Link to the webinar recording and slides

Friends,

I recorded yesterday’s webinar (link for paid subs below).

The topic was “Understanding the Black Scholes Equation As A Strategy”. I covered the equation and mapped each term to actual chunks of strategy or familiar concepts. One commenter said despite watching many vids on B-S has never seen it discussed quite like that.

The genesis of why I see it the way I do comes from being relatively stupid. Before I turned the recording on, I started with the story of SIG’s 10-week training class in Bala. The first 4 weeks were devoted to derivatives pricing theory and hands-on homeworks like building models of trees, convertible bonds, and measuring index volatility from the components.

But I distinctly remember, week 1. Professor Costa spent 4 hours on one day deriving the assumptions of B-S and the next day the equation itself. Being an eager beaver and knowing that this info was either here or in notation-heavy texts, I better take good notes. Well, about 20 minutes I gave up. I couldn’t listen for understanding and write at the same time. And within another 20 minutes, I was already “just tell me what matters”, the equivalent of “what’s going to be on the test” but for practical risk-taking.

Back in those days, the range of hires was much wider. There were MIT kids to whom this was a review of thermodynamics. But I was one of their stupider trainees at least when it came to math.

Personal note: My own math education stopped after Calc BC in HS. I got a 4 on the AP test and that placed me out of college math which I was fine with. I knew that I could get good grades in college by bullshitting on blue-lined pamphlet prelims and being naive I took the greedy algorithm right to the peak of a highly local maxima, incurring tremendous technical debt (and regret) in the process.

Anyway, here’s the slides for the talk.

The recording ~ 2.5 hours as the Q&A veers off into practical trading questions which is the way it should be.

Stay groovy

☮️