I'm playing an investment game. How do i make $50k from $1 m
-
- Posts: 17
- Joined: Mon Feb 11, 2013 10:54 am
I'm playing an investment game. How do i make $50k from $1 m
Ok, I already made a thread, but I didn't really explain properly how this game is scored. I started of with $1,000,000 in February, and I have to make atleast 20 trades by the end of May. The way I win the game is if I can match the S&P 500 index or if exceeded.
If Starting market S&P 500 Index = 1000
Ending market S&P 500 Index = 1500
I outperformed the s&P and so i'd win. I'm not where to go. We are allowed to trade stocks, futures, bonds, options, mutual funds, etc.
So, if using that example of the s&p 500 index, If I had a million and ended with a million fifty thousand, then I'd get the win.
If Starting market S&P 500 Index = 1000
Ending market S&P 500 Index = 1500
I outperformed the s&P and so i'd win. I'm not where to go. We are allowed to trade stocks, futures, bonds, options, mutual funds, etc.
So, if using that example of the s&p 500 index, If I had a million and ended with a million fifty thousand, then I'd get the win.
Last edited by pinnerman12 on Tue Feb 12, 2013 3:20 pm, edited 2 times in total.
- bertilak
- Posts: 10726
- Joined: Tue Aug 02, 2011 5:23 pm
- Location: East of the Pecos, West of the Mississippi
Re: I'm playing an investment game. How do i make $50k from
Depends on how soon you need it and how willing you are to NOT get there at all in that time.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
-
- Posts: 25625
- Joined: Thu Apr 05, 2007 8:20 pm
- Location: New York
Re: I'm playing an investment game. How do i make $50k from
Two ways - get a 5% return on your $1 million.pinnerman12 wrote:I'm playing an investment game. How do i make $50,000 from $1,000,000?
i invested in apple,VTSMX, and take-two interactive so far.
Or lose $950K - short all securities that show a rising momentum, low p/b ratio and low p/e ratio. Or just head on down to the race track and put it on number 4 in the third race.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Re: I'm playing an investment game. How do i make $50k from
If you had invested in the S&P 500 January 1, you would have made your 50k. It returned 5% in January.
No one knows. We only know in hindsight.
No one knows. We only know in hindsight.
Re: I'm playing an investment game. How do i make $50k from
This is a game, right? Imaginary money (like they give you at Forex, to get you "in the know" on "how to play" currencies).
My advice: don't play. Investing is not a game.
My advice: don't play. Investing is not a game.
-
- Posts: 686
- Joined: Mon Sep 15, 2008 10:27 am
Re: I'm playing an investment game. How do i make $50k from
With your VTXMS, just wait patiently for about 40-50 years. While Apple is a great company, I doubt they've got a 20x rise in them, even at a 40-50 year time span (the tech field is especially prone to creative destruction).
-
- Posts: 17
- Joined: Mon Feb 11, 2013 10:54 am
Re: I'm playing an investment game. How do i make $50k from
subscription ends in junebertilak wrote:Depends on how soon you need it and how willing you are to NOT get there at all in that time.
-
- Posts: 17
- Joined: Mon Feb 11, 2013 10:54 am
Re: I'm playing an investment game. How do i make $50k from
john94549 wrote:This is a game, right? Imaginary money (like they give you at Forex, to get you "in the know" on "how to play" currencies).
My advice: don't play. Investing is not a game.
yes, it's a simulation where i have to make 5%
Re: I'm playing an investment game. How do i make $50k from
1) Find an investment that will either double or go to zero with roughly equal probability.
2) Invest $50,000.
3) If it doubles, you are done.
4) If it goes to $0, invest $100,000, then $200,000, then $400,000 and go to step 3.
In the end, you have a 94% chance of making your $50,000 and a 6% chance of losing $750,000.
5) Realize that investment games are silly.
As a note, I sometimes wonder if actively managed funds that show small out-performance over a long period of time and then blow up spectacularly are more or less based on this sort of "investing".
2) Invest $50,000.
3) If it doubles, you are done.
4) If it goes to $0, invest $100,000, then $200,000, then $400,000 and go to step 3.
In the end, you have a 94% chance of making your $50,000 and a 6% chance of losing $750,000.
5) Realize that investment games are silly.
As a note, I sometimes wonder if actively managed funds that show small out-performance over a long period of time and then blow up spectacularly are more or less based on this sort of "investing".
