Does the sky fall tomorrow? (Strategy with options)

[esdresynes]

Hello, I would like to know opinions, especially from people expert in options, about a trading system that I have in mind. I am particularly interested in recommendations from options traders in Forex. SUPPLY: From time to time something completely unexpected happens. We can classify these events by gravity: minor (one or two times a year)

[esdresynes]

I forgot to add this: The implicit assumption is that the profits derived from these extreme events would more than compensate for the weekly losses accumulated by the options that expire without value.

[Esunhaes]

Citing: $536.33 x 52 weeks = $27,837.16 What would have to happen to get that back? I guess something VERY big. You�re betting that eventually financial apocalypse will come. It sounds interesting in theory, but in practice you�re going to bleed capital for quite some time until something really explodes.

[duogagesxxi21]

There is a strategy that I am still testing in stocks, but that could also apply to Forex with the new options available. If you wait for a volatile movement within a short period, you can buy a put and a call at the market price (straddle

[goSuos]

Hi Bagger, I would recommend that you study Dr. Nassim Taleb�s work thoroughly. He has even been mentioned in this forum. He won millions with a strategy very similar to yours. He has a PhD in Financial Mathematics and more than 30 years of experience in the market, even in traditional pits. He has written several books explaining his trading philosophy based on unlikely events of great impact. It is very worthwhile if you want to polish your approach.

[esSgesrrabun]

Bagger, by the way, where did you get that quote for the GBPJPY put-out due on December 18, 2007? That premium seems to me very high... Walt

[esdresynes]

Citing: $536.33 x 52 weeks = $27,837.16 What would have to happen to cover that? A lot, I guess. Yes, one of the reasons I chose GBPJPY is because when everything goes to hell, this pair moves like crazy. Even more than GBPUSD.

[esdresynes]

Citing: Bagger, where did you get the GBPJPY option quote due on December 18, 2007? That price looks very expensive... Walt De PFG Best... do you know any other place where premium products are more competitive?

[esdresynes]

Quoting: Hi Bagger, I suggested you study Taleb, who succeeded with a similar strategy. Yes, I know Taleb�s work. I am very interested in replicating his results, but I still don�t quite know how to land him in a concrete strategy.

[92desnu]

I am testing a similar strategy. But I do a straddle at the current price. If GBPJPY moves more than 431 pips in one direction before 21, I win. Of course I have to consider the loss of value over time (theta

[esdresynes]

One of the reasons why I am attracted to this strategy is precisely its asymmetrical approach. The maximum loss is clear from the beginning, but the potential gain in case of an extreme event is enormous. I don�t know if it is sustainable over time, but the idea of being always positioned for a collapse has some appeal. I�m starting to consider alternatives, such as changing the maturity to fortnightly or monthly to reduce the impact of theta. I could also look at other crossed pairs that have high structural volatility. Suggestions are accepted.

[EsKUCEsSEs]

The problem I see is that you�re betting every week waiting for lightning to fall. It�s like playing the lottery with financial logic. I�m not saying it doesn�t work, but it�s a strategy that requires a steel stomach and a lot of patience. Also, the opportunity cost is very high. You�re spending 52 weeks a year with no tangible return. If �the big event� doesn�t come, you�re going to end up emotionally and financially exhausted.

[jsesSos14]

I think you're idealizing Taleb's approach without considering the whole context around him. He had access to institutional spreads, lower commissions and structures that allowed him to absorb prolonged losses. You don't. It's not the same thing to operate with millions as with a retail account. Mathematics doesn't apply the same when you have such a different cost structure. And that changes the final result a lot.

[usC123]

I like your approach. Having a �black swan hunt� mentality isn�t for anyone, but it can be powerful. At least you�re being aware of the risk and you have a clear plan. That already puts you ahead of 90% of the people who operate without knowing why. Maybe you could consider structuring your portfolio as a mix: a part dedicated to this strategy of extreme events, and another more conventional part that generates more consistent revenue while you wait for the �shock.�

[bessok32]

Honestly, it sounds like you�re looking for excitement rather than profitability. Betting every week that everything goes to hell isn�t strategy, it�s anxiety with financial disguise. If you want adrenaline, go parachute. If you want consistency, look for more balanced structures. The market doesn�t need someone to �predict� it, it needs you to read it well.

[Cayojesx]

Did you not consider trying with longer-term options? LEAPS, for example, give you more exposure without burning each week with theta. You can search for six-month or one-year puts and diversify events. That gives you more air and allows you to wait for strong movements without time eating you alive. Also, if you crack, you will be much more covered.

