The Skinny on Options: Abstract Applications

Standard Deviation Always Applies

The Skinny on Options: Abstract Applications

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

In an old article in the Harvard Business Review, Nassim Taleb (and others) claimed that standard deviation is irrelevant and impractical for risk managers to use in their decision-making. As tastytraders, we lean heavily on standard deviation (and rightfully so) as a foundational element of understanding both the risks to our overall portfolio and individual positions.

Thus, needless to say, we “take the other side” of some of the quotes from the article.

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