-
- Posts: 17
- Joined: Mon Feb 11, 2013 10:54 am
Re: I'm playing an investment game. How do i make $50k from
the simulation is based on the current market
Re: I'm playing an investment game. How do i make $50k from
There's absolutely no way to guarantee a 5% return between now and June. This is gambling, not investing.
"Investment games" are inherently harmful. They promote market timing, short-term speculation, "stock picking", unsound decision making, gambling mentality, and high-risk behavior.
It's important to recognize that whoever is sponsoring this "game" does NOT have your best interests at heart.
Even if this is just a game, at some point in your life you'll need to learn about real investing. You will learn nothing valuable from this game, but you'll learn a lot from the wiki on this site: http://www.bogleheads.org/wiki/Boglehea ... art-up_kit
"Investment games" are inherently harmful. They promote market timing, short-term speculation, "stock picking", unsound decision making, gambling mentality, and high-risk behavior.
It's important to recognize that whoever is sponsoring this "game" does NOT have your best interests at heart.
Even if this is just a game, at some point in your life you'll need to learn about real investing. You will learn nothing valuable from this game, but you'll learn a lot from the wiki on this site: http://www.bogleheads.org/wiki/Boglehea ... art-up_kit
Re: I'm playing an investment game. How do i make $50k from
This was precisely the sort of "investing" exposure I got back during high school - trying to come out ahead during a single semester. The ideas of long-term investing, attention to costs, or diversification just weren't there.SSSS wrote:There's absolutely no way to guarantee a 5% return between now and June. This is gambling, not investing.
"Investment games" are inherently harmful. They promote market timing, short-term speculation, "stock picking", unsound decision making, gambling mentality, and high-risk behavior.
It's important to recognize that whoever is sponsoring this "game" does NOT have your best interests at heart.
Yes indeed.Even if this is just a game, at some point in your life you'll need to learn about real investing. You will learn nothing valuable from this game, but you'll learn a lot from the wiki on this site: http://www.bogleheads.org/wiki/Boglehea ... art-up_kit
Pinnerman12: Is this part of a school or college project?
Just random advice: If you're still young...try to start investing early, in low-cost, diversified mutual funds. I'm closing on 31 now, and it wasn't until only around last November that I was introduced to the idea of index funds, so I'm still relatively new to this stuff too. Until then, I'd viewed anything to do with the stock market as little more than a high-class casino, mostly because of anything I'd been exposed to - which was always picking stocks, constant buying and selling, and always hoping that the management at your stocks' companies wouldn't do anything stupid.
Index funds: You're riding along with the whole, sometimes turbulent, market, and hopefully at a low, low cost.
I wish I'd have known about them sooner. I missed out on quite a few years of investing time.
Last edited by Jeff7 on Tue Feb 12, 2013 12:02 am, edited 1 time in total.
- InvestorNewb
- Posts: 1663
- Joined: Mon Sep 03, 2012 11:27 am
Re: I'm playing an investment game. How do i make $50k from
Take it to a casino's roulette table and wait for a long pattern of consecutive black or red colors to show up. I'm talking 20 colors or more. You could be in there all day, or even all weekend.
Now bet 50k on the opposite color.
If you lose, bet 150k.
If you lose again, bet 250k.
If you lose again, bet 500k.
If you lose again, you will only have 50k left and won't have any chance of recovery.
But each of the first 4 bets ensures a 5% gain if you win.
Based on the law of averages, you should come out ahead in at least 1 of the first 3 bets. The wins are small, but the losses are big. You would also have to go to a casino that doesn't have a table maximum, so VIP area or Vegas.
Disclaimer: I take no responsibility for losses.
Now bet 50k on the opposite color.
If you lose, bet 150k.
If you lose again, bet 250k.
If you lose again, bet 500k.
If you lose again, you will only have 50k left and won't have any chance of recovery.
But each of the first 4 bets ensures a 5% gain if you win.
Based on the law of averages, you should come out ahead in at least 1 of the first 3 bets. The wins are small, but the losses are big. You would also have to go to a casino that doesn't have a table maximum, so VIP area or Vegas.
Disclaimer: I take no responsibility for losses.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
Re: I'm playing an investment game. How do i make $50k from
Your subsequent bets seem larger than they need to be:InvestorNewb wrote:Now bet 50k on the opposite color.
If you lose, bet 150k.
If you lose again, bet 250k.
If you lose again, bet 500k.
If you lose again, you will only have 50k left and won't have any chance of recovery.
