How are YOU telling BP to go **** itself?

[Al B. Sure!]

KH, I don't remember much Finance (and I coasted through derivatives classes) so you got to walk me through this.

Your original point was that roulette is a better bet than a typical equity trade. What would you say is a typical implied volatility for an equity security?

[KrazyHorse]

About 30% per annum is pretty typical

[Al B. Sure!]

How much different? The house takes 3% of your initial bet on a game in which your variance is approximately the size of your initial bet (roulette). How much was your brokerage fee? How long did you hold BP for? What was the implied vol over that time period?

Considering when you said this... what would you suppose BP's implied vol would have to be, assuming 0.56% commission, so that it is as efficient as betting in roulette?

[KrazyHorse]

To hold intraday? about 5 times higher than it is

[Al B. Sure!]

About 30% per annum is pretty typical

So daily would be what? 30%/SQRT(252)= 1.86% ???

[Al B. Sure!]

To hold intraday? about 5 times higher than it is

Why? 5x assuming it's annual volatility is ~90%?

[KrazyHorse]

Yes.


3%/100% = 0.03

That is the price you are paying per "unit of risk".

0.56% at that same ratio means that you need approx. 19% per day to hold for one day.

So, sorry. ~3.3 times, not 5 times. Though the wisdom of applying monthly vols to intraday movements is questionable...

The point is that discounted stock prices are martingales, and betting on them for very short increments is no less silly than going to the casino and putting it all on black.

[Al B. Sure!]

To be fair, my broker charges $0.015 per share or a minimum of $5.00 per transaction. So $5.00 for up to 333 shares. Had I bought 333 shares at $30, then you'd be talking per transaction commission of 0.05%.

If I had made a much bigger bet, the price per unit of risk would go down substantially. Then I'd need what? 3% per day?

[KrazyHorse]

Yes, to the point where it's slightly smarter to bet on the intraday fluctuations of BP than to bet on roulette...

[KrazyHorse]

Stop mucking about with the stock market and find a real job. There's a lot more upside in it....

How much did you make on your bp trade? 50$? Come on....

[Al B. Sure!]

Stop mucking about with the stock market and find a real job. There's a lot more upside in it....

How much did you make on your bp trade? 50$? Come on....

$100+

And I'll get a real job that pays well soon. It's just I need to finish OCS

[KrazyHorse]

The armed forces don't pay well...

[Al B. Sure!]

KH:

The average entry level salary for someone with my degree is ~45K.

A newly commissioned O-1 with no dependents living off base near the three main Marine Corps bases makes...

Quantico, VA: 51828
Camp Lejeune, NC: 47772
Camp Pendleton, CA: 54564

Then you add in Montgomery GI Bill benefits, CLRP (college loan repayment program), and medical benefits and the total compensation package starts looking a lot better than the private sector... Add in additional compensation if you have dependents, and it starts looking really good.

With 4 years of experience and the typical promotion to Captain, an individual stationed at Camp Pendleton will make $84744, not to mention those benefits would add additional compensation.

Do you think I'd be making that much after 4 years in the private sector?

[KrazyHorse]

If you have any brains in your head, yes.

[Al B. Sure!]

If you have any brains in your head, yes.

With a mere BBA? My friends in finance aren't making that much after 2-3 years.

Look, KH, if everything goes well, after 4 years on active duty, i'd be able to pay for grad school in cash