Here is Taleb's startegy to deal with swan events: Invest your bankroll in t-bills, and use the interest income to buy deep OTM options. In essence, take no risk and take enormous risk at the same time. The only problem with this strategy is that it's not been documented to either work or fail. I don't recall Taleb ever divulging if it worked for him or not. You could easily bleed to death waiting for a swan event to occur to make your fortune.
You can compress the time by using a volatile instrument,where the 'swans' occurance is almost on a daily basis.
I love this quote. Not only because it's funny, but it's true. I can't remember which Market Wizard said it (Larry Hite, maybe?), He said statistically significant events happen in the market far more often than statistical math would indicate.
So i take it that black monday(10.19.87), is just a big red daily candle to you? Would my assumption be correct?
No and the people who lost their asses that day were those who panicked and sold out at any price. I've done fairly extensive reading on the subject. I suspect getting out at a reasonable price (if you sold) was more luck than anything else. Fill confirmations were so far behind people didn't even know if they were long or short. Of course the next day brought the markets biggest historical rally.
Quite frankly I assume if another oct 1987 rolls around I assume I'll either, be wiped out or make a good deal of money all depending on whether I'm short or long at the opening. I don't think counting on your ability to maneuver your portfolio around a lot under those conditions is very realistic.