Keep writing naked puts and then compound it by assessing your risk based on historical data.
This is a surefire way of loosing your shirt when the next Lehman level event comes around.
The risk in your strategy is that the stock market has very fat tails and unlikely events happen with more regularity than they should -- and the math that you're using to assess your risk discounts all these events by terming them unlikely.
sure. you've got to watch out for black swans..you should certainly shouldn't plan your portfolio around such a thing. You may as well put your money in CDs.
This is empirical nonsense. Market-behavior is not normally distributed so basic statistics and even portfolio theory just puts you back in the same situation as Lehman Bros..
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[ 2.8 ms ] story [ 24.6 ms ] threadKeep writing naked puts and then compound it by assessing your risk based on historical data.
This is a surefire way of loosing your shirt when the next Lehman level event comes around.
The risk in your strategy is that the stock market has very fat tails and unlikely events happen with more regularity than they should -- and the math that you're using to assess your risk discounts all these events by terming them unlikely.
Only rational way to invest: http://en.wikipedia.org/wiki/Modern_portfolio_theory
http://fora.tv/2008/02/04/Nassim_Nicholas_Taleb_A_Crazier_Fu...
I acknowledge the strategy isn't risk free (no strategy is), but if you're going to buy a stock, considering using this strategy instead.