First bet: $50k ($950k left if loss, $1050k if won)
Second bet: $100k ($850k left if loss, $1050k if won)
Third bet: $200k ($650k left if loss, $1050k if won)
Fourth bet: $400k ($250k left if loss, $1050k if won)
You still only get 4 bets, but if you lose all 4, you've got $250k left instead of $50k in your example -- that might make it easier to get credit for a fifth bet.
- InvestorNewb
- Posts: 1663
- Joined: Mon Sep 03, 2012 11:27 am
Re: I'm playing an investment game. How do i make $50k from
^ My mistake. What's funny is that I actually used this system with $1000 and was successful at it for a few weeks. I was making $50 per day at the casino, and would leave as soon as I got the $50.SSSS wrote:Your subsequent bets seem larger than they need to be:InvestorNewb wrote:Now bet 50k on the opposite color.
If you lose, bet 150k.
If you lose again, bet 250k.
If you lose again, bet 500k.
If you lose again, you will only have 50k left and won't have any chance of recovery.
First bet: $50k ($950k left if loss, $1050k if won)
Second bet: $100k ($850k left if loss, $1050k if won)
Third bet: $200k ($650k left if loss, $1050k if won)
Fourth bet: $400k ($250k left if loss, $1050k if won)
You still only get 4 bets, but if you lose all 4, you've got $250k left instead of $50k in your example -- that might make it easier to get credit for a fifth bet.
I then lost it all in a very unlucky game where black colors kept appearing. It requires a lot of patience and guts; I would spend hours at the casino to make $50.
Since losing, I haven't been back since.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
-
- Posts: 17
- Joined: Mon Feb 11, 2013 10:54 am
Re: I'm playing an investment game. How do i make $50k from
what are some good short-term index funds sir? Is VBISX good?Jeff7 wrote:This was precisely the sort of "investing" exposure I got back during high school - trying to come out ahead during a single semester. The ideas of long-term investing, attention to costs, or diversification just weren't there.SSSS wrote:There's absolutely no way to guarantee a 5% return between now and June. This is gambling, not investing.
"Investment games" are inherently harmful. They promote market timing, short-term speculation, "stock picking", unsound decision making, gambling mentality, and high-risk behavior.
It's important to recognize that whoever is sponsoring this "game" does NOT have your best interests at heart.
Yes indeed.Even if this is just a game, at some point in your life you'll need to learn about real investing. You will learn nothing valuable from this game, but you'll learn a lot from the wiki on this site: http://www.bogleheads.org/wiki/Boglehea ... art-up_kit
Pinnerman12: Is this part of a school or college project?
Just random advice: If you're still young...try to start investing early, in low-cost, diversified mutual funds. I'm closing on 31 now, and it wasn't until only around last November that I was introduced to the idea of index funds, so I'm still relatively new to this stuff too. Until then, I'd viewed anything to do with the stock market as little more than a high-class casino, mostly because of anything I'd been exposed to - which was always picking stocks, constant buying and selling, and always hoping that the management at your stocks' companies wouldn't do anything stupid.
Index funds: You're riding along with the whole, sometimes turbulent, market, and hopefully at a low, low cost.
I wish I'd have known about them sooner. I missed out on quite a few years of investing time.
- bertilak
- Posts: 10726
- Joined: Tue Aug 02, 2011 5:23 pm
- Location: East of the Pecos, West of the Mississippi
Re: I'm playing an investment game. How do i make $50k from
The last time I was at a casino I beat the house!InvestorNewb wrote: I actually used this system with $1000 and was successful at it for a few weeks. I was making $50 per day at the casino, and would leave as soon as I got the $50.
I came $10 and left with $10. (It was a long time ago!) Although I had no more money when I left I did get a free lunch and drink an they gave me the deck of cards when I left! Not bad for an hour's work. That's not even counting the entertainment value.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
Re: I'm playing an investment game. How do i make $50k from
Of course, since each roll of the roulette wheel is independent of the previous roll, it doesn't matter how many consecutive black or red colors have shown up prior to when you start playing.InvestorNewb wrote:Take it to a casino's roulette table and wait for a long pattern of consecutive black or red colors to show up. I'm talking 20 colors or more. You could be in there all day, or even all weekend.
Now bet 50k on the opposite color.
If you lose, bet 150k.
If you lose again, bet 250k.
If you lose again, bet 500k.
If you lose again, you will only have 50k left and won't have any chance of recovery.
