If you knew an asset was going to zero in 6 months but it's price is currently...

Illusionz
Illusionz

If you knew an asset was going to zero in 6 months but it's price is currently rising and highly volatile would you buy it? Maybe day trade it?

Also you can't short it.

iluvmen
iluvmen

That's like every other biotech stock we discuss on the RH threads.

TreeEater
TreeEater

@iluvmen
Bit irrational don't you think? You wanna be on the moon but don't care if the rocket blows up.

Emberburn
Emberburn

@Illusionz
Also you can't short it.
Why on earth not?

RumChicken
RumChicken

@TreeEater
you can make money both ways. Its a rocket that pays to go up and pays on its way down

StonedTime
StonedTime

Explain why you would buy and asset you know is going to zero

ZeroReborn
ZeroReborn

@RumChicken
both ways
Right?
Play the run-up, then the plunge

New_Cliche
New_Cliche

@ZeroReborn
Yes he means you can purchase the asset and make capital gains buy it appreciating. And he also mean that you can make money from borrowing the equity from your broker at its current price and immediately sell the equity and buy it back at a later date for a profit if the share price has fallen.

But what he doesn't know is when to stop holding the bag of shit.

girlDog
girlDog

Buy the dip. Sell the rip.

King_Martha
King_Martha

@New_Cliche
But what he doesn't know is when to stop holding the bag of shit.
Sounds like you're looking for that special market technique.
The one that insures you don't lose any money.

You would definitely need both directions available to pull that off. Why is it that you can't short again?

w8t4u
w8t4u

This whole thing was a behavioral finance experiment. The rational thing to do would not be to buy it. If markets were truly efficient then people wouldn't buy at all. You know the asset is going down but you bought anyway though the Robin Hood and crypto-currency threads already do refute the EMH to some degree. You can't short as I just told you it was going to zero. If I tell you it's going to zero then it makes sense to short it at any price above zero.

Still not sure if this type of behavior is just isolated to Veeky Forums or markets are not efficient, although it really only takes a few rational investors to make money off of the irrational traders (retail) and make the market efficient as Eugene Fama argued. I believe the results are telling either way though. I think this thread may also support the great fool theory, momentum working and technical analysis.

hairygrape
hairygrape

You mean Bitcoin and Ethereum?

RavySnake
RavySnake

@w8t4u
You can't short as I just told you it was going to zero
Well, that's pretty fucking stupid.

Here, i've got one for you:
You're at a roulette table where the ball is spinning in the wheel (it's going to come up red).
What would you bet?
You can't bet red, though, because I already told you it would be red.

MPmaster
MPmaster

@RavySnake
If the rules stipulate that I can't bet red then I would not play at all as I know I would lose. But that is not the case here.
asset is going to zero in 6 months but it's price is currently rising would you buy it?

Everyone who posted said yes they would buy it regardless of it's future value being zero.

Nude_Bikergirl
Nude_Bikergirl

@MPmaster
If the rules stipulate that I can't bet red then I would not play at all
Then there's your answer, right there.
Which makes you wonder about the people using Robinhood.

Emberburn
Emberburn

@Nude_Bikergirl
They know the equities are likely going to be zero in the next few months yet they buy in anyway. If you read the threads people say they don't wanna be holding the bag at the end. This is interesting because it defies logic and conventional finance wisdom. The value of an asset is suppose to be the present value of it's future. If it's going to zero then the asset has no future.

Thus the only logical reason they are buying is because they believe that others will buy after them despite the asset itself already trading at or below fair value.

There is nothing wrong with the robin hood broker.

I have actually changed my investment philosophy. Might actually buy some meme stocks or btc,eth maybe even trump.

Sorry for the bad English

LuckyDusty
LuckyDusty

@Emberburn
that's called the greater fool theory.

if you are super-disciplined, you can take profits out of the market. there's a documentary on youtube called "mind over money". legitimate research done at post secondary institutions. the trick is, sell before everybody else does. duh!

i'm actually a momentum trader. i seen charts literally move in one direction and completely reverse in the next 5 mins. in and out, take your profits and move on to the next trading opportunity.

cum2soon
cum2soon

@LuckyDusty
I've published a paper on the topic of both momentum and greater fool theory. Eugene fama it was one of the greatest threats to emh. Interestingly momtum is also the greatest factor in all the investing factor models and academics can't explain it. The winners and losers keep switching, same with the risk profile also the timeline on which it occurs.

Gigastrength
Gigastrength

@cum2soon
shhh. you're going to get shitposters in this thread if you keep going on about that.

anyways, if you have published work, there's no point posting on this board. it's very clear that markets are irrational.

Sharpcharm
Sharpcharm

@Emberburn
the robin hood broker
Robinhood is a broker like a guy in a wheelchair is an olympic athlete.

There is nothing wrong
Anyone who would trade in financial markets while being limited to one direction of price movement is, put simply, a congenital idiot.
You see this as dissimilar from the roulette argument?
It isn't.

AwesomeTucker
AwesomeTucker

@Sharpcharm
Well that depends on your overall thought process when trading. Either in general markets move up and you don't need to short or you should hedge using a market natural portfolio. But if we're still talking about Robin Hood meme stocks then yes, it would be advantageous to short when the rocket explodes. I've never used this broker but I'm guessing you can use trailing stop losses which would reduce risk.

Need_TLC
Need_TLC

@AwesomeTucker
depends on your overall thought process
Either in general markets move up and you don't need to short
"in general" doesn't mean constantly, so the only way this approach works is over long term, eating the downturns. You can't argue that profiting in the opposite direction is an ability that should be withheld by any "brokerage".

I'm guessing you can use
I wouldn't assume anything with those guys. I've barely scratched the surface of what they don't have, but it's enough to make me laugh when they get called a broker.

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