Nassim Taleb
Taleb was born Lebanon and lived in the midst of the Lebanese civil war of the 1970’s when he spent several years in the basement of the family home hiding from shrapnel and studying. He hails from a wealthy, highly educated Greek Orthodox family and had received degrees at Wharton, Pennsylvania, and the University of Paris before becoming a Wall Street trader. He has authored three very notable books, Fooled by Randomness, The Black Swan, and Dynamic Hedging. The first two of these books have a lot to say about predicting the course of events, or more precisely, the real difficulty in making accurate predictions. In Fooled by Randomness, the author argues that much of what happens is indeed random, and that we as human tend to assign order to situations where there is none. A Black Swan is an event that is highly improbable, but does occur, and changes the course of history in a big, often dramatic, way. It derives from the belief that all swans are white, at least to Europeans of yesteryear ... until that idea was shattered when they arrived on the banks of the Swan River in Western Australia where black swans are rather common. The 9/11 tragedies in New York and the Pentagon certainly qualify as a Black Swan. The recent BP oil-spill in the Gulf of Mexico is probably another. How do Nassim Taleb’s concepts impact us as options traders? We already know that options are volatile and that certain options trading strategies, such as selling naked calls (and leaving them unmonitored without stops), carry enormous risk. Here in safe-options-trading-income.com, we emphasize conservative methods and safety in options trading. Even then there is no guarantee. The markets are not easily predictable and will move the way they wish. Black swans occur and will continue to occur. Hence, the main lesson we can take form Taleb is to create trading plans that account for as many contingencies as we can think of, and protect our downside risks by using relatively safe techniques and following our plans, particularly our trade-exit plans whenever called for.
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