What Nassim Taleb Did on Black Monday 1987

[tomorton]

OK mate, I'll google him. Was just interested in ETs view of him - just saw some off comments here and there. Will check him out. Thanks.

My view is, he's clever, with one important idea to his name, then a massive ego that won't let us forget how - not just clever - but important he is to the entire world. You'd think he'd cured malaria.

Tried to read his black swan book but it tells not teaches.

As far as trading's concerned, academics hate trading. They write lots and lots of boring books saying this type of trading cannot work, that type of trading cannot work. And of course for them it doesn't.

 

[Pekelo]

Seems to me that if you are looking just at the options themselves (and ignoring holding the underlying), for one to lose money on average the other would have to make money on average?

Time decay and spread. The time decay is obviously killing the buyer and wide spreads are bad for both. Plus commission can also come to the picture.

Karen was selling insurance until the big hurricane came. Universa is buying insurance but the hurricane might never come. And as I said, Universa still has a timing problem, they have to cash out at the bottom, and that is not easy to pick. Or they cash out too early.

They both can make money in the long run, but I bet neither is beating the market in the same period.

 

[maximumpossiblesuffering]

Just read up on him, and he seems to be a pretty successful and smart guy. From wikepedia:

His first non-technical book, Fooled by Randomness, about the underestimation of the role of randomness in life, published in 2001, was selected by Fortune as one of the smartest 75 books known.[46]

His second non-technical book, The Black Swan, about unpredictable events, was published in 2007, selling close to 3 million copies (as of February 2011). It spent 36 weeks on the New York Times Bestseller list,[47] 17 as hardcover and 19 weeks as paperback,[18][48] and was translated into 31 languages.[18] The book has been credited with predicting the banking and economic crisis of 2008.

Essentially calling the 2008 crash puts him ahead of like 99% of ETers I would guess. But elsewhere it did say his overall performance has not been all that great - long periods of relatively dry performance (bull markets) punctuatte by periods of greatness (crashes). I guess that just goes to show that you can't invest/trade as if tomorrow is going to be a black swan event - else over time the bull markets will always prevail in the end and you will be left behind.

Even a newspaper called the 2008 crash. There was an article talking about the “liquidity crisis” a couple of months or so before the market top.

Retail investors had been pulling money out of the market for a long time before the top. Not because they wanted to, but because they had to.

Real estate had topped and the refi game was winding down. In addtion, certain industries such as transportation companies and transportation equipment manufacturers were seeing double-digit declines in revenue before the market’s top. This implied a slow down in manufactured goods as well. There may have been cheerleading from a variety of sources at the time, but Wall Street ended up holding the bag.

Wall Street firms ended up getting caught with a lot of inventory when the cheerleading did not work.

I pity the long term investor who failed to see the 2008 crash develop.

 

[ironchef]

I pity the long term investor who failed to see the 2008 crash develop.

Don't cry for them, the true buy and hold guys and gals that did nothing are doing well. If they bought SPY at the peak in 2007, they double their money even without including dividends.

 

[ironchef]

The man is a near genius. He is a finance expert, successful trader, master of mathematics, speaks 5,6 languages and can intellectually argue about ancient languages and the origin of words....Sumerian, Aramaic etc.

He is an intellectual giant .

He is on twitter and tweets daily, check him out.

I agree and I am a fan.

I don't know how good a trader he is but his teaching and writing had a profound impact on the way I now trade options.

Best wishes to you.

 

[sss12]

When I was trading options, I read a lot of books on trading with focus on psychology (Reminiscences, Market Wizards, New Market Wizards, The Way of the Warrior-Trader, Fooled by Randomness, etc.). I stopped trading options when I learned about bitcoin in 2013 and traded cryptocurrencies exclusively since.

Taleb has tweeted positively about bitcoin, but I don't think he ever disclosed actually owning any. I credit "Fooled by Randomness" and another book "Complexity: The Emerging Science at the Edge of Order and Chaos" with being able to hold through a 2 year bear market in cryptos and currently the biggest gain of any investment I have. If bitcoin goes to 0, change credit to blame (j/k).

If you did not have stops on after readin NT you need to work on your reading comprehension.

 

[Windlesham1]

If you think options are just simply bought and sold in isolation then you do not understand options-stick to penny stocks. NT was at one point the most prolific options trader in the world,and of course tail risk is mis-priced, but we don't know in which way. I have seen puts go from 3 to 300 in a few days-I made a lot in 2008 and felt bad for the dumb money. No more. Those dickheads have bled the real world dry as QE bolstered the stock market and took away income from prudent savers. Maybe the dumb money gets its ass kicked in 2018, but for sure they will get hit some time. I rejoice each time. QE killed volatility-anyone notice what happened to volatility? Anyone see QE being reversed? Go figure
and by the way

 

[Bekim]

The man is a near genius. He is a finance expert, successful trader, master of mathematics, speaks 5,6 languages and can intellectually argue about ancient languages and the origin of words....Sumerian, Aramaic etc.

He is an intellectual giant .

He is on twitter and tweets daily, check him out.

But he doesn't like to be called an intellectual

 

[ironchef]

I have seen puts go from 3 to 300 in a few days-I made a lot in 2008 and felt bad for the dumb money.
[/MEDIA]

Don't feel bad for us.

Us dumb money roared back after March 2009. Ignorance is bliss.

I do have a question for you if you don't mind: I read the book and tried to hedge but how do a retail dynamically hedge without being eaten up by commissions and bid/ask?

 

[Maverick74]

I found this article interesting from last year. I copied just a few excerpts. In it he does make reference to his bet on interest rates.

https://www.ft.com/content/f9682d92-1626-11e6-b197-a4af20d5575e

“If you can stomach the negative carry, by all account go for it, but a low-vol fund doesn’t have that [cost of buying expiring options],” he says Mr Spitznagel says that investors should keep allocations to their funds as a small percentage of their overall portfolio, and another person familiar with the matter said Universa investors should expect to lose 1-2 per cent annually when markets are steady.

The firm now protects about $6bn of investor money, backed by about $200m-$300m of capital (the firm declined to say exactly how much because of regulatory issues). Fees are paid on the nominal amount insured against calamity, rather than the capital invested. Still, sometimes it can go wrong. After the financial crisis, Universa bet that the Fed pumping money into the system would spur hyperinflation. So far inflation has been notable for its absence, but Mr Spitznagel is undeterred. “This is the greatest monetary experiment in history. Why wouldn’t it lead to the biggest collapse? My strategy doesn’t require that I’m right about the likelihood of that scenario. Logic dictates to me that it’s inevitable,” he says. investors will be praying he is wrong.