[orgardacesaxs]

This reminds me of the hurricane insurance strategy. You pay every year waiting for one to arrive. If it comes, you save yourself. But if it doesn�t, you�re throwing money constantly. The difference is that with a hurricane at least you have a definite season. In markets, chaos can take decades. Or never come.

[TrrCC]

What if you better find a way to identify when the market is entering �panic� mode? There are indicators of feeling, volatility, coverage ratios, etc. that can help you tune in. Buying puts every week at random is too rudimentary. You could be throwing good money that you could use better when there are really signs of stress.

[JesvesSaxxessjesck]

Your approach is interesting from the theoretical point of view, but it has a fundamental problem: you are playing against the odds rather than in favor. And that is not what you are looking for in a winning strategy. If the goal is to win in the long term, you should aim at strategies where the odds are in your favor from the start, and not rely on a catastrophe to justify logic.

[esnsoSCaCot]

There's something brave about your approach: accepting that you can't predict anything and that it's best to always be positioned for the improbable. That humility is not common in this world. However, I would recommend you test this strategy with historical data and simulate at least 5-10 years of market. So you'll know if your hypothesis has a real foundation or if it's just a theoretical illusion.

[Sesndresjarbes]

Don't underestimate how difficult it is to emotionally sustain this strategy when you've been losing it for 30 weeks at a time. The theory looks nice in Excel, but practice eats your soul. If you're not mentally prepared to endure that streak, you're going to abandon it just before the big event arrives. And that would be losing it all.

[esdresynes]

Yes, that's my biggest fear. Not knowing if the strategy is worth it because maybe it won't hold back enough to see it work. It's like paying to see in an eternal game. But the opposite risk is worse: missing the only chance I could change my life by having abandoned just before. That's the paradox.

[SiTorTarra]

I understand you. It is the classic dilemma of the operator looking for extreme events: to persist or abandon. But there is a way to soften it: to make it part of a portfolio, not in the whole. So do not depend emotionally or financially on the market to collapse, and you can sustain the system in time without pressure.

[esresnzesziub]

Did you try selling options out of money instead of buying them? Statistics say that more than 80% expire without value, so you could be on the other side and charge premiums constantly. Of course, the risk is that when �the event� arrives, you lose more than you earned all year. But it all depends on your risk tolerance.

[besrTkTes]

It seems to me that your strategy is more philosophical than practical. You seek to prove that you can win with the unlikely, but without a structure that makes it viable. There are ways to operate that approach, but it requires much more preparation. It is not enough to buy puts every week and cross your fingers.

[RibonsToros]

If you are going to continue with this idea, at least rotate the assets. Sometimes use GBPJPY, other times EURJPY, even indices or commodities. So you diversify the possible triggers of collapse. Don't put all your bets in one pair. Black swan can come from anywhere, not just from the yen.

[Sheskor]

Your idea is like buying lottery tickets with positive mathematical hope. It�s rare, but not necessarily bad. Just make sure you have the discipline and mental health to sustain it when everyone tells you you�re throwing money. Because they�re going to tell you.

[esdresynes]

My most conservative trading friends think I'm crazy, but something in me tells me that the logic behind this makes sense, maybe the secret is in persevering enough for the event to happen, although yes, I know it's not for anyone.

[dsraxcesys]

You're not crazy, you're just playing in a different league. This isn't day trading, this is long-term asymmetric positioning. Very few understand it. But if you want to do it right, study more choice theory, asymmetric risk and thick tail statistics. Don't improvise it.

[crustunesbor]

Eye, that many try to replicate to Taleb without having the structure that he had. He operated with tight spreads, parallel coverages, and institutional access. You are alone, in a retail market with wild commissions and spreads. The difference is abysmal.

[nukattuSveses]

What nobody says is that the real secret of these strategies is leverage. Taleb earned so much because he could multiply his exposure with complex derivatives. You with vanilla options will need a real apocalypse to see a significant gain. And that doesn�t happen every year.

[kesCikesCi]

Why don't you combine this idea with macro analysis? You can filter weeks where there's a higher probability of shock: central bank decisions, elections, wars, etc. You won't guess the event, but you can increase your chances of being in the right place when something happens.

[sesSvesaxos]

It's refreshing to read someone who doesn't want to make a living with a five-pipe EURUSD scalping. At least you have vision and originality. Most of them look for boring, linear systems. You're betting on total breakup. It's not a bad idea, just that you need an iron mind to bench it.

[esdresynes]

Thanks to everyone. They�re really helping me fine-tune this idea. I thought they were going to kill me for raising it, but I was surprised to see so much constructive perspective. I�m going to continue reading about Taleb, thick tails, LEAPS and also see how to combine it with macro analysis. And yes, I�m definitely going to test everything before putting more money.