[Event Driven Options - LEAPS]

@DrValue

I suggest reading Hedge Fund Wizards, specifically chapter 7.

in the meanwhile here are some summaries

https://keanchan.com/2017/01/16/my-main-takeways-from-market-wizard-jamie-mai/

http://the7circles.uk/jamie-mai-seeking-asymmetry/

[Event Driven Options - LEAPS]

@theozmancometh

 

You're not wrong!

The amount of "opportunities" I see that turn out to not be opportunities is frustrating.

 

I think i would be lucky to find even one investment a year with the certainty and risk return profile I'm looking for. The research would be immense too.

 

Maybe a group of dedicated individuals could pick an area each to look at and report back. Who knows?

 

Well the classical example you gave is Cornwall's trade.. But if you read the interview they do in Hedge Fund Wizards, they talk about other asymmetric type trades (Korea or perhaps shipping volume), they didn't use LEAPs to do that trade.. In other words, LEAPs are a means to an end. You're not looking for mispriced LEAPs, you're looking for mispriced asymmetric trades with low downside and high upside, so that if you take 10 of them, you only need 1 or 2 to work to make a  lot of money. That's the thesis of their fund (or was), I'm not sure what they do now.

[Event Driven Options - LEAPS]

(I'm new here, don't bite :P)..

 

DrValue is talking about a very specific type of LEAP trade mentioned in the Big Short, which was super asymmetric. If my memory serves me correctly, Capital One had some issue (2003ish), the market totally tanked the stock over the issue, they did a ton of research and didn't think it made sense, and decided to act accordingly. It was a binary bet, either the stock would go to near nothing or go back to near normal values. The extra thing is that the LEAPs may have been mispriced as well, which made it almost a sucker's bet in their favor.

 

I don't even know if trades like that come around every year:)