First some general observations. It’s my experience that if someone can’t say what they mean using plain English then invariably they’re trying to hide something.
Nope, he's just having fun with you. Most things related to probability can't be proven in plain English, only with math so using "plain English" is usually insufficient anyway. Would you say that he was hiding something if he answered you using math sentences?
Much of it as I’ve said before is self-contradictory and close to gibberish (it reads like James Joyce had he taken a semester of calculus at night school) but I’ll now review the more coherent passages:
He exceedingly concise, precise and has developed his own terms for some complex concepts which makes him difficult for the average reader to read. It took me many years of reading ahhaha to understand most of what he writes and I have an IQ 2 full standard deviations above average.
Do you actually understand what options are and how they work?
Well now you doing what you accuse him of doing. It's funny from my perspective since I know his background in options. I might be the only person who asked him how it is he developed his knowledge about options and got the full answer. Not because I'm the only one he answered but I might be the only one who asked! What we have here is a failure to investigate. Why not investigate before you make a damned fool of yourself in public?
Let me give you a little advice which you surely will not take: always assume the person you are debating is smarter, more experienced and more knowledgeable than you until they prove otherwise. Men almost never do this, it is a genetic flaw. They have an abundance of confidence without the abundance of competence to back it up.
This is truly bizarre. Taleb’s main observation was that the normal curve was a misplaced model for extreme events. Though you seem not to realize it you’re actually agreeing with my point!
Ahhaha implied elsewhere that in crash situations you can't get the price that the model predicts. One can only transact if there is a counterparty on the other side of the transaction and MMs can back away, the public backs away. Furthermore you can't expect counterparties to payoff the extreme payoffs. You can hold all the crash puts you want, in a truly chaotic event (think nuclear bomb in downtown Manhattan or DC) you won't be able to cash them in because of counter party failure, or worse, systemic failure.
This is something no one in the realm of the official world will admit can and will happen but did happen in 1987. You won't find this anywhere in books and papers about the crash. I went back and forth a few years back with a Fed guy who wrote most of the research the Fed uses regarding the safeguards in place for counterparty and clearing house failure in options markets and it was news to him that there were clearing house failures in 1987. 1987 could turn out to be a relatively minor event in the range of possibilities. You win big and break the house, who pays you off?
There ARE some patterns that exist outside of chance but certainly not as crude as “all buyers are losers” as you claim.
He never said that and it is this kind of statement which made ahhaha doubt that you had any background in probability. Negative expected return means that the expected return is less than 1. Roulette has a negative expected return which if you do the calculations means "on average" you lose about a nickel for every dollar ventured. Only someone who was probability challenged would think that is the same as "all players are losers". Given enough roulette players, some small number of players could continue their winning streak for a very long time in roulette and never have the negative expected return catch up with them. This is especially so if they quit while they are ahead. Which, BTW, is the secret to winning at options. But almost no one quits when they are ahead, they quit when they are busted. Probability eventually catches up with everyone given enough trials and it catches up with most sooner rather than later. |
