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"Never bet on a long shot." - Frank "Lefty" Rosenthal

Higher than normal kurtosis (leptokurtosis) means fat tails. You could take the Black Swan approach with this. Buy treasuries, and use the interest income to buy OTM calls and/or puts.

This implies that at any given time there are possibly many technical analysis methods which work and can make you rich, but which may not work as well N years in the future. Hogwash! If Donchian channels worked back then, they will work today. The caveat is that they may not work the same on...

Have a look at John Ehlers web site. http://www.mesasoftware.com/fftcomparison.htm

But cheap and expensive are relative terms, not absolute. What's expensive can become more expensive, and what's cheap can become cheaper (bounded by zero of course.) So yes, using Black Swan, you always have to buy no matter the price, because you don't know when they may become more expensive...

Taleb doesn't use or offer any alternative analyical frameworks, because he knows they are all bullshit when extreme events happen. He keeps it simple by taking no risk, yet at the time taking enormous risk. He buys t-bills, and uses the interest income to buy optons. It's a strategy most people...

The actual odds are unknowable since there are too many variables to account for. One has to make assumptions, such as prices moving in a perfectly Gaussian manner. Those assumptions are almost always wrong. Remember: An assumption is the root of all screwups.

The failures of the normal distribution are well known, and this is what Taleb has become famous for dispelling. However a financial law of the universe is that with no risk there is no return. Someone please tell me a better way to control risk on a huge portfolio worth millions or billions of...

Once you normalize IV data relative to strike price, volatility, and time, smile structures are remarkably stable. This smile structure can form the basis of predicting what option price should be. This stability of smile structures probably is of more importance to market makers and people...

Markets are highly fractal in nature. I can show you bar charts of daily, weekly, or 5 -minute data, and you couldn't tell which one is which.

Consistently making money in options (or any other tradable vehicle) hinges on being right. That could be direction of the underlying, direction of IV, time, amount of order flow, direction of interest rates, or most likely, combinations of any of these or more. So for the folks who say they...

As I heard him describe once, the idea is to take no risk, and at the same time take large risk. His execution of this would be to buy T-Bills, and use the interest income to pay for option premium. Assuming you don't sell your bills after a large run up in rates, shouldn't the downside to...

There is one way, and only one way to make a stock go up, and that is to buy it. Therefore, to answer the question, the stock is up because people are buying it (i.e. demand is outstripping supply.) There is every reason under the sun why people decide to buy (or sell) a given stock at a...

Is it really any wonder to any of you that nothing exists to allow you to predict the future with anything better than 50% accuracy.

The market tends to be fractal in nature, so it doesn't matter so much which time frame you pick.

The way to compare historical IV with current IV is to normalize the volatility surface across strike, time and IV. Reference the work of Robert Tompkins. A normalized surface will look something like the attached spreadsheet.

Your ratio could be 10/90, but what you want from a system is positive expectancy. Also related to expectancy is payoff, which is the probability of a win times the reward to risk ratio. payoff = p*(reward/risk) Seek to maximize the payoff, not just the probability of a win.

It comes out of the mathematics of options pricing.

To calculate the actual odds at expiration (and under a perfectly Gaussian distribution assumption), put these formulas into Excel. std. devs. = (ln(future_price/current_price))/(volatility*sqrt(days_til_expiry/252)) probability = normsdist(std. devs.) The probability is the area under...

Point your computer to the OpenDNS servers, instead of your ISPs. 208.67.222.222 208.67.222.220