But each of the first 4 bets ensures a 5% gain if you win.
Based on the law of averages, you should come out ahead in at least 1 of the first 3 bets. The wins are small, but the losses are big. You would also have to go to a casino that doesn't have a table maximum, so VIP area or Vegas.
Disclaimer: I take no responsibility for losses.
- bertilak
- Posts: 10726
- Joined: Tue Aug 02, 2011 5:23 pm
- Location: East of the Pecos, West of the Mississippi
Re: I'm playing an investment game. How do i make $50k from
Yeah, but at least you have a system.gt4715b wrote:Of course, since each roll of the roulette wheel is independent of the previous roll, it doesn't matter how many consecutive black or red colors have shown up prior to when you start playing.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
Re: I'm playing an investment game. How do i make $50k from
If we knew where to make 5% in 6 months, we'd all have our money there and happily share it with you. Unhappily, no one knows.pinnerman12 wrote:john94549 wrote:This is a game, right? Imaginary money (like they give you at Forex, to get you "in the know" on "how to play" currencies).
My advice: don't play. Investing is not a game.
yes, it's a simulation where i have to make 5%
JT
-
- Posts: 17
- Joined: Mon Feb 11, 2013 10:54 am
Re: I'm playing an investment game. How do i make $50k from
general advice to make some money with a million rather than losing itbottlecap wrote:If we knew where to make 5% in 6 months, we'd all have our money there and happily share it with you. Unhappily, no one knows.pinnerman12 wrote:john94549 wrote:This is a game, right? Imaginary money (like they give you at Forex, to get you "in the know" on "how to play" currencies).
My advice: don't play. Investing is not a game.
yes, it's a simulation where i have to make 5%
JT
- InvestorNewb
- Posts: 1663
- Joined: Mon Sep 03, 2012 11:27 am
Re: I'm playing an investment game. How do i make $50k from
I agree, but my rebuttal is this: how often do you see 20+ consecutive red/blacks on a roulette table. Very rarely - from my own experience. Either way, it would be interesting to write a script to analyze the probability of such an outcome with a data set that covers millions of spins.gt4715b wrote:Of course, since each roll of the roulette wheel is independent of the previous roll, it doesn't matter how many consecutive black or red colors have shown up prior to when you start playing.InvestorNewb wrote:Take it to a casino's roulette table and wait for a long pattern of consecutive black or red colors to show up. I'm talking 20 colors or more. You could be in there all day, or even all weekend.
Now bet 50k on the opposite color.
If you lose, bet 150k.
If you lose again, bet 250k.
If you lose again, bet 500k.
If you lose again, you will only have 50k left and won't have any chance of recovery.
But each of the first 4 bets ensures a 5% gain if you win.
Based on the law of averages, you should come out ahead in at least 1 of the first 3 bets. The wins are small, but the losses are big. You would also have to go to a casino that doesn't have a table maximum, so VIP area or Vegas.
Disclaimer: I take no responsibility for losses.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
Re: I'm playing an investment game. How do i make $50k from
There's no such thing as a "short-term index fund". Any money that you'll need within a couple years should not be invested. VBISX is a bond fund for short-term bonds, and although bond investing is much safer than stock investing, it's still not suitable for short time horizons. VBISX's bonds have an average duration of 2.7 years, so if interest rates rise 1%, the market value will fall 2.7%. VBISX has a yield of about 0.5%, so in the absence of market fluctuations, you could expect an approximate 0.5% return over the course of a full year. VBISX has actually returned about 1.25% over the past year, probably due primary to declining interest rates. But nobody here has any idea if interest rates will increase or decrease over the next year (despite the annoying amount of speculation on the subject).pinnerman12 wrote:what are some good short-term index funds sir? Is VBISX good?
If this is for a class, perhaps instead of participating in the game, you could write a few paragraphs about why it's a futile and counter-productive exercise. Then your teacher could learn something too.
gt4715b wrote:Of course, since each roll of the roulette wheel is independent of the previous roll, it doesn't matter how many consecutive black or red colors have shown up prior to when you start playing.
Re: I'm playing an investment game. How do i make $50k from
On the contrary, if you believe in efficient markets, and you knew how to make 5% in 6 months, you should never share it with anyone. If you do, it most likely won't work anymore.bottlecap wrote: If we knew where to make 5% in 6 months, we'd all have our money there and happily share it with you. Unhappily, no one knows.
JT
Re: I'm playing an investment game. How do i make $50k from
Since this is virtual game anyway, you could try this.
