<p>Heh that kid's hedge fund is called Cilantro. Kind of a douchebag. In one of the scenes he almost has a heart attack from losing 6K in a day and in another he is telling his friends that even if he has a 50K day it isn't much. Down a whole lot last year to boot. </p>
<p>What MK is describing is the effect of regime changes. For the past few years those writing options (selling premium) have had consistent returns. However, that can't last because sooner or later it will change. The managers that did well in that regime will not do well in the next. This is why there are so few managers returning consistent returns over decades. What works now will not work tomorrow and one must consistently adapt to keep pace. </p>
<p>I have a decent understanding of options (I have played with vanillas and do a few exotic (binary) bets as well). There is a lot more to it than just complex mathematics. A good grasp of high school calculus is enough to know the basic pricing models. You might want to check out the book by Natenberg which is a great read (better than Hull IMO).</p>
<p>And yes penny stocks are...what one could call risky. I made a little over 600% last year (followed the moves of a friend), holding nothing more than 3 days. Lost a hefty amount of that at playing blackjack as well, so it evens out and i have learned my lesson. I was playing a pretend game at a party dealt by hired dealers, rules and odds were played by the official rules and my first time actually playing, i turned my $300 starting into 15k. That gave me a little to much...uh...confidence at the real casino. Morongo sucks by the way</p>
<p>Above (penny stocks) i do not consider gabbling at all...it is pure luck and you must get rid of your holding quickly (from what i have learned, no more than 5 days, but try to keep it at 3 or less)</p>
<p>Any of you play with hedgelets yet (hedgestreet.com)?</p>
<p>To me even 3 days is too much. I usually buy on momentum and once the stock jumps 100% I sell half of my position to protect my capital and watch to see if the stock gaps the next day. It's much better to cut your profit earning potential in half rather than risk losing everything. One of my friends was so confidant in a certain pink that he continued to hold it after it made a 200% gain in 2 days, and the very next day his account balance read $2 because the stock no longer existed. The scammers took his money and ran for the hills.</p>