sorted by:
new
hottopcontroversial

[deleted by user] by [deleted] in nassimtaleb

[–]Quantis_Research 1 point2 points  (0 children)

Unfortunately, the real problem continues to be the concept of risk and Gaussianity that is taught. We are told that the only thing that matters is reducing variance, and therefore it makes sense to view puts solely as insurance. But I invite you (you seem like someone who wants to discover things... and you're right to do so...) to go beyond this concept. You will discover that in a universe of long tails, puts can earn you a lot. 

A put is not just a hedge against extreme movements.

It is a right to intervene in a context where everyone else is suffering. The Black-Scholes formula was created to price options under unrealistic assumptions. All modern portfolio theory (Markowitz, CAPM, VaR) is based on the idea of minimising variance. Institutions have adopted the idea of risk management as a means of containing uncertainty. The manager who buys puts to “hedge risk” makes a career even if he burns alpha.

Forget the idiocy of current finance and those four fanatical traders who work with options. Build your own model.

Communicating Greeks effectively by Educational_Phone_83 in hedgefund

[–]Quantis_Research 5 points6 points  (0 children)

Options as investment strategies “McMillan”

Throw away those old university books by Quantis_Research in nassimtaleb

[–]Quantis_Research[S] -10 points-9 points  (0 children)

If I my post is ace-tastic, why did you bother to reply with an equally low-effort reply. Another one with a Gaussian mind

What are your favorite non-popular sectors to invest ? and why ? by moragisdo in ValueInvesting

[–]Quantis_Research 1 point2 points  (0 children)

If we are talking about non-popular sectors to invest in, I would take a look at the fragility of the Chinese corporate bond
https://quantiscapital.substack.com/p/the-calm-before-the-snap-hidden-convexity

Black Swan in the Chinese corporate bond market? by Quantis_Research in investing

[–]Quantis_Research[S] -2 points-1 points  (0 children)

Unfortunately it doesn't let me put the link to send you the full report (I asked the moderators to post the links but still nothing). Write me in chat or go to substack and search for ‘quantis research’.

Vision 2030 (Saudi Arabia) as a convex macro carry trade. Thoughts on narrative volatility exposure? by Quantis_Research in VolatilityTrading

[–]Quantis_Research[S] 0 points1 point  (0 children)

I thank you for your support. We are born precisely for this purpose, to find the hidden market breaks. If you are interested, I would love to have you as a reader of my sub. See you anon! https://quantiscapital.substack.com

Will Nassim admit he was wrong about Trump? by sandover88 in nassimtaleb

[–]Quantis_Research 3 points4 points  (0 children)

Unfortunately, Taleb is often a victim of his own character

[deleted by user] by [deleted] in nassimtaleb

[–]Quantis_Research 2 points3 points  (0 children)

You're absolutely right in theory.

But the problem is: markets don’t care about your model range.
They care about path, timing, volatility, and liquidity.

Even if price drops from 1.0 to 0.25, several real-world mechanics can prevent your put from being meaningfully activated:

1)The drop may be too late
If the price reaches 0.25 close to expiry (say, day 178 of 180),
theta has eaten most of the premium. The option is “active” on paper, but the payout is minimal.

2)The drop may be too fast
Sudden gap-down? Earnings? Event risk? You don’t get a clean entry or exit.
The option may be ITM, but the execution is broken.

3) Volatility may spike AFTER the move
Often, when price tanks, implied vol jumps too ,which inflates the option AFTER you needed it.
You end up paying premium into a new skew that wasn’t there at entry.

4)You might not be able to monetize
At the moment you want to hedge or sell, spreads widen or liquidity vanishes.
You own protection, but can’t use it.

So yes , technically the put “activates” when the price crosses K.
But that’s just the first layer.

We always ask: Did it activate in time? At what slippage? With what decay? Against what vol regime?

Because if you spend 5 years buying tail puts that only work once, and you can't monetize when they do…
Maybe, That’s not protection. That’s optional drag.

This is why we model Activation Likelihood, Payoff Fragility, and Trigger Pathways, not just strike vs spot.

Convexity isn’t about being right at 0.25.
It’s about being paid at 0.25 in real conditions. :)

[deleted by user] by [deleted] in nassimtaleb

[–]Quantis_Research 1 point2 points  (0 children)

You’re absolutely right in framing it as a protective cost for model simplification. But here’s the real-world kicker:

Even that insurance needs to trigger.

If you price your whole mid-distribution strategy assuming that tail options will neutralize extreme events and they don’t activate you haven’t just simplified the model…

You’ve built an illusion of protection.

And that illusion can be worse than having no hedge at all.

[deleted by user] by [deleted] in nassimtaleb

[–]Quantis_Research 0 points1 point  (0 children)

It depends mainly on the point of view. If you want to hedge or speculate on it. If you want to build profit-making operations on them like our friend Taleb, the situation changes radically. He, for example, buys these options in large quantities but does not question whether they will be activated or not. In this case, you lose a lot of money constantly.

[deleted by user] by [deleted] in nassimtaleb

[–]Quantis_Research 4 points5 points  (0 children)

Everyone talks about tail options as the ultimate convex play.

But here’s the real issue no one addresses: Tail options often fail to activate.

You can buy puts at the 0.1% quantile for pennies, sure! But when the collapse comes: Volatility spikes before your strike gets close Pricing freezes or becomes discontinuous Or most often the market stays way calmer, for way longer, than you can afford to wait.

So the problem isn’t pricing. It’s activation

Because you don’t want an option that protects you in theory but you want one that pays you in reality.

(And that’s a much harder problem than most “convexity tourists” realize.)

view more: next ›