How does Nassim Taleb trade?

Discussion in 'Strategy Building' started by stocon, Oct 1, 2006.

  1. It is not difficult for him to subpoeana you guys who should do some homework and try to know what's going on before writing about other's people's business. I hope you guys know the meaning of short options.
    :)

    Note that your employers are also liable for damages if you are using work computers.
    good luck guys
     
    #11     Oct 3, 2006
  2. Your post seems well-intentioned, but sadly, it's incorrect - mostly due to a semantic misunderstanding.

    Taleb's contention is the 5,6,7th Sigma events happen more frequently (and with greater certitude over time) than the market would indicated based upon how they are priced.

    He sells short-term volatility and buys longer-term 5,6,7 sigma far, far OTM options.

    So, yes - he sells volatility - shorter term volatility that is common in the market (to put it in perspective, it's likely that he lost money between May-Jun 06 as there was significant vol, which he was likely selling since it was merely a solid selloff and not a "Black Swan" event).

    He BUYS 5,6,7 sigma events volatility based on the conention that the market is incorrect that such events are highly remote (Oct 87, Tech Burst, 9/11)...
     
    #12     Oct 3, 2006
  3. taowave

    taowave


    My subjective comment regarding his "attitude" was from reading his first book.It was very clear that he had a hard on for traders,and annoyingly voiced his contempt and loathing thruout the book....His huberis and self appointed intellectual superiority was a bit much..

    Bottom line is if he was long vega in the equity markets the last 4 years he probably got his head handed to him.I have no idea what ratio he has the near nerm vol realtive to the longer dated OTM vol,but my guess is the steeper the ratio,the more he lost.

    I sincerely doubt the decay from the spot options made up for acroos the board vol contraction...
     
    #13     Oct 3, 2006
  4. zdreg

    zdreg

    agreed. the writer taowave has tao in his handle. perhaps he should read the tao.
     
    #14     Oct 3, 2006
  5. zdreg

    zdreg

    be serious. this thread is not the UK with its absurd libel laws.
     
    #15     Oct 3, 2006
  6. taowave

    taowave

    have you read talebs first book on exotics????
     
    #16     Oct 3, 2006
  7. empee

    empee

    Although you now have people who trade for you, can you share with us a little of your methodology?

    I specialize in way-out-of-the-money [fat] tails, but I don't like to buy volatility. A lot of people think I just buy volatility, but that's not true, and I laugh when I hear that said about me. I like to sell volatility and buy tails, which is the opposite of what a lot of people think I do.

    ---

    This pretty much refutes what some of this thread has said.
     
    #17     Oct 3, 2006

  8. Does Levy's family know you're butchering their namesake?
     
    #18     Oct 3, 2006
  9. I read the same thing empee and came to the same conclusion.

    This appears to be what he does in laymans terms (as I see it):

    sell options ---> make money to run business and to pay for otm options

    buy otm options -----> make money once a 6 or 7 sigma event occurs.

    To what extent selling itm relates to buying otm, i have no idea. One thing he has never said ( that i have read ) is I like to buy low volatility, even though im assuming that buying low volatility is a good thing when your making money off a fat tail. I guess you could buy a breakout in volatility.
     
    #19     Oct 3, 2006
  10. Backspreads have done horribly in all but the energy complex.
     
    #20     Oct 3, 2006