Thanks anubis but I am not even trying to assign prob on pegs. I am just getting as much info as I can now on what Fx has artificial limits and completely staying away from them . I don't care if the peg unravels in 1 month or 3 years. Just want to completely be away from those tickers where the movements are so big -like biotech or mergers. A little too old for those kind of pnl curves.
The losses from IB customers came from 5 non US countries including Spain and Hong Kong. The customers were trading futures that were margined at exchange minimums of 1%. 4 individuals. Source IB conference call.
lol, you keep up with your swan colors (which are utterly irrelevant in this world), what matters is that events like the SNB debacle are extremely rare but people believe they are even rarer than they actually are which leads to the mispricing of events like this. Whether it is a black red or white swan nobody could care less. And Taleb has never struck it rich ever. He only proved that you can indeed go bankrupt by being long rare-event risk (he would have long time ago folded the tents without his book sales). I am not promoting irresponsible behavior but look how the retail "herd" herd is behaving right now: "I will never ever go above 2:1 leverage again ever", "I will never touch a swiss franc pair again ever"...bla bla...give it couple weeks and the same idiots will engage in their gambling patterns again, just in a different product. My point is that there is a golden middle, excessive risk taking will be punished and so will be risk avoidance. I have never ever heard of a single person who survived being long wings over a long period of time. Your swans or whatever you wanna call them (and again the name is utterly irrelevant) after all do not occur all that often.
Nobody can attach credible probabilities to such events, but they do happen. Regular trading should be a precise science of probabilities and statistics but one should openly admit that events like this cannot be predicted nor its probability estimated. Simple as that. And it can happen anywhere. Hong Kong could be swept and swallowed by a tsunami tonight for that matter. There is no prediction regarding some "next" collapse. Lesson to take away from all this is : Safeguard against extreme events IF your life savings depend on it AND try to avoid direct exposure to rare event risk that can somewhat be avoided That does not mean you should leave the financial arena just because such thing could happen in every asset class. You could as well be struck with a lightning bolt. And there is empirical evidence that "being long such event risk" has not generated any alpha ever either".
Volpunter There is a big mistake in your reasoning. Obviously, you confound acts of God and financial failure. In terms of probability, it is impossible to predict a tsunami, earthquake, September 11 ... But a failure?! If you do your homework, of course! For example, you could easily predict SNB would implode ! When you need to buy 90% of the Swiss GDP to keep your PEG alive, it is impossible it lasts forever!!! In my case, I was waiting for more than 1 year to see PEG implode! Probability to implode : 100% ! And we were numerous to know that! This is the same if you say it was impossible to predict subprimes crise, or peripherical debt crisis ! When you get a financial failure, people don't want to see reality. But SOONER OR LATER, when reality is unavoidable, boom! Really ??? I got another "prediction" for you : I can predict for the coming year that US Equities will get a wild correction you never saw for long ! Probability : 100%. I can predict lots and lots of people will lose FORTUNES. Probability : 100%. Am I a genius ? No ! I know the rules, I know how the game works, I do my homework and I got too many experience to be naive and think bad things never happen !!
nonsense, if you indeed predicted the SNB failing to maintain its peg you would be several tens of millions richer by now. I would strongly assume you did not meaningfully benefit from the most recent events. Haha, you can predict a US correction? So can you show all of us your blotter and your large position that will capitalize on your prediction? People like you have sprung up with their tea leaf readings every once in a while on this website, most all such predictions utterly failed. Do a simple search and I am willing to bet you will find more than 100 predictions over the course of last few years that called for a sharp correction if not outright downfall in the US equity markets. Nobody said "bad things" never happen, I said you can't predict the events AND right timing of such extreme events.
Lol you are wrong and you want to argue? Don t be childish. Of course there are incertainties. Sometimes I would be wrong and I dont care. But elaborate scenarios with probas is my job so dont tell me it is impossible because you cant. And you want me to send you a blotter?! Lol Man I am not an amat like you! I am a pro and not a bad one. I trade millions every day. So learn rather than argue. Chris Mac
Finally some ground for agreement. You are correct that there is always the golden middle ground when it comes to risk and being long rare event risk is not a way to prosper. BTW, I don't call them Swans ... Taleb's phrase.
When trading ANY instrument in ANY market: 1. Don't ever create a leveraged position that can kill you in a worst-case-scenario. 2. Identify the worst that can happen, and be prepared for it. Because in a long trading career it WILL happen. 3. If you can't stand the heat, get out of the damn kitchen.