several weeks (modulo some experiments I tried to improve upon the basic trade which didn’t work). Asked a professional (via a friend) about this, and they said the biggest risk is that the price delta could stay elevated (above your entry point) for a long time and you could end up paying stock borrowing cost for that whole period until you decide to give up and close the position. But even in that case, the potential losses are of the same order of magnitude as the potential gains.