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  3. Jjapp

    Nassim Taleb, The King of Long Volalitlity

    I think there is an interesting side question that comes out of all of this. Most portfolio theory is based on the idea of minimizing returns variance for some level of average returns. Even some options pricing models use that idea when you loosen a lot of the standard BS assumptions. People rarely question whether that is the right objective function for them. Some people do argue that it is the wrong objective function (Munger, Buffett, Taleb all come to mind). I'm not arguing with anyone on this thread but I am saying that sometimes we forget some of the fundamental assumptions in the models that support the tools we use. You can find a bunch you would probably question if you work through the derivations of CAPM etc. I'm guessing you can put together an objective function where a huge percentage of your money in a tail risk strategy would make sense. I've actually started messing around with this a bit. Under 'x' objective function how should you invest? On the actual trading strategy I think Hull talks about something in his market wizards interview that sounds like Taleb's barbell comments. He talks about how he often shorted at the money options but maintained huge "explosion" positions. Granted, I believe this was prior to the 87 crash so they were probably cheaper than but Taleb has posted some papers online recently showing that he thinks tail risk in options is still under-priced. Of course, all of this is only tangentially related to the debate here but it was fun reading and got me thinking.
  4. I would be glad to be proven wrong. But I think there is a good reason why they recommend placing only 3.3% into the fund.
  5. RapperT

    Nassim Taleb, The King of Long Volalitlity

    1. You don’t know that. You’re assuming that. Taleb preaches non stop about protecting capital in between big moves. You’re also implying extreme moves /events are super rare. Theres a goood piece on his success on a single day during flash crash too ( I believe that’s what it was, will look.). You may be right that loses are big in normal years ( doubt it), but we don’t know. I think it would be beneficial to read a bit about his approach because trades geared toward black swans make up ( or made up at one point) a small portion of his holdings. 2. Not disagreeing. That’s a fantastic result. 3. Also not disagreeing and haven’t in this entire thread. I was having fun with this earlier but it seems like you think I’m making an argument I’m not. I think the only things we disagree on are whether or not the article title is misleading and if talebs fund loses big most of the time. Hopefully we can find the year by year results. Im certainly open to the possibility I’m wrong
  6. You are missing my point. A standalone strategy that can produce over 3,000% in one month cannot make money in normal times. Period. By definition. And I never said he is full of shit. On the contrary - as I mentioned, I consider him one of the smartest people I know. And no, not everyone can produce same results. But he must be investing in a mix of strategies, including tail strategies. So let me clarify it one more time: If you have $1M and put all of it into Universa’s fund on Jan.1 2020, you will have over $30M on March 30, 2020. But you would be losing money big time during normal years. If you placed 3% of the same $1M into Universa’s fund and the rest into S&P 500 as they recommend, you would be flat in March, and outperform S&P in the long term. Outperforming S&P over time by few percentage points per year while being hedged against catastrophic event is an excellent result - very few can do it. But it's not the same as making 3,000%+ during crisis on the whole portfolio AND being able not to lose much rest of the time.
  7. RapperT

    Nassim Taleb, The King of Long Volalitlity

    For those interested, he talks about his “barbell strategy” in his books. He doesn’t get into specifics but you can get an idea of his approach ( and also see that he’s not just buying puts). He talks about being more heavily weighted in lower risk ( and lower return) trades but always having exposure to More speculative trades that capitalize on tail risk. Been awhile since I read though so may want to check it out to get more detailed explanation.
  8. RapperT

    Nassim Taleb, The King of Long Volalitlity

    who said he’s losing 95% of the time in the fund? So far I’ve only seen that suggestion here on the board. His approach has a long term positive expectancy. Any strategy at all can lead to going broke unless that’s the case. I don’t have a record of every trade he’s taking. Maybe he’s buying and holding index funds. We can theorize about why it’s equivalent to buying spy puts ( with the implication being any dope can match his success) but the b*llshit filter in all of this is the fact that it’s been working for him for over 30 years and other “tail” funds haven’t seemed to produce same results. If it were that easy than we should all be worth 9 figures. Obviously people are welcome to think he’s full of shit. I’m not claiming there is “magic.” My point is that he’s a very talented trader with a long track record. I haven looked any more results with this particular fund yet . More history on talebs trading career is easy to find online for anyone interested. ill see what I can find and let you know.
  9. "mostly around tail strategies" is not the same as put the whole portfolio into those strategies. And "long stretches of unimpressive returns" is not the same as losing money 95% of the time. There is no magic. Tail strategies are designed for a small part of your portfolio. They are lie lottery tickets. A strategy cannot make thousands percent of returns during crisis and make money during normal times. Even Taleb cannot do it. I would assume that he is putting a larger percent of his portfolio into those strategies compared to "average" investor. Were you able to find returns of the Universa’s fund in "normal" years (excluding 2008-2009 and 2020)?
  10. RapperT

