Black Swan Trading

[Joab]

"What we call here a Black Swan is an event with the following three attributes

"First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable."

- Nicholas Nassim Taleb

I thought I would start this thread to discuss the concepts that Taleb addresses in his new book.

The premise is simple, buy way out of the money options looking for homeruns.

Personally I like the ideal of 100:1 risk to return trading because I can get 95 trades wrong and 1 right and still make money.

So let's begin this discussion.

btw, I'm off to the book store today to get the book and I will be reading it this week.

 

[wee man]

ok, here is the next Black Swan event -

taking into account that the markets have factored in to a large degree a terrorist event or catastrophe any way -

It will be an alien landing with aggressive intent!

You heard it here first...

 

[danoXP]

A strategy of buying lottery tickets ... with positive expected value ... unfortunately, sometimes we just don't live that long

 

[Joab]

Quote from wee man:




It will be an alien landing with aggressive intent!

You heard it here first...

Ha !

If an alien technology can make it to Earth with a aggressive intent it wont matter because our grade school technology will not stand a chance.

 

[wee man]

Quote from Joab:

Ha !

If an alien technology can make it to Earth with a aggressive intent it wont matter because our grade school technology will not stand a chance.

Yes, I agree, but. What if there are only a few of the aliens so the threat is confined to trailer parks etc but the initial shock sends the market down.

 

[iprph90]

Quote from wee man:

ok, here is the next Black Swan event -

the markets have factored in to a large way -
degree a terrorist event or catastrophe any taking into account that
It will be an alien landing with aggressive intent!

You heard it here first...

the only thing the markets have "factored" in a large way is liquidity::

 

[Joab]

Quote from wee man:

Yes, I agree, but. What if there are only a few of the aliens so the threat is confined to trailer parks etc but the initial shock sends the market down.

They will probably only want to do anal probs at that stage of the invasion.

 

[MajorUrsa]

Quote from iprph90:

the only thing the markets have "factored" in a large way is liquidity::

Very good. The most unexpected thing for a Blacks Swan if there is no water to land on!

You can buy all the options you want, when a real BS come by you won't be able to trade them. Maybe a day or 2 later.

Ursa..

 

[doublea]

So if we see S&P at 2000 by 2008, will that be considered a Black swan?

 

[wee man]

Quote from Joab:

They will probably only want to do anal probs at that stage of the invasion.

Ah, maybe then the world will be saved by billybob and tommyjoesue etc cos the military will have been given time to come up with counter measures and repel the Alien Analists, ergo the markets rebound large...