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Overall the argument by the author is very convincing and well put. One part I don’t fully agree with is > If the trades hadn’t worked out, the losses would ha

Overall the argument by the author is very convincing and well put. One part I don’t fully agree with is > If the trades hadn’t worked out, the losses would have been swift and total. Zero-day options don’t forgive bad timing. The entire $2.5 million could have evaporated by the close of trading. Even with SPY shares, any unexpected reversal would have meant millions in losses. This has exactly been Taleb’s strategy. Buy option where the writeoff is small when wrong and the payoff huge when correct. As described in the post, the ratio was 1 to 25. Also it was likely that the market would go through huge shifts because the policy is so unpredictable. So it is not impossible that someone figured that it would be possible to just buy these calls for the whole month. As long as one was a hit, the trade would not make a loss. And given the volatility, at least one would be a hit in this month. These short option bets are truly not such strange ehm options in these volatile times. So I would like some data about whether similar options were bought on other days in similar volumes. Having said that, I do find the evidence very strong and it’s reasonable to assume that this was insider trading. I personally suspect someone at JPM or Ackman. They said they “convinced” Trump so maybe Trump said in a meeting that it would probably happen and they immediately bought the calls.

dwedge 2y ago
Unless I'm totally misreading this, it wasn't a 2.5m trade, it was 80c per option at 30,000 of them, less than $30k The option to buy at 2.5m was not an obligation to do so
- MichaelRo 2y ago
  Yes you are misreading because options have a contract size of 100. So you can't buy "one option", only a contract of 100 options at minimum. Which means 80 cents x 100 = 80 bucks per contract. Multiply by 30,000 and you get =~ $2.5 million. And it's bullshit that you can reliably make money of such low probability options. Even if you do, you never put $2.5 million on something with a huge probability of ending in a complete loss, these deep out of the money options are essentially lottery tickets. I do buy slightly OTM options and it's barely profitable and even so I think mostly out of pure luck. No way would someone have done this trade without inside info.
  - huijzer 2y ago
    > And it's bullshit that you can reliably make money of such low probability options. Even if you do, you never put $2.5 million on something with a huge probability of ending in a complete loss, these deep out of the money options are essentially lottery tickets. Nassim Taleb: "I was effectively short volatility. [...] I would have been harmed by small movements. I was set up to be harmed by small movement and gain if the move continues to something very large." [1] He also described in one of his books that this strategy works because on most days you will lose money, and most people psychologically don't like that. But you have to ignore that and keep betting until you suddenly make a lot of money. In case you don't know Taleb and would like to point out that he probably is a fraud, please note that his books and articles have been cited 39946 times according to Google Scholar. See also his Wikipedia [2]. Although I am aware that these are all popularity-based metrics, I unfortunately don't have a better metric available. I invite you to read his books for yourself and make your own decision on his credibility. > I do buy slightly OTM options and it's barely profitable and even so I think mostly out of pure luck. No way would someone have done this trade without inside info. Okay if the discussion is whether this particular trade was unlikely I can agree, but your "No way" makes no sense to me. [1]: https://youtu.be/pavjXIkARS4 https://youtu.be/pavjXIkARS4 [2]: https://en.wikipedia.org/wiki/Nassim_Nicholas_Taleb https://en.wikipedia.org/wiki/Nassim_Nicholas_Taleb
    - nramanand 2y ago
      Doesn't that mean he was long volatility? Taleb's point seems more to be that he saw a mispricing and traded on it one day, rather than anything profound regarding option pricing, unless I am missing something. Anyway, it has little to do with what's being said in the article.
      - huijzer 2y ago
        > Doesn't that mean he was long volatility? Now that you say it could be that he misspoke indeed. > Taleb's point seems more to be that he saw a mispricing and traded on it one day Okay so Taleb was literally an "option trader" as in he traded one option on one day in his life? > Anyway, it has little to do with what's being said in the article. How is Taleb, who is an option trader and who has written about options trading for years, not related to an article on an options trade?
ncann 2y ago
> So I would like some data about whether similar options were bought on other days in similar volumes. The volumes are there for all to see and the answer is no.
- dash2 2y ago
  Could you do the rest of us a favour who don't know how to look up volumes on spy options, and post a link?
  - hermannj314 2y ago
    I think Wall Street would love to know the secret formula that can detect fraud and insider trading by analyzing trade volume in real-time that apparently hundreds of people in this very forum all seem to be aware of. I'm surprised if they would let the trades go through at all once they know the secret.
svg7 2y ago
nicely put, but I wonder why you think that similar volume of options would be bought on other days. These days are much more volatile and bets like these love volatility

