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I think we are talking past each other at this point. My last post wasnt really clear, so I see what you're saying. In terms of his approach, my original statement was that, based on his interviews, Taleb likely exclusively trades in a manner that is focusing on taking advantage from tail events. That doesn't mean he's only trading spx puts or vix options. The other 85% of his portfolio exists for a reason and doesn't contradict anything ive said. To your point, I would be shocked if anyone they advise utilizes the same approach. Its not really marketable imo. Of course other traders have monstrous wins too. I dont think Ackmans success or the fact that trustyJules had a good month takes away from the point of the thread! Happy good Friday I agree, fun chat.

Billionaire investor Bill Ackman turned $27 million into $2.6 billion by betting that the coronavirus would tank the market The mysterious trader nicknamed ’50 Cent’ made $200 million last week as the market blew up There are more examples of "monstrous wins" by different traders. But in all cases, they were part of a bigger portfolios, usually a small part. We are in a full agreement that Taleb is a very smart man and a great trader. This is not the point. As you pointed out yourself, he is probably allocating 10-15% of his account to tail risk strategies. Which was exactly my point all the way - this is not a standalone strategy. You cannot allocate your whole account to the strategy and still make money during normal times. This is why I still believe the headline is misleading. But I enjoyed the discussion regardless. 😊

The story really is not impressive - this is a screenshot from my account with my European broker - I use them almost never because more expensive, less flexible and user friendly than TastyWorks. So there is a small sized budget there which was unused for most of the year but which in this volatility period I used for three trades. This is the quoted result: Believe me I am not retiring for a life of cruises as Kim is planning to do - yes I made a buck but these return calculations are pretty misleading when taken out of a fuller context as has been pointed out.

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.

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.

Very interesting, thanks for sharing. So they say "the fund returned 3,612% in March". And then: "Spitznagel included a chart in his letter showing that a portfolio invested 96.7% in the S&P 500 and 3.3% in Universa’s fund would have been unscathed in March, a month in which the U.S. equity benchmark fell 12.4%. The same portfolio would have produced a compounded return of 11.5% a year since March of 2008 versus 7.9% for the index." This is not exactly apples to apples comparison. I assume the fund itself would be losing money all years, but the mix is what makes it so attractive. It's some kind of hedge, but the one that doesn't lose in up markets. Using similar terminology, we can say that the "hedging" part of the Anchor made over 1,000% in March. Of course this would be a bit misleading because it was part of a portfolio that had other components.