Taleb -Black Swan on $1,000 per month
- Thread starter drenaud
- Start date
$1000 a month for the rare event!!!??? You can play options for earnings events for certain companies quarterly and be way ahead, and use that to offset the BlackSwan events. In my 15 years or so I have found particular companies that are fairly good for option bets going into earnings. The list has changed over the years, but that is why this is a job and requires some work. I guess the guy who would be defined as my mentor as what I learned from him clicked, turned me onto the earnings trade in options. He regularly picked options before earnings that made money. It was a sideline to my learning to trade futures, but I spent the time figuring out it out. The Blackswan is good if you hit it quickly, but you could easily run through more money than you ever make betting on it. It is a Vegas bet, like Keno, the odds are way against you guessing it right, and you will be long in the hole before you win. Look for more obvious bets, and put the odds more to your favor. There are definite plays available, but you never plan to win them all, but to come out ahead.
I think the black swan strategy is a bit overated , too costly to implement probably. You need a timing element , and even if you get that right , you also need to take at least some profits when you have them because at expiration you could still lose money , especially with Bernanke and Co.
"A black swan by definition cannot be a stock market crash. You have to bet on something to happen that has NOT happened before, hence a black swan. "
the instrument must be cheap in price. +likely it can only be custom made by a bank or brokerage firm.
therefore if you are part of the investing public it is impossible to achieve because the type of instruments that you need are not available to you.
even a bet on interest rates rising in Japan in the next 2+ years which does not quite meet the definition is unavailable generally to the investing/ trading public.
Taleb's approach is to take no risk, and at the same time take large risk. In other words, put your money in t-bills/bonds and use the interest from those to purchase OTM options.
I suppose what you lose in this strategy, if no black swan event happens, is capital due to taxes, inflation, and opportunity costs. However, you won't blow up either. So, $12,000/year isn't enough interest income to implement that approach (unless you save for many many years before beginning.)
I suppose what you lose in this strategy, if no black swan event happens, is capital due to taxes, inflation, and opportunity costs. However, you won't blow up either. So, $12,000/year isn't enough interest income to implement that approach (unless you save for many many years before beginning.)
Actually, you can and Taleb did... Maybe not blow up in a dramatic sense, but you can sure underperform the mkt and your peers to the point where you have to close down shop.
I think his current fund was down 10% last year.
I am referring to his earlier efforts, actually. In general, like pretty much anything in life, buying lottery tickets, if done to excess and indiscriminately, can kill you. Compared to short vol strats, probably not as effortlessly and certainly not as spectacularly, but the end result would be the same.