Sell NFLX June 13 100/280 Strangle for 4.65 credit. You need to sell 108 contracts to collect $50,220 premium.
Current price $177.89, so you will have $78 downside protection and about $103 upside protection. Option prices are pricing you will keep the premium with probability of 85%. These are better odds than roulette.
Sell NFLX June 13 100/280 Strangle for 4.65 credit. You need to sell 108 contracts to collect $50,220 premium.
Current price $177.89, so you will have $78 downside protection and about $103 upside protection. Option prices are pricing you will keep the premium with probability of 85%. These are better odds than roulette.
Re: I'm playing an investment game. How do i make $50k from
That would be a perfect blurb for the back cover an an options-trading book.Ranger wrote:better odds than roulette.
Re: I'm playing an investment game. How do i make $50k from
There are probably enough Arb event opportunities but may not settle in time. (plus the game probably can't execute exchange tenders).
Can you do options?
If i'm just picking I'd load up on GKK and BRK.A/BRK.B
I was hoping this was a lose 95% in the next 6 months... that would be fun (triple leverage, bad options, etc)
Can you do options?
If i'm just picking I'd load up on GKK and BRK.A/BRK.B
I was hoping this was a lose 95% in the next 6 months... that would be fun (triple leverage, bad options, etc)
-
- Posts: 17
- Joined: Mon Feb 11, 2013 10:54 am
Re: I'm playing an investment game. How do i make $50k from
yes, it has futures, options, mutual funds, stocks etc.
Re: I'm playing an investment game. How do i make $50k from
It's unlikely the simulation can acurately account for slippage (http://www.investopedia.com/terms/s/sli ... z2KduRNLWX). This seems like something you could take advantage of.
Re: I'm playing an investment game. How do i make $50k from
When I attended high school 20 years ago, this is exactly the type of exercise we did. In retrospect, I think it really turned me off to both saving and investing. All my paper trades wound up with loss of capital, and so this exercise just taught me a "spend it now, cuz it'll all be gone later anyway" mentality.Jeff7 wrote: This was precisely the sort of "investing" exposure I got back during high school - trying to come out ahead during a single semester. The ideas of long-term investing, attention to costs, or diversification just weren't there.
- Nestegg_User
- Posts: 2112
- Joined: Wed Aug 05, 2009 1:26 pm
Re: I'm playing an investment game. How do i make $50k from
Actually, I was at a casino in vegas one time and saw either green "0" and "00" seven times on the twenty-number board -- what are those odds??InvestorNewb wrote:I agree, but my rebuttal is this: how often do you see 20+ consecutive red/blacks on a roulette table. Very rarely - from my own experience. Either way, it would be interesting to write a script to analyze the probability of such an outcome with a data set that covers millions of spins.gt4715b wrote:Of course, since each roll of the roulette wheel is independent of the previous roll, it doesn't matter how many consecutive black or red colors have shown up prior to when you start playing.InvestorNewb wrote:Take it to a casino's roulette table and wait for a long pattern of consecutive black or red colors to show up. I'm talking 20 colors or more. You could be in there all day, or even all weekend.
Now bet 50k on the opposite color.
If you lose, bet 150k.
If you lose again, bet 250k.
If you lose again, bet 500k.
If you lose again, you will only have 50k left and won't have any chance of recovery.
But each of the first 4 bets ensures a 5% gain if you win.
Based on the law of averages, you should come out ahead in at least 1 of the first 3 bets. The wins are small, but the losses are big. You would also have to go to a casino that doesn't have a table maximum, so VIP area or Vegas.
Disclaimer: I take no responsibility for losses.
Re: I'm playing an investment game. How do i make $50k from
Trick question -- you didn't specify if it was seven times in a row.Cheap_rookie wrote:Actually, I was at a casino in vegas one time and saw either green "0" and "00" seven times on the twenty-number board -- what are those odds??
Re: I'm playing an investment game. How do i make $50k from
Is this part of Options & Futures MBA course?pinnerman12 wrote:yes, it has futures, options, mutual funds, stocks etc.
If they are allowing futures, then it is not a fair game. Are they measuring performance in risk adjusted basis?
Futures allow enormous leverage. Consider Emini S&P 500 index futures. This product is levered almost 20 times. You just need to put up $3,750 to control approximately $76,000 notional value.
http://www.cmegroup.com/trading/equity- ... bonds.html
So, if you go all in, your $1 million can control $20,000,000 notional value. In that case, prices just have to move 0.25% to get your $50,000.
