3 ms·

Perhaps an oversimplification but basically you short the market at all times, losing a little money every month when times are good, but cashing in like crazy

Perhaps an oversimplification but basically you short the market at all times, losing a little money every month when times are good, but cashing in like crazy when something disrupts the market. Takes a pretty strong stomach to play that game.

chrstphrhrt 7y ago
Is that any way related to dollar cost averaging? -not an investor
- burlesona 7y ago
  Not really. Dollar cost averaging means that you trickle money into the market rather than putting it all in at once. For example, suppose you got a $10k net bonus at work, and decided to put it all into the stock market. One approach is just to put it all in right now. If the market generally moves up for a while that works out fine. But if you did this right before a big dip, you now spend a while waiting for things just to get back to even. If you took a DCA approach you might instead invest $500 every week for 20 weeks. Then if there’s a big dip, only a little of your money was invested with “bad timing” and much of it probably came in during the dips and therefore was a better deal. Note, though, that you get the opposite effect if you consider an investment that would have happened right before a giant boom. So basically DCA means you’re going to just track the market closer and have less timing risk compared to making larger less frequent investments.
- mcnamaratw 7y ago
  It's very different. Dollar cost averaging (if you really follow it) has been very low risk for a very long time. What Taleb says he's doing (betting on events that everybody assumes will not happen) tends to produce (nearly) guaranteed losses each year, with the hope that one day you make it all back and more.
brenden2 7y ago
Yes this is right. They buy puts and keep rolling them forward indefinitely waiting for things to go awry. The premiums on the puts eat into their overall returns in the hopes that one day there will be an event that makes back all those lost premiums. They aren't really disclosing enough information to be able to evaluate whether or not it actually works, so I suspect this is just a marketing ploy to get more clients.
edoceo 7y ago
Basically: buy OTM downside PUTs

chrstphrhrt 7y ago

Is that any way related to dollar cost averaging? -not an investor

burlesona 7y ago
Not really. Dollar cost averaging means that you trickle money into the market rather than putting it all in at once. For example, suppose you got a $10k net bonus at work, and decided to put it all into the stock market. One approach is just to put it all in right now. If the market generally moves up for a while that works out fine. But if you did this right before a big dip, you now spend a while waiting for things just to get back to even. If you took a DCA approach you might instead invest $500 every week for 20 weeks. Then if there’s a big dip, only a little of your money was invested with “bad timing” and much of it probably came in during the dips and therefore was a better deal. Note, though, that you get the opposite effect if you consider an investment that would have happened right before a giant boom. So basically DCA means you’re going to just track the market closer and have less timing risk compared to making larger less frequent investments.
mcnamaratw 7y ago
It's very different. Dollar cost averaging (if you really follow it) has been very low risk for a very long time. What Taleb says he's doing (betting on events that everybody assumes will not happen) tends to produce (nearly) guaranteed losses each year, with the hope that one day you make it all back and more.

brenden2 7y ago

Yes this is right. They buy puts and keep rolling them forward indefinitely waiting for things to go awry. The premiums on the puts eat into their overall returns in the hopes that one day there will be an event that makes back all those lost premiums. They aren't really disclosing enough information to be able to evaluate whether or not it actually works, so I suspect this is just a marketing ploy to get more clients.

edoceo 7y ago

Basically: buy OTM downside PUTs