    Nassim Taleb, The King of Long Volalitlity

    @Kim yes, I think Taleb approach is focused mostly around tail strategies. He talks about this all the time. He acknowledges that he will have long stretches of unimpressive returns.
  11. Yesterday
  12. You mean that Taleb puts all his portfolio into Universa’s fund like strategies? I highly doubt it. Exactly.. no matter what any of those guys is telling us, there are only 2 ways to protect your portfolio: stock/index puts or VIX calls. Familiar with 50 cents trader? Take a look: https://www.cnbc.com/2018/02/12/the-mysterious-trader-nicknamed-50-cent-made-200-million-last-week-as-the-market-blew-up.html https://www.reuters.com/article/us-usa-stocks-volatility/big-volatility-options-trade-points-to-mystery-investor-50-cent-idUSKBN1ZS0HW The strategy involves buying next month OTM VIX calls around 50 cents. Now, if you bought those calls on Feb.1, this would be your return on March 16: However, you would be losing the whole premium 95% of the time. Same is true for far OTM puts. You spend maybe 2-3% of your portfolio on Universa’s fund like strategies, and it helps you to protect the portfolio during big drawdowns. But can you say that you made 4,000% (or 7,000% in case of VIX trader)? btw, I implemented a similar strategy with SPX puts. This is how it looked on Mar.18: (Posted on twitter on March 18 - https://twitter.com/SteadyOptions_/status/1240315512229376001) Some of them gained over 1,000-1,500%. But I never claimed to make those returns.
  13. Topcat

    Nassim Taleb, The King of Long Volalitlity

    Agree-you can go bankrupt if the return on other years are really negative if you put morethan 3%. I can't find returns for other years? can anyone else? Also I'm not sure how this would be different from buying SPY puts for long term stock portfolio insurance, say 15 to 20% below current levels or maybe even putting a tiny % into 3x inverse funds. Essentially portfolio insurance would cost you a small % off the top of total returns over years but in the down years like 2008/2009 and recent it smooths things out-allowing you to stay invested. I do like Universa's article on the "volatility tax" https://www.universa.net/riskmitigation.html
  14. RapperT

    Nassim Taleb, The King of Long Volalitlity

    haha. Yes we are (mostly) agreeing. Anyway, you gave Taleb his due so my work is done here I never suggested anyone invest in it as a standalone fund! I just said its very likely Taleb only trades this way
  15. P.S. My comments don't mean in any way any disrespect for Nassim Taleb. He is one of the smartest people I know, and I have a tremendous respect for him. I just think that those headlines are misleading. Which is not surprising - the financial media was never interested in facts, it's more about ratings. Exactly like CNBC who host clowns like Cramer and Najarian brothers only because they are entertaining.
  16. Exactly my point!! Nobody in their right mind would invest in this fund as a standalone fund. It's always a small portion of the overall investment. While technically the fund did made those returns, advertising it that way is like saying that if you invested 1M in the fund on January 1st, you would have now $40M+. But nobody would invest it that way because most of the years you would be losing money big time. Another way to look at it is like us advertising that Anchor "hedge fund" made 1,000%+ because the hedge part (the long puts) increased in value 10 times. Nobody would do that because nobody would buy those puts as a standalone investment - they are part of a broad portfolio.
  17. RapperT

    Nassim Taleb, The King of Long Volalitlity

    because even though the CIO seems to argue otherwise a bit in the letter, we should remember that funds like this are often designed to protect investors from the far left tail on the return distribution. By definition thats what a tail fund is. Also, as I said, Im sure it helps attract investors and generate fees when positioned as a smaller part of a bigger portfolio...
  18. Because event like 2020 (35% down in just few weeks) might be a one in a lifetime event, and it might be another 20-30 years till the next one. As I mentioned, if you are losing money year after year, you might not have enough capital when an event like 2020 comes. IF it comes at all. You know what they say - more money has been lost in preparing to corrections than corrections themselves. And again, why they recommend placing only 3.3% into it?
  19. todavidlee

