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Any other sources that go into more technical details how those black swan funds work ? Is there a timed protocol they use to buy those options, or do they jus

Any other sources that go into more technical details how those black swan funds work ? Is there a timed protocol they use to buy those options, or do they just buy when their gut tells them ?

blitzar 3y ago
They buy the downside options every day.
skippyboxedhero 3y ago
This has been a topic of significant controversy with Universa because they are selective about what they report (i.e. the ludicrous 3000% number that journalists lapped up) and the guy who runs it has (iirc) repeatedly claimed he isn't just buying puts all the time (despite the performance of the strategy suggesting he is). But...they claim to be buying moderately OOM puts (10-20%) based on value (i.e. if vol becomes expensive relative to some metric they follow then they do not buy). It is possible if you time this correctly, it is profitable. But the strategy they are actually running (whether they are timing or not, who knows) does not appear to be profitable...which is true for put buying (I am not an options person but I believe this is regime-based, it has been profitable in the past but isn't today).
- candiodari 3y ago
  I wonder how this strategy is affected by the 2008 experience. You see, back then all sorts of, frankly, illegal measures were used to prevent those who bet against the housing market to cash out. Markets were frozen, contracts and even stocks artificially priced, for most investors right until the contracts were worthless due to bankruptcy, as pointed out in "the Big Short". Yes, VERY few investors did exactly the right thing at exactly the right time and got lucky. https://www.youtube.com/watch?v=SQTbbUASPLQ https://www.youtube.com/watch?v=SQTbbUASPLQ Wall Street outright lied to offload known crashed investments to unsuspecting buyers. Again, this is obviously highly illegal. Nobody got punished, we can argue about why not, but one can remark it would have seriously affected the government. https://www.youtube.com/watch?v=whlzFWwVv98 https://www.youtube.com/watch?v=whlzFWwVv98 It would have made both parties unelectable for a century because Will Emerson would have been forced "to take his hand off the scale". https://www.youtube.com/watch?v=2f2kGHcdJYU https://www.youtube.com/watch?v=2f2kGHcdJYU (second part of this clip, after 1m05s) The banks will not play fair. This can be proven by pointing out that they simply can't. If they make profits, they get those out of the company rapidly, and by design, the system cannot pay out the contracts it underwrites beyond a minimal "safety margin". They simply cannot cover the contracts they underwrite in the event of a crash, they don't have the money. You'd have to hope that the FED covers those contracts ... and ... not even if hell freezes over will they do so. And of course even this is ignoring real "black swan" events. Here's the thing: if a real meteor or comet hits earth, for example, black swan investors won't get paid ... and they won't even care.

Any other sources that go into more technical details how those black swan funds work ? Is there a timed protocol they use to buy those options, or do they just buy when their gut tells them ?

blitzar 3y ago

They buy the downside options every day.

skippyboxedhero 3y ago

This has been a topic of significant controversy with Universa because they are selective about what they report (i.e. the ludicrous 3000% number that journalists lapped up) and the guy who runs it has (iirc) repeatedly claimed he isn't just buying puts all the time (despite the performance of the strategy suggesting he is). But...they claim to be buying moderately OOM puts (10-20%) based on value (i.e. if vol becomes expensive relative to some metric they follow then they do not buy). It is possible if you time this correctly, it is profitable. But the strategy they are actually running (whether they are timing or not, who knows) does not appear to be profitable...which is true for put buying (I am not an options person but I believe this is regime-based, it has been profitable in the past but isn't today).

candiodari 3y ago
I wonder how this strategy is affected by the 2008 experience. You see, back then all sorts of, frankly, illegal measures were used to prevent those who bet against the housing market to cash out. Markets were frozen, contracts and even stocks artificially priced, for most investors right until the contracts were worthless due to bankruptcy, as pointed out in "the Big Short". Yes, VERY few investors did exactly the right thing at exactly the right time and got lucky. https://www.youtube.com/watch?v=SQTbbUASPLQ https://www.youtube.com/watch?v=SQTbbUASPLQ Wall Street outright lied to offload known crashed investments to unsuspecting buyers. Again, this is obviously highly illegal. Nobody got punished, we can argue about why not, but one can remark it would have seriously affected the government. https://www.youtube.com/watch?v=whlzFWwVv98 https://www.youtube.com/watch?v=whlzFWwVv98 It would have made both parties unelectable for a century because Will Emerson would have been forced "to take his hand off the scale". https://www.youtube.com/watch?v=2f2kGHcdJYU https://www.youtube.com/watch?v=2f2kGHcdJYU (second part of this clip, after 1m05s) The banks will not play fair. This can be proven by pointing out that they simply can't. If they make profits, they get those out of the company rapidly, and by design, the system cannot pay out the contracts it underwrites beyond a minimal "safety margin". They simply cannot cover the contracts they underwrite in the event of a crash, they don't have the money. You'd have to hope that the FED covers those contracts ... and ... not even if hell freezes over will they do so. And of course even this is ignoring real "black swan" events. Here's the thing: if a real meteor or comet hits earth, for example, black swan investors won't get paid ... and they won't even care.