Warren Buffett & Charlie Munger: Derivatives
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- Опубліковано 21 лют 2019
- Warren Buffett and Charlie Munger discuss derivatives at the 1995 Berkshire Hathaway annual meeting.
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Wow, already in 1995 Buffett and Munger nailed it.
If you're anything like a nail, Buffett and Munger are your hammer.
I know someone who works as a prop trader very well at a well known firm, he said retail investors who buy derivatives are thought of as "free money"
And they are right, is free money, full of risk, which is a differente issue.
@@sergiogarofoli573 your comment doesn't even make sense.
@@TheUndulyNoted because you count the money, not the risk involved. Money alone disguise the risk
It's a con. A scam.
Robinhood gamblers will reduce their risk after watching this video, maybe, by 1%..
Hahahahaha
Charlie Munger said that he disapproves more than Warren Buffett.
Well said gentlemen. Well said.
Good job
Important point that wasnt so clear there. Derivatives do have a good purpose for risk management but it only works if the counter party deliveries, much like an Insurance policy which arguably is a derivative and like an insurance policy it depends how the contract is written. Derivatives as an investment is not a good idea unless it relates to your area of expertise, ie you add value and know why the price represents good value
Financial crisis would've been avoided implementing some of these recommendations years and tears ago!
So what I am getting from this , can win big or lose big ! Agree 100% with Charlie and Warren 😎
Prescient. Both the Gov't of the 1920's and Charlie were right. Society did have an interest since we had to bail them all out in 2008 for their misdeeds with hyper leveraged instruments.
2008 wasnt caused by derrivatives but by people signing on loans that they could not take.. of course the cds frenzy and cdo mania that led to ever needing higher returns surely did not help,but it always required someone to sign onto a bad deal they could not afford. in other words,the people were stupid and greedy and the banks were greedier.
Exchange traded derivitaves are nothing like what took down the housing market in 2008-9. That's over the counter where countr party risk is an issue. I wish people would delineate the two,they are very different. Exchange traded options are just another way of price discovery, but there isnt really any margin either,so buffet is mostly talking the OTC derivitaves,and he isnt wrong.
can you elaborate more on the difference between et options and OTC derivatives
Exchange traded options are on a public marketplace,exactly like stocks or futures. Over The Counter (OTC) is basically a side bet,usually between two large financial institutions,where its basically a private deal. Who knows what size or volume they are trading. Being cross collateralized like that AND private,could basically take down the system. Thats why in 2008 they basically just turned the printing presses on because they were ALL going to fail! But I just dont like when media talks about "options" as if they are all bad. OTC has its place,but can be very risky and no one knows what the risks actually are to the system as a whole. Regular options traded on an exchange are just like stock,they are margined and everyone involved know what they are getting into.
@@brianmccullough4578 so how are OTC options regulated?
Looks like central clearing is a counterparty @GME meltup hehexd
@@brianmccullough4578 do you have a video I could watch
Options contracts trading
Holy shit, wow. Okay, wanted to because the hype almost got me. Now, won't
Derivatives are a simple word trick. Not a math trick. It means they "derived" it from something else, like mortgages.
It’s fine! Not like these derivatives are gonna help create a housing bubble whose crash will just about obliterate the global financial system or anything..
What happens if the counterparty doesn't pay up?
Warren has traded options
Sold on and gained money
Yes, and he made money and lose money.
The big difference between Buffett and others is that he never puts up collateral on the puts he sells and then he immediately reinvests the premium.
If you are retail good luck with finding a broker that will let you sell puts and put up absolutely no collateral
@@VampiricVolt a typical margin account will only require 10-20% collateral for the mind of stocks warren deals with
@@sovietsandvich8443 I know, but there is still a huge difference between not putting up collateral and using margin to put up collateral. By not putting up any collateral he essentially has the benefits of margin but none of the risk associated with margin, because he isn't actually borrowing any money.
Not dissing options traders, I love trading options, but when people say 'Buffett sells puts' I always feel obligated to say that he has different requirements for the options he does sell. I myself like selling options and occasionally buying them, but comparing him to retail is simply an apples to oranges comparison.
This was a long 6 minutes
He says uh alot
They are talking about stock options. Personally I'm glad they are a thing.
Not just options, futures as well
hes talking about all derivatives
@@missionpupa what's wrong with futures? I'm glad they have derivatives, I think they're awsome :) I love buy and holds, but trading contracts is amazing.
@@marcmini8137 Didnt you watch the video, these 2 just explained why. Why dont you just buy the actual stock and use margin. I trade derivatives too, but we could live without them.
@@missionpupa I dont use margin fuck that. I cashflow from my stocks using derivatives. Changed my life FOREVER. Financial free with no job becuase of option contracts :)
But the funny thing is: Warren Buffet said he would use them. Of course he is not talking like Bank of America, but still..
People forget that without the swaps market thered be no disneyland in france or japan!!!
How can you grow with no money options want it all for themselves guys are billionaires and there still crying
Warren makes bad money