    Nassim Taleb, The King of Long Volalitlity

    This begs the question, is the fund open to the public?
  20. RapperT

    Nassim Taleb, The King of Long Volalitlity

    haha. Man you are tough! Who gives a crap if it loses single digits multiple years if it then returns 4000%!!! Come on! The annual mean ROIC is 76% since 2008! , Killing me Kim edit for citation: "Moreover, the standalone Universa tail hedge strategy’s life-to-date mean annual net return on invested capital (expressed as returns on a standardized capital investment since inception in March 2008, and using yours from your start date) has been +76% per year. (During this period, as a reminder, the SPX has gained 151%. Are we really such an “über-bearish” strategy?"
  21. Of course. But we also need to put things in perspective. How the fund itself (not the 3%/97% mix) performed during "normal" years? They don't provide those numbers. The performance they mentioned included the huge gains in 2020 (4,144%), and probably some nice gains in 2008-2009. But if it was losing around 10% per year during normal years, someone who joined in 2010 wouldn't even have enough capital to enjoy that 4,144% gain. and again, if it is so good, why they recommend allocating only 3.3% to it?
  22. RapperT

    Nassim Taleb, The King of Long Volalitlity

    thats lots of different funds. Here's a recent investor letter from Universa. I think we need to give some credit where credit is due https://www.zerohedge.com/markets/black-swan-hedge-fund-advised-nassim-taleb-returns-3612-march
  23. Here is some data: https://www.investopedia.com/news/black-swan-investors-lose-big-stocks-thrive/ "after hitting peak performance in September 2011, these funds have fallen by about 55%, according to data from CBOE Eurekahedge reported by the Journal."
  24. RapperT

    Nassim Taleb, The King of Long Volalitlity

    Obviously the fund likely loses during periods of low vol but I dont think there's any evidence it loses a lot. We dont know the return stream outside of last month. Im going to do some digging and see what I can find. Regardless, Taleb has a long history as an accomplished trader. As @Jjapp recently said to me, hes not worth 100 mil from his writing. He's not someone I would ever bet against in the long run.
  25. exactly - timing is everything....
  26. cwelsh

    Welcome to Anchor Trades

    The problem comes in hedging, as the prices do not move in unison. E.g. if SPY drops $1 a VIX call is not going to go up $1. I just pulled both charts for today, SPY is up 1.7% and VIX is down 3.2% -- so not only can you not match dollar moves, you can't match percentage moves. I'm not saying there's not a way to do it -- and it might even work better in very large moves down (as VIX can go through the roof quickly), but I'm not sure how comfortable I'd be using as it replacement for SPY puts.
  27. When they are saying "96.7% in the S&P 500 and 3.3% in Universa’s fund would have produced a compounded return of 11.5% a year since March of 2008 versus 7.9% for the index." - this is an excellent result, but don't forget that this period starts at the beginning of the 2008-2009 financial crisis, and ends at the period when indexes were down big time, and the Universa’s fund component had huge returns. I can assume that the Universa’s fund itself would be losing a lot during "normal" periods, otherwise why they recommend allocating only 3.3% in this fund?
  28. We did double the size of the portfolio due to volatility. Even at 50K we expect pretty healthy volatility. But we basically kept the position sizes the same but doubled the total portfolio size. One thing I really like about trend following is it ties up pretty minimal capital which means I can easily use it in combination with other strategies that have different return streams, giving me a nice diversification aspect. I think we're ok with spreads based on what we're seeing. The return stream will definitely be different than long options and ideally I would trade straight long options when I could (like we do with SB). Unfortunately doing so with some of the other contracts would require a much larger portfolio if you wanted to maintain similar vol. I see the 30% oil crash though and it hurts to think I had a spread on. A lot of the math I've been doing on options pricing is applying a dynamic programming approach to a model with more realistic assumptions than the classic pricing model. It does imply sometimes that the far otm options are mispriced (usually too cheap). I'm not using that though for anything we're doing here.
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