Yip, it's not that rare events happen more frequently then we think (they do) it's that rare events are seriously underpriced. Again, there are no "positive edge" options. It's my understanding Taleb did very well for himself. He made money for 20 years running several institutional derivatives desks. He is now purely an academic and can now enjoy the fruits of his labor by spending the rest of his life researching and writing about things that interest him. There is a common misconception that Taleb simply bought DOTM options. This is not true. He was actually a big seller of ATM options and bought wings. I'm not endorsing this strategy, just want to explain that very few people on ET really understand what it is he did and why he did it. Anyway, his new book is coming out April of next year called "The Black Swan". Get your copy now!
Well, yes and no. I am oversimplying it for the benefit of all the soccer moms on this thread. LOL. Please don't attack the messenger.
When I get a break between real work tasks, I will take a look at the b/a spreads on fotm ES and ER2 options. If I spot a super tight spread, I will often take the inside bid or offer and use that to make a cheap debit spread as crash insurance. This month, I have a bunch of ER2 NOV705/702.5 put spreads that I picked up for 0.05. You can do this kind of trade on globex, where you participate more directly in the market, compared to sending an order down to the SPX pit. Cheap partial-insurance against a black swan.
Did you mean "yes and no" to my second statement? Or "yes" to my "agree" statement, and "no" to my strategy statement. Just want to clarify and not to confuse the soccer dads and moms.