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0 pointsthaumasiotes6y ago0 comments

That's the opposite of what he said. Look at his latest article:

> We have discussed this theory before, during Tesla’s wild rally, and I conceded that they’ve got a point. Not a perpetual motion machine, but a motion machine, sure. The machine runs on leverage. If you have $100, you can buy $100 worth of stock, and the stock will go up a little; your trade will be self-reinforcing. If you get a margin loan, you can buy $200 worth of stock, and the stock will go up a bit more; your trade will be a bit more self-reinforcing. On the other hand if the stock then goes down a bit, your broker might call more margin from you, and if you can’t put up more money the broker will liquidate your whole position and the stock will go down. Trading on margin magnifies swings

Or what he originally wrote:

> the call options should have a volatility-increasing effect: Dealers who sell call options have to buy stock to hedge, and they have to buy more stock to adjust their hedge as the stock goes up (and sell as it goes down), meaning that speculators who buy Tesla call options to bet on the price and volatility going up also to some extent cause that to happen. To some extent! “LOL BLOOMBERG ADMITTING THAT AS LONG AS WE BUY THE CALLS THE STOCKS WILL GO UP BECAUSE OF HEDGING ALGORITHMS,” was Reddit’s takeaway from Kawa’s article, and I would not personally go that far.

How do you get from Matt Levine saying "this cannot perpetuate an upward movement" and "other people are taking this to mean that the stocks will keep going up as long as we keep buying the calls, but those people are wrong" to "Matt Levine says this perpetuates an upward movement"? He made a direct, first-person statement of what he thinks, and you've inverted it.

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tybit6y ago

Not a perpetual motion machine, but a motion machine, sure.

The GP was correct, Matt clearly says it can create some upward momentum, albeit not an unlimited amount.

thaumasiotesOP6y ago

No, he says it exaggerates the ups and downs, so you get higher highs and lower lows. That is not "creating upward momentum" in an ordinary sense.

Also, it takes some guts to defend the idea "this perpetuates an upward movement" by quoting someone explicitly saying it doesn't. A finite upward boost and an infinite upward boost are different things, as explicitly noted in the quote you just pulled and in your comment on it.

greenie_beans6y ago

Oof, yeah, I misspoke. I was responding to the parent comment which said that r/wsb can’t move markets when, 30 minutes prior, I had read something (Matt Levine’s take on it) with a claim to the contrary.

Thank you random HN commenter for pointing out my flaw in the “perpetual upward” comment. Levine’s take still claims that r/wsb can technically move the market, no? Or should I go back and re-read? Maybe I interpreted differently. But I don’t know for sure, because I don’t study such things and hardly know options or markets. Neither does like 98% of the folks on this post based on their comments here (yourself included!)

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