With all due respect, this is a perception of luck. It was really the laws of physics that determined what happened to the ball. It could just as easily been argued that the player had a shot good enough that it would hit the net and trickle over. The idea that there is any such thing as "luck" is very shortsighted in my view. This takes nothing away from many of your other points and analyses, many of which are well thought out.
Nassim Taleb makes the rounds again
- Thread starter Maverick74
- Start date
I think we have beaten this luck thing into the ground. Back to Taleb for a minute, his only reason for discussing luck at length is not to say that luck rules our lives or whether luck even exists, but rather, to question what you see with more careful eyes. Many men out there running funds are imposters cloaked in a veil made of luck.
My view is that fortunate would be a better description. The imposters , and there are many, have not been lucky , but have been fortunate that so far they have not tanked. They may have made random or reckless decisions or decisions based upon ego etc and just haven't paid for the mistakes yet. I think we are roughly on the same page. As a last statement on the subject, without agreeing that there is luck, I would say that I would rather be good than lucky and I imagine you feel the same.
LOL. you better stop all that publicity you're giving Taleb, or you might jinx his luck. On the other hand, you may end up getting a phone call to work for him so you can help with picking his fat tails. Which "luck" are you shooting for?.
So I guess if you have just won the lottery, you are not lucky, but good at picking numbers... 
But sure, luck runs out on the long run.
Going back to Taleb, I pointed out a few months ago so I will do it again:
Instead of buying out of money options because you are waiting for a once-a-year (or less) bad event will make up for the rest of the year, if you are so affraid of black swans, why not just play the market (the American ones) from the short side all the time?
Looks to me that shorting ETFs in a sideways market is a more rewarding strategy than waiting for the very rare big drop.
But sure, luck runs out on the long run.
Going back to Taleb, I pointed out a few months ago so I will do it again:
Instead of buying out of money options because you are waiting for a once-a-year (or less) bad event will make up for the rest of the year, if you are so affraid of black swans, why not just play the market (the American ones) from the short side all the time?
Looks to me that shorting ETFs in a sideways market is a more rewarding strategy than waiting for the very rare big drop.
Quote from Pekelo:
So I guess if you have just won the lottery, you are not lucky, but good at picking numbers...
But sure, luck runs out on the long run.
Going back to Taleb, I pointed out a few months ago so I will do it again:
Instead of buying out of money options because you are waiting for a once-a-year (or less) bad event will make up for the rest of the year, if you are so afraid of black swans, why not just play the market (the American ones) from the short side all the time?
Looks to me that shorting ETFs in a sideways market is a more rewarding strategy than waiting for the very rare big drop.
I think far too many people here have no clue what Taleb is doing. What's even more annoying is that on the first post on this thread I posted an article about him where he actually describes his trading methodology and it does not involve him just buying deep OTM options. He basically trades butterflys. He sells ATM juice and buys wings. Guys, this is not rocket science. It's options 101.
And another thing, Taleb's interest in talking about luck and such is really just a segue into a more serious talk about understanding risk and the consequences of risk. His points are very valid "IF" you take the time to read his articles.
He also points out that he is not really all that interested in index markets but rather fixed income and currency markets. His biggest trades were not in the SP 500, but rather in the Eurodollars. If you take the time to look at the premium in currencies and fixed income, you would see that these markets are predicting almost zero chance of any instability going forward in the world. Seems like a good laugh if you asked me.
It would not be a bad bet to make some deep OTM bets in these instruments while selling the ATM juice. If and when disaster strikes, those options are going to explode. Unfortunately, the put skews in most index products almost make it prohibitive to take advantage of such event.
Quote from riskarb:
Yeah, well selling one sigma and buying tens in the front month is essentially short the atm combo. Now, go WATCH THE GAME!
I am watching the game and it's putting me asleep. This is the most boring Superbowl EVER!
And no, I don't think he is just buying 10 sigma options with his short ATM juice. From the articles I read, he is buying every strike out. In other words, short christmas trees. I mean Jesus risk, have you see the OTM options in fixed income? You can't buy 10 sigma options. LOL. If you go 2 strikes out they are offered like 3 ticks. LOL. What's the purpose to going another 4 strikes out and paying 2 ticks?
Quote from Maverick74:
I am watching the game and it's putting me asleep. This is the most boring Superbowl EVER!
And no, I don't think he is just buying 10 sigma options with his short ATM juice. From the articles I read, he is buying every strike out. In other words, short christmas trees. I mean Jesus risk, have you see the OTM options in fixed income? You can't buy 10 sigma options. LOL. If you go 2 strikes out they are offered like 3 ticks. LOL. What's the purpose to going another 4 strikes out and paying 2 ticks?
Read the article that you keep referring to. He specifically mentions buying 10sigmas in the front month. Yeah, it's retarded:
I've been a trader for 20 years, and I still hate trading as much as I did the first day. I have some form of addiction [laughs]. It's love-hate.
Although you now have people who trade for you, can you share with us a little of your methodology?
I specialize in way-out-of-the-money [fat] tails, but I don't like to buy volatility. A lot of people think I just buy volatility, but that's not true, and I laugh when I hear that said about me. I like to sell volatility and buy tails, which is the opposite of what a lot of people think I do.
Please elaborate.
Some of the products we used to offer customers (at Empirica) were strategies that were viewed as protection strategies -- buying puts, buying strangles or buying butterflies, for example -- but one thing about fat tails is that the farther you're out on them, the less you have to be right from a probability standpoint.
I specialize in options that are between 10 and 20 sigma out of the money. Let me explain better: Let's say I consistently buy a one-month option that is 20 so-called sigma out of the money. How long can I bleed the cost of purchasing those options and still be made whole when a sigma-20 event finally occurs?
Years, we suppose. You want to know how many years? (Laughs loudly) More than 5,000 years!