Buying calls for a living and arguing with derivman
- Thread starter Derivman
- Start date
If I might I would like to offer some thoughts for you with respect to this kind of questioning. Mostly they are not mine. They are from one of the best thinkers regarding risk taking in the world today. . .Nassim Nicolas Taleb. He also knows just a tiny bit about options trading.
"There is a silly book called A Millionaire Next Door, and one of the authors wrote an even sillier book called The Millionaire's Mind. They interviewed a bunch of millionaires to figure out how these people got rich. Visibly they came up with bunch of traits. You need a little bit of intelligence, a lot of hard work, and a lot of risk-taking. And they derived that, hey, taking risk is good for you if you want to become a millionaire. What these people forgot to do is to go take a look at the less visible cemetery â in other words, bankrupt people, failures, people who went out of business â and look at their traits. They would have discovered that some of the same traits are shared by these people, like hard work and risk taking. This tells me that the unique trait that the millionaires had in common was mostly luck."
Here is a link to the interview with him that this quote is from.
http://www.edge.org/3rd_culture/taleb04/taleb_index.html
I think any student of the markets should have some Taleb in their library.
When all is said and done, I think what Taleb is saying in the above applies equally to trading. You can apply yourself, learn the pertinent technical points, work hard, be diligent, dedicated, study hard. But I know people who have done that and still can't trade worth a sack of beans. There is no prescription for success - for education yes; there are things you must learn - but learning those things will not necessarily equal the kind of succes most of us are aiming for/have acheived. And all good traders know luck needs to be accepted with good grace b/c it is definitely part of the game. To pretend otherwise is naive.
Nicely put AAH/DJM
.db
The same skill that a trader of ANY financial instrument needs to learn - risk management. Without an understanding of where the risk lurks in any position (real & theoretical) you are dead in the water.
Quote from daddy'sboy:
Nicely put AAH/DJM
db
Cheers db. . .going to bed soon. My trading is done for the day. You're not up screen watching are you?
1. How not to lose money.
After you learn number 1 then you can concentrate on number 2.
2. How to make money.
Well I'm watching some of my IC's, may need to roll some short puts since they're getting to my delta triggers
.Cheers
db
Thanks for the reply anti ad hominem. Whilst I accept the fact that Taleb is an educated and intelligent person, I tend to disagree with the concept of luck. I myself believe that there is no such thing as luck. I have read a simple little book called "how to make your own luck", and to cut a long story short, the author points out that there is no such thing as luck. Everything that we do is governed by one thing or another. Understanding what the things are may be a better approach than just saying something like "wasn't that a good piece of luck". I am not naive here, I am stating my honest opinion which I truly believe to be the case, and that is, there is no such thing as luck. If we go down that road as a trader, the next thing we will be talking about is "wishing", and I am sure that many of us, as traders, know the outcome of "wishing". And then we might find "hoping" creeping in, and before we know it, we are sitting there with our hands on our head, saying, "why the hell did that have to happen to me". This is not the approach that I want to take as an Options trader, nor will I allow myself to go down that route, for in my opinion, that is the route to disaster, and I have no intention of destroying my trading career just because of what some person has written down on paper. If the writings do not agree with me, then I will ask myself why, and then commit to find out the reasons why the writings do not agree with me. Cheers.
Derivman
All Taleb is getting at is that a lot of what we perceive as 'skill' may, more often than not, be really just luck. But it's hard to prove one way or the other.
db
Off topic a bit, but I'd disagree a bit Taleb's assessment on the millionaires. Yes, there are folks that take calculated risks and it doesn't go their way and they end up worse off than if they just stuck with a steady job and invested in T-Bills. But by and large, the bankrupt broke people that I know are not that way because they took a calculated risk, managed that risk and still had it blow up in their face, it's because they were stupid. They took unnecessary dumb risks (i.e. bought new cars they couldn't afford, bought worthless crap they couldn't afford and moved into that house that was 4-6x their annual income on an adjustable rate).
But this does tie back a bit in to everything, as was pointed out. Educating yourself on the vehicle, learning to manage risk is key. This puts the probability of success a bit more in your favor as opposed to the guy that's buying or selling blindly with no concept of the risks in the vehicle and as a result, no concept of managing the risk.
Just my 2 cents.
But this does tie back a bit in to everything, as was pointed out. Educating yourself on the vehicle, learning to manage risk is key. This puts the probability of success a bit more in your favor as opposed to the guy that's buying or selling blindly with no concept of the risks in the vehicle and as a result, no concept of managing the risk.
Just my 2 cents.