Now you're getting somewhere! Sorry, but I just couldn't think of any educational value in picking 10 stocks to go long over a 4-month period.
I used to speculate with options once in a while. But I talked myself into the "momma says you shouldn't play zero-sum games" bit and cut way back except for the occasional portfolio insurance long put.
But I do find Taleb's idea of looking for potential Black Swans kind of interesting. So my approach would be to think about possible low-probability events that the market is basically discounting to zero probability and use a very small portion of my portfolio to place bets on that outlier.
I'll have to think about exactly which events I'd like to bet on, but it would be an interesting topic for a thread....
It took me some time to think about what you said. As I see things:
I just don't think it's possible for laymen to find black swans in the financial markets, unless they're incredibly perceptive and diligent. I think black swans are primarily found in the world of primary business ownership, as you mentioned earlier, where someone perceives a need and then fills it: if the need was big enough and the product or service good enough, then jackpot, probably after a number of years of hard work and doing without. Starting McDonalds as a restaurant chain is a good example as I see things. The idea comes and you act on it correctly all the way thru, or at least until you can hand it over to others (for a nice price). All outside the normal box of things.
The financial markets, all the stocks, bonds, derivatives, financial instruments that retail folks can buy, bla and bla, are not blacks swan possibilities--to my mind, theoretically. They are things created by others and then sold to folks. We, as retail folks, aren't privy to all the information in the vast majority of cases. And if that's true, then we are making decisions bases on partial knowledge (And right here I'm making a case for Bogle and indexing.), which almost precludes the possibility of getting enough information to do things well or correctly or to find those wonderful life changing deals/experiences--to my mind. The insiders have a larger quantity of knowledge, and they're the ones who will pick thru the pile first and with the best instruments, finding the best deals.
Brewer has been trained to find the best bond deals in the market; that's his job. How can I compete, unless perhaps if I've gone thru similar training and have access to similar tools and quantities of money? At best, I can do a job that might approach Brewer's ability and skill after a number of years of practice and mistakes. This is basically true about every single financial instrument available to us; there are alot of professionals out there ahead of me. Sometimes we can get the jump on folks if, for example, we buy into a hedge fund with a smart fellow who has a big rolodex and a couple good ideas. But we both know that now even they are doing a bit of crash and burn as they kept doing the same things over and over again with increasing leverage. What they did was a sort of black swan initially, finding a wonderful new product built around a few core services. Now it seems to be primarily a bunch of chunky lemmings waddling toward a cliff--to my mind. Not black swan material for the most part now.
There is also the fact, to my mind anyway, that there is a huge amount of money flooding the system that seems to be working its way thru gradually and pricing out any discrepancies, anomalies and bargains--much less black swans. The professionals mentioned above price all those bargains out of the market with the huge amounts of money they have at their disposal--to my mind. And they see any good stuff coming waaaay before me.
Those are the strikes that I see against finding any black swans. But that doesn't mean they're not out there.
Currently, I have a full hand (five: one gold/metals stock, a pharma, two oil, and one industrial) of individual (what I think are still) 10 bagger stocks. I can't add any more until the ones I have have a hit or miss. I'm not selling nor am I buying speculative stocks right now. I don't even want to think about them for a while because if I think about buying something speculative, then I probably will start looking; and if I start looking, then . . . .
But I currently see option calls as a reasonable way to earn 100%-200% over the next year with limited downside. That appears reasonable to me IF my optimistic view holds up in the real world and if the option market gets whacked a good one soon so that I can get some at a price I like.
I'm watching these calls for a decent dip:
GE: Options for GEN ELECTRIC CO - Yahoo! Finance