Dad Trade

A calculated bet or series of bets with price determination and risk/reward fully contingent upon Event X occurring. It successfully occurs, but all positions remain in the red.

It is commonly witnessed when listening to a friend's dad talking about his investment rationale for making certain risky trades. His reasoning is always foolproof but the results are inevitably unfavorable.

A preventable Dad Trade in the making

Industry professional: Mr. Chen, I strongly urge you to hedge against your positions in Brazilian ethanol companies with some short currency futures and some put options on the underlying stock.

Mr. Chen: Don't presume to teach me about equities sonny; I have more years of investment experience than you have in years lived. If Obama gets elected, he will subsidize corn, and ethanol production profitability will skyrocket.

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