I don't understand why people bash Taleb so much... He is a writer and a former floor trader.. He says alot of interesting stuff.. Dynamic Hedging is a great book. With that being said you can be both long and short volatility.. Yes your net position is going to be either short or long.. I think the more interesting trades to me are long higher degrees of convexity and short lower degrees of convexity.. Taleb talks about convexity effects alot.. I never was sure if his fund was like a vxx type etf of hedge funds with more convexity on vol spikes and less draw on low vol environment.. idk
Maybe because he is usually just Captain Obvious and a narcissistic ass who edits his own Wikipedia page. Also because quite often he is wrong: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=azLmks3BmQm4
I know you and I have discussed this many times...but for those who think you have to trade vol with one bias, I will offer a typical setup from my bag. Using a futures curve u can run long vol combo in the front end as that is where u get the black swan payment...and then in middle curve, back curve u can short vol to help pay, offset the bleeding. Admittedly to make a living and prosper this way is not easy but I do it and I know a few others who do.... maybe Taleb does something similar.
Well, good question. ..I have been selling vol in back curve since Monday and always too early..so there's a bit of DD as the bias may lean short vol now...holding front long vol .
What's most incredible is ET can still find a reason to trash them. Any way you cut it, it's very difficult to make $1B in the timeframe they did. Given their initial risk allocation, it's not easy to come up with a strategy that has enough convexity to make 20% in a couple days without subsequently losing 20%pa. They are doing something right.
Yes, Taleb or guys running stuff like him could be long vol and short vol across curve or maturities with bleed or payouts set according to their goals. My layout could be very different, that's why he maybe scored and I'm waiting for a bit of steepening in mid curve.
It's amazing to me how difficult it is for some people to conduct simple research to find answers to simple questions. Why not listen to the man himself who runs the fund and hear his answers. BTW, this took me less then 10 seconds to find. http://www.bloomberg.com/news/video...-investor-hungry-for-a-bull-market-correction This is 3 months old. So it's "before" the selloff.
Difficult? They bet $6bln on long vol/tail setups. Seeing +10 to 20% days happens once or twice every market cycle (5-7 years) years. It's not 'difficult' at all.