Trading Kurtosis

Discussion in 'Options' started by bozwood, Feb 7, 2003.

  1. bozwood


    I am familiar with options, their terminology, etc, but have never traded them. I have recently read a number of articles about Nassim Taleb and he mentioned that he trades kurtosis. Can someone here explain what that means?

    Thanks in advance.
  2. He is probably talking about platykurtic. In other words, the tendency of a distribution to have fat tails. He looks for extreme events to occur more often than a distribution would suggest.
  3. bozwood


    ... be exlusively buying puts and calls? I read that he buys volatility. Does that mean he buys when IV is low or as it is expanding after being low hoping it goes higher?
  4. I think he is saying that the models being used underestimate the probability of the "100 yr storm " happening. As such, he does not mind taking these aymetrical bets where he might lost a majority of the time but will still come out ahead.
  5. not too different from hoping to strike it big by buying lottery tickets....

    most expire worthless, but every now and then you hit the jackpot...
  6. maglia rosa

    maglia rosa Guest

    You would put on a bet on kurtosis by buying far out strike strangle and selling ATM straddle. It's obviously quite difficult to say this is just on kurtosis, since the distr. might show some skewness to it as well.