Has anyone ever experienced any live black swan event in their trading career?
When did it happen and How did you manage it? - portfolios, options sellers, etc.
Share your experiences guys:)
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Sadly I missed the earlier Black Swans – Dot Com Burst, '08 Meltdown, Flash Crashes and other such events as I was a teenager.
Which only leaves Covid as the (Debatable!) Black Swan event I have personally actively witnessed, debatable because Taleb himself has refused on many occasions to identify it as a Black Swan. But I personally believe it checks all boxes.
As I only take Weekly net credit positions so wasn’t affected at all. However I did stop trading for about a Month-40 days just to get some clarity, which the follow up Bull Market more than made up for.
With the rise of technology driven trading, it is becoming almost a mathematical certainty that we shall be able to witness some big Flash Crashes in the future.
But that’s just how Humans have always been throughout history, we get hit, dust ourselves off, come back next day like nothing happened. Anything short of a Planet ending Asteroid and we are alright.
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2008 market crash, satyam computers fall, emkay global fat finger error, election result days, corona crash…seen many rapid movements in market.
The way I manage a probable Black swan event against my position is by using options. I just buy options and so all I will loose is the premium I paid, no matter what happens in market. It’s sort of an insurance against financial health hazards.
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I often buy put options against large holdings against my portfolio and then I sleep in peace. Or sometimes, I sell call options provided I have all the shares, as naked call selling is very risky. Options can be your best friend when handling great degree of uncertainty, though only use them when you are knowledgable about them.
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Covid was the only major event that i personally witnessed. I did keep on holding what i already did and sold heavy which i thought would not really make a comeback. Would not say that i was right.
Had options at my rescue to some extent but then i thought of buying onto big chips as i wanted to create a good looking long term portfolio. The bull run favoured me XD.
But the event did help with the investors like me for a good market experience.
Though for the new age investors, a pandemic can be termed as a Blank Swan event, the below article however questions the same.
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Will the current crisis add to the list?
This concept has been misused and spammed to the point where it means nothing at all. If someone wishes to go around looking for black swans, all they will find is black swans. In the post-meme era, the shelf life for any useful idea is 16 days give or take. We need new terms and concepts heading forward. Old ones have been tainted.
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No, this Russian -Ukraine issue was going on since 7- 8 years. It wasn’t a sudden unexpected event.
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