Selling volatility for income works because investors consistently overpay for convexity and insurance. Index options are priced with implied volatility that, on average, exceeds the volatility markets ultimately realise. The gap between implied and realised volatility is the volatility risk…
Value in investing is not visible. It cannot be observed directly, and it is never proven by the actions of other investors. As Warren Buffett famously said, “Price is what you pay, value is what you get.” This distinction matters…
Strong historical correlations often break down over shorter time frames, creating opportunities for investors who can identify and exploit these dislocations. Examples of strategies that profit from such breakdowns include: Investors who exploit those patterns must be aware that the…
Markets aren’t just fragile when they crash—they’re fragile when they lose diversity. As Nassim Taleb defines it, fragility means vulnerability to shocks, while antifragility describes systems that benefit from disorder. What determines whether a market is fragile or antifragile is…
Owning a wide range of assets doesn’t automatically make you diversified. True diversification is about managing uncorrelated risk, not just achieving variety. Diversification isn’t simply adding more assets to a portfolio — it’s about strategically allocating to assets that behave…
As the U.S. presidential elections approach, the equity market’s volatility tends to increase and remain stable. Historically, volatility tends to subside immediately after the election, regardless of the winning candidate. On average, markets have seen about 5% gains in the…
Fundamentals tend to be serene, while prices are tempestuous. Market sentiment, news reconciling large information asymmetry, events resetting expectations, liquidity, momentum, and technical factors are all responsible for these dynamics. Understanding the stimulant of a large price move is an…