There is no way plain vanilla index fund, can beat 20 times levered futures as long as you picked the direction right. Now picking the direction is the hard part
-
- Posts: 7502
- Joined: Mon Dec 17, 2007 6:32 pm
Re: I'm playing an investment game. How do i make $50k from
That doesn't matter. When 19 consecutive black or red spins have come up, the probability of those no longer matters. That's already happened, so the probability is 1. The only thing that matters is the NEXT spin. There are three possibilities:InvestorNewb wrote:I agree, but my rebuttal is this: how often do you see 20+ consecutive red/blacks on a roulette table. Very rarely - from my own experience.gt4715bOf wrote:course, since each roll of the roulette wheel is independent of the previous roll, it doesn't matter how many consecutive black or red colors have shown up prior to when you start playing.
1. The wheel is fair, and the 19 previous spins are an improbable but possible event.
2. The wheel is not fair, due to the physical nature of it and not under control.
3. The wheel is not fair, and is under the control of someone.
So you should bet on the streak. In case one, it doesn't matter which you pick, as it's the same probability of success. In the second case, you will be exploiting an inefficiency. In case three, someone has an agenda. If they don't want you to win, it won't matter what you pick. If they have some other plan, then you don't know what it is.
Brian
Re: I'm playing an investment game. How do i make $50k from
Few things:
1) This really isn't the board for asking about a short-term trading game.
2) Since the goal is to beat the S&P, the thing to do is to use futures and forex (or possibly options). The increased flexibility from leverage will help you win.
3) Contra what other people have said, you don't want to increase you bet size each time you lose and decrease it when you win. (This is called martingale betting. It sounds good in theory, but it increases your risk of ruin and lowers your expected growth rate.) What you want to do is anti-martingale; increase your bet size when you win and decrease it when you lose. There's a simple formula for this in the case of binary outcomes (see here). Ralph Vince has a book that generalizes the formula into something you can use for a portfolio and goes into all the details. He doesn't use calculus (although that would have simplified his presentation), so parts of it are frustrating mathematically, but you can make the adjustments easily enough. Optimal f investing increases your volatility quite dramatically, but for a trading contest this is what you want since you can assume that everyone will have roughly the same expected return and thus the winner will be someone who has lots of volatility and gets lucky.
4) If you do #3, what you want to do is find a sort of bet you can take repeatedly that has positive expectancy. You need to go to forums on trading to learn about this. But once you have identified such a bet, then you can calculate your optimal f and get your expected growth rate. Then if you know the expected number of trades, you can calculate your expected total wealth at the end.
5) Alternatively, you can try to beat the market with one "big bet". Simplistically, if you put on enough long futures positions to give you $2M of S&P500 exposure, then you'd beat the S&P if the market was up, and trail if the market was down. You can improve on this by finding some high sharpe ratio mix between the S&P and bonds (it's probably something like 25/75 or 30/70 stocks/bonds) and then using futures to take a leveraged position. (So instead of 30/70 you'd be 60/140, or 90/210). You can do a bit better by exploiting the fact that VIX futures and S&P futures are negatively correlated and that VIX futures have 0 expected return. (I don't know what the right mix is, but back of the book, I think it's about 20% of your stock exposure should be in VIX. So this would move your from 30/70, etc. to 30/6/70, 60/12/140, and 90/18/210.) This isn't the most reliable way to win, but it is simple and gives you decent odds of success.
1) This really isn't the board for asking about a short-term trading game.
2) Since the goal is to beat the S&P, the thing to do is to use futures and forex (or possibly options). The increased flexibility from leverage will help you win.
3) Contra what other people have said, you don't want to increase you bet size each time you lose and decrease it when you win. (This is called martingale betting. It sounds good in theory, but it increases your risk of ruin and lowers your expected growth rate.) What you want to do is anti-martingale; increase your bet size when you win and decrease it when you lose. There's a simple formula for this in the case of binary outcomes (see here). Ralph Vince has a book that generalizes the formula into something you can use for a portfolio and goes into all the details. He doesn't use calculus (although that would have simplified his presentation), so parts of it are frustrating mathematically, but you can make the adjustments easily enough. Optimal f investing increases your volatility quite dramatically, but for a trading contest this is what you want since you can assume that everyone will have roughly the same expected return and thus the winner will be someone who has lots of volatility and gets lucky.
