Taleb fund and how it profited

[cdcaveman]

A ‘Black Swan’ Fund Made $1 Billion This Week http://www.wsj.com/articles/nassim-talebs-black-swan-fund-made-1-billion-this-week-1440793953


Anyone wanna speculate on how this happen ha-ha... DeepOtm vix calls... Spitz has predicted 50% decline because of fed fluff

 

[der_kommissar]

wow, I figured he bought up a bunch of far otm puts on various indicies, but I remember Zero Hedge posted about a huge buyer of far otm VIX calls for something like $0.50...

 

[i960]

I also remember someone buying 2500 options of something.. can't remember if they were VIX calls or SPX puts.

 

[i960]

Found it and this could simply be hearsay. Also, they would have been ITM at the time with decreasing gamma so not sure this would be a Taleb play.

 

[Butterball]

Long volatility funds buy far OTM puts AND calls on a variety of assets: currencies, bonds, equity indexes, commodities (oil, gold). If there are sharp moves in either direction they profit. If there aren't any major moves they lose 1-3% a month.

Note that the articles about the fund were pure marketing fluff "Profited $1bln on Monday". Without saying how much it lost in the last 5 years.

 

[i960]

Once again, I'm certain Taleb knows how to trade typical stuff without getting his balls cut off. It's entirely possible they bias towards positioning of black swan like positions while also supplementing income through other hedged or outright long volatility plays.

I don't know exactly what they do but I doubt they're losing 1% a month for 3 years straight only to make it all back on a single event - and even if that's what they're doing, if it's net profitable in the long term, then does it really matter?

 

[Butterball]

@i960 You're assuming, you don't know. You assume because Taleb has a PHD and is on CNBC then surely he 'knows his stuff'. Why so gullible?

"It's entirely possible they bias towards positioning of black swan like positions while also supplementing income through other hedged or outright long volatility plays."

No that's not "entirely possible", it's actually impossible. You can't establish an overall position that benefits from both long and short volatility, at the end of the day you're either long or short. Every option position can be expressed as a long or short position in the underlying and vice versa. Your 'idea' would translate into being long and short the underlying. Supplementing income through long volatility plays? You can't be serious.

if it's net profitable in the long term, then does it really matter?

Going back to the WSJ article:

Some funds racked up double-digit percentage gains in the past week, largely on Monday. Capstone Investment Advisors LLC is up 52%, or nearly $100 million, for August through Wednesday, nearly all of it coming from gains last Friday through Tuesday, according to a person familiar with the matter. Black Eyrar, a fund of London-based 36 South Capital Advisors LLP, was up in the double-digit percentages for August through Friday, according to a person familiar with the fund.

I have access to that fund's data, here's a snapshot of the last couple years. Even if they were up on Monday "in the double digits" they are still down massively over time:

 

[Mtrader]

Typical. Only show the good trades and forget about the losing ones. But this kind of information is what people want to read. That's why they buy magazines.

Capstone Investment Advisors: YTD (before last week) +3%. return since inception: 6%.
http://www.globalfunddata.com/funds...ent?variant=Capstone+Investment+Advisors,+LLC

http://www.globalfunddata.com/funds/new/performance?order=field_return_12_month_value&sort=desc

 

[i960]

@i960 You're assuming, you don't know. You assume because Taleb has a PHD and is on CNBC then surely he 'knows his stuff'. Why so gullible?

I don't watch CNBC and if you knew me in person you'd probably consider me anti-gullible. I'm not saying the guy is a super trader but he does have actual real world trading experience and has written books related to it.

No that's not "entirely possible", it's actually impossible. You can't establish an overall position that benefits from both long and short volatility, at the end of the day you're either long or short. Every option position can be expressed as a long or short position in the underlying and vice versa. Your 'idea' would translate into being long and short the underlying. Supplementing income through long volatility plays? You can't be serious.

You're overcomplicating this. I'm not saying they're long and short the same thing I'm saying it entirely possible they supplement income with both long and short vol plays on DIFFERENT instruments. I highly doubt they just open .05 delta SPX puts and go home.

I'm not even a Taleb fannatic and would agree the recent headlines are just that - headlines. On the same token I don't think he's just throwing shit into the wind.

 

[Visaria]

@i960 You're assuming, you don't know. You assume because Taleb has a PHD and is on CNBC then surely he 'knows his stuff'. Why so gullible?

No that's not "entirely possible", it's actually impossible. You can't establish an overall position that benefits from both long and short volatility, at the end of the day you're either long or short. Every option position can be expressed as a long or short position in the underlying and vice versa. Your 'idea' would translate into being long and short the underlying. Supplementing income through long volatility plays? You can't be serious.



Going back to the WSJ article:



I have access to that fund's data, here's a snapshot of the last couple years. Even if they were up on Monday "in the double digits" they are still down massively over time:

Very interesting, thanks for posting. I'm guessing that these types of funds are really only for institutional funds who want some protection against bad things happening and willing to invest maybe 5% of their funds. I'm also guessing that the long vol funds have hefty annual fees since most of the the years, they will be unlikely to make money and wil not be able to charge performance fees.