dwedge 2y ago

Unless I'm totally misreading this, it wasn't a 2.5m trade, it was 80c per option at 30,000 of them, less than $30k The option to buy at 2.5m was not an obligation to do so

MichaelRo 2y ago
Yes you are misreading because options have a contract size of 100. So you can't buy "one option", only a contract of 100 options at minimum. Which means 80 cents x 100 = 80 bucks per contract. Multiply by 30,000 and you get =~ $2.5 million. And it's bullshit that you can reliably make money of such low probability options. Even if you do, you never put $2.5 million on something with a huge probability of ending in a complete loss, these deep out of the money options are essentially lottery tickets. I do buy slightly OTM options and it's barely profitable and even so I think mostly out of pure luck. No way would someone have done this trade without inside info.
- huijzer 2y ago
  > And it's bullshit that you can reliably make money of such low probability options. Even if you do, you never put $2.5 million on something with a huge probability of ending in a complete loss, these deep out of the money options are essentially lottery tickets. Nassim Taleb: "I was effectively short volatility. [...] I would have been harmed by small movements. I was set up to be harmed by small movement and gain if the move continues to something very large." [1] He also described in one of his books that this strategy works because on most days you will lose money, and most people psychologically don't like that. But you have to ignore that and keep betting until you suddenly make a lot of money. In case you don't know Taleb and would like to point out that he probably is a fraud, please note that his books and articles have been cited 39946 times according to Google Scholar. See also his Wikipedia [2]. Although I am aware that these are all popularity-based metrics, I unfortunately don't have a better metric available. I invite you to read his books for yourself and make your own decision on his credibility. > I do buy slightly OTM options and it's barely profitable and even so I think mostly out of pure luck. No way would someone have done this trade without inside info. Okay if the discussion is whether this particular trade was unlikely I can agree, but your "No way" makes no sense to me. [1]: https://youtu.be/pavjXIkARS4 https://youtu.be/pavjXIkARS4 [2]: https://en.wikipedia.org/wiki/Nassim_Nicholas_Taleb https://en.wikipedia.org/wiki/Nassim_Nicholas_Taleb
  - nramanand 2y ago
    Doesn't that mean he was long volatility? Taleb's point seems more to be that he saw a mispricing and traded on it one day, rather than anything profound regarding option pricing, unless I am missing something. Anyway, it has little to do with what's being said in the article.
    - huijzer 2y ago
      > Doesn't that mean he was long volatility? Now that you say it could be that he misspoke indeed. > Taleb's point seems more to be that he saw a mispricing and traded on it one day Okay so Taleb was literally an "option trader" as in he traded one option on one day in his life? > Anyway, it has little to do with what's being said in the article. How is Taleb, who is an option trader and who has written about options trading for years, not related to an article on an options trade?

ncann 2y ago

> So I would like some data about whether similar options were bought on other days in similar volumes. The volumes are there for all to see and the answer is no.

dash2 2y ago
Could you do the rest of us a favour who don't know how to look up volumes on spy options, and post a link?
- hermannj314 2y ago
  I think Wall Street would love to know the secret formula that can detect fraud and insider trading by analyzing trade volume in real-time that apparently hundreds of people in this very forum all seem to be aware of. I'm surprised if they would let the trades go through at all once they know the secret.

svg7 2y ago

nicely put, but I wonder why you think that similar volume of options would be bought on other days. These days are much more volatile and bets like these love volatility