4) If you do #3, what you want to do is find a sort of bet you can take repeatedly that has positive expectancy. You need to go to forums on trading to learn about this. But once you have identified such a bet, then you can calculate your optimal f and get your expected growth rate. Then if you know the expected number of trades, you can calculate your expected total wealth at the end.
5) Alternatively, you can try to beat the market with one "big bet". Simplistically, if you put on enough long futures positions to give you $2M of S&P500 exposure, then you'd beat the S&P if the market was up, and trail if the market was down. You can improve on this by finding some high sharpe ratio mix between the S&P and bonds (it's probably something like 25/75 or 30/70 stocks/bonds) and then using futures to take a leveraged position. (So instead of 30/70 you'd be 60/140, or 90/210). You can do a bit better by exploiting the fact that VIX futures and S&P futures are negatively correlated and that VIX futures have 0 expected return. (I don't know what the right mix is, but back of the book, I think it's about 20% of your stock exposure should be in VIX. So this would move your from 30/70, etc. to 30/6/70, 60/12/140, and 90/18/210.) This isn't the most reliable way to win, but it is simple and gives you decent odds of success.
Last edited by Akiva on Tue Feb 12, 2013 2:07 pm, edited 1 time in total.
- Clearly_Irrational
- Posts: 3087
- Joined: Thu Oct 13, 2011 3:43 pm
Re: I'm playing an investment game. How do i make $50k from
5% is easy, just buy preferred shares.
Re: I'm playing an investment game. How do i make $50k from
Doesn't the market value of the share decline equal to the amount of the dividend? In addition to standard equity risk? I assume this exercise would require pricing all assets at current market value at the end of the exercise to determine if there was actually a gain or loss.Clearly_Irrational wrote:5% is easy, just buy preferred shares.
Maybe another joke (this thread has been overall quite silly), but on some of these posts I'm a bit concerned that this gentleman and/or lady might not be able to tell which are serious and which are not.
- Clearly_Irrational
- Posts: 3087
- Joined: Thu Oct 13, 2011 3:43 pm
Re: I'm playing an investment game. How do i make $50k from
Sort of, preferred stocks are strange. The values are actually pretty stable due to the fact that they're cumulative dividends. The main risk with preferred stocks would be underperforming the market rather than failing to deliver the expected return. Normally they're not worth it for individuals due to that fact, but for the specific case of the contest where your objective is to return 5% rather than match or beat the market they make sense.SSSS wrote:Doesn't the market value of the share decline equal to the amount of the dividend? In addition to standard equity risk? I assume this exercise would require pricing all assets at current market value at the end of the exercise to determine if there was actually a gain or loss.Clearly_Irrational wrote:5% is easy, just buy preferred shares.
-
- Posts: 17
- Joined: Mon Feb 11, 2013 10:54 am
Re: I'm playing an investment game. How do i make $50k from
I have to beat the S&P 500 index
- Clearly_Irrational
- Posts: 3087
- Joined: Thu Oct 13, 2011 3:43 pm
Re: I'm playing an investment game. How do i make $50k from
Ah ok, guess I didn't read the original posting closely enough. *shrug* Then options are your best bet. Buy a bunch of calls and hope for an up market year.pinnerman12 wrote:I have to beat the S&P 500 index
Re: I'm playing an investment game. How do i make $50k from
It is easy if you are willing to cheat and it is worth a couple of hundred bucks of real money for you to win.
What you do is look through the penny stocks and find some very thinly traded dog and then in your game you "buy" one million dollars so that stock. The next day you take your couple of hundred dollars of real money and buy the real penny stock which will likely drive the price up significantly. You then "sell" your game shares at the new price for a large gain.
What you do is look through the penny stocks and find some very thinly traded dog and then in your game you "buy" one million dollars so that stock. The next day you take your couple of hundred dollars of real money and buy the real penny stock which will likely drive the price up significantly. You then "sell" your game shares at the new price for a large gain.
Re: I'm playing an investment game. How do i make $50k from
That's actually pretty brilliant. The simulation would be too dumb to realize you couldn't actually purchase a million dollars dollars of the stock without moving the price (or couldn't buy a million dollars of the stock at all).Watty wrote:What you do is look through the penny stocks and find some very thinly traded dog and then in your game you "buy" one million dollars so that stock. The next day you take your couple of hundred dollars of real money and buy the real penny stock which will likely drive the price up significantly. You then "sell" your game shares at the new price for a large gain.
I'm pretty sure you just Kobayashi Maru'd this "game".
- Nestegg_User
- Posts: 2112
- Joined: Wed Aug 05, 2009 1:26 pm
Re: I'm playing an investment game. How do i make $50k from
For a simple approach to "beat" the S&P: purchase S&P index with lowest ER , then sell a well-out-of-the money call for the one million in the index. With the proceeds of the sale of the call, buy a 10X leveraged S&P fund. If the call is exercised, the leveraged fund will "pay off", if the S&P tanks (but not by more than your selling gain) you still "beat" the index -- although by an insignificant margin -- likewise for a stagnant market: the proceeds of the sale of the leveraged fund will be lower than purchase, but the whole will be nominally above the S&P -- win, tie, tie !
Hopefully the excercise will show the class how few actually beat the index, and the risks taken to try to beat the index.
Hopefully the excercise will show the class how few actually beat the index, and the risks taken to try to beat the index.
Re: I'm playing an investment game. How do i make $50k from
Put in an savings CD in India.. You get 9.5% interest a year that is around 5K per month...
Yes inflation risk and currency risk. Just saying..
Yes inflation risk and currency risk. Just saying..
Re: I'm playing an investment game. How do i make $50k from
"Investment game" is an oxymoron. Games should be fun. Investing should be dull.
-
- Posts: 17
- Joined: Mon Feb 11, 2013 10:54 am
Re: I'm playing an investment game. How do i make $50k from
hahaMark13 wrote:"Investment game" is an oxymoron. Games should be fun. Investing should be dull.
- cheese_breath
- Posts: 11787
- Joined: Wed Sep 14, 2011 7:08 pm
Re: I'm playing an investment game. How do i make $50k from
Be an early subscriber to a large ponzi scheme with > 20% earnings guarantee. This will get you more than 5% by the end of May.
The surest way to know the future is when it becomes the past.
Re: I'm playing an investment game. How do i make $50k from
When we had to manage a paper-traded stock fund for my MBA investments class, the simulator would only let you enter orders for a certain % of daily volume and it would base your trade price on the relevant bids and asks being quoted in the market. So this "trick" wouldn't have worked there. His simulator may or may not be this sophisticated, but most of the serious trading competition simulators I've seen are actually more accurate than the one we used for that class. (They inject your orders into the day's tick stream and see how that would have changed things.)SSSS wrote:That's actually pretty brilliant. The simulation would be too dumb to realize you couldn't actually purchase a million dollars dollars of the stock without moving the price (or couldn't buy a million dollars of the stock at all).Watty wrote:What you do is look through the penny stocks and find some very thinly traded dog and then in your game you "buy" one million dollars so that stock. The next day you take your couple of hundred dollars of real money and buy the real penny stock which will likely drive the price up significantly. You then "sell" your game shares at the new price for a large gain.
I'm pretty sure you just Kobayashi Maru'd this "game".
Re: I'm playing an investment game. How do i make $50k from
Beating the index is easy peasy.
If you want beat SP500, just buy $1,000,000 notional value using futures.
Current June Emini future is worth 1512 * 50 = $75,600. So you need to buy 13 Emini SP500 contracts.
Margin required for those contract is only 13*3,500 = $45,500
You have around $950,000 cash left.
Sell 400 of SPX put 1100 strike price. Mid price as of now is $1.55. Since these are virtual games, you will get filled easily.
Margin required to sell these puts is around $560,000. Keep the rest in cash, in case index declines and one needs to put up more margin.
Total Premium collected will be $1.55 * 100 * 400 = $62,000.
Since futures and cash price will converge in June, those performance will be similar. Assuming SP500 won't get below 1100 (safe bet) you will keep $62,000 premium.
If you want beat SP500, just buy $1,000,000 notional value using futures.
Current June Emini future is worth 1512 * 50 = $75,600. So you need to buy 13 Emini SP500 contracts.
Margin required for those contract is only 13*3,500 = $45,500
You have around $950,000 cash left.
Sell 400 of SPX put 1100 strike price. Mid price as of now is $1.55. Since these are virtual games, you will get filled easily.
Margin required to sell these puts is around $560,000. Keep the rest in cash, in case index declines and one needs to put up more margin.
Total Premium collected will be $1.55 * 100 * 400 = $62,000.
Since futures and cash price will converge in June, those performance will be similar. Assuming SP500 won't get below 1100 (safe bet) you will keep $62,000 premium.