Taleb, blackswan, circuit breakers and bigger bubbles

Universa investments cashed in big on Thursday crash. Lots of people in the market are blaming him for the crash. Not that this trade really mattered in the big picture since it’s such a small amount. However, why don’t we question the bulls who sold the puts in the first place?

The rate of market climb in the last few weeks clearly indicated that it’s due for a correction. Greece debt issue came up a few months ago. Market reacted briefly and then forgot about it.
Good for Taleb and others who cash in on the black swan.
SEC is considering synchronizing the circuit breakers and/or moving the thresholds so that market meltdowns won’t happen. However, if you understand anything about chaos theory the circuit breakers only delay the inevitable or prolong it. It’s like fighting gravity. Imagine pouring sand into a mound. It’s only a matter of time before the sand mound collapses. When exactly it will happen is hard to tell but it will. However, if you protect the mound from collapsing by holding it with your hands wrapped around it, the mound will become a hill before it collapses more spectacularly.
If we don’t want the bubble and the subsequent bust to get bigger, it is a good idea to let the market release its energy by letting it burst sooner than later.
I think bigger bubble is opportunity for buyers of put options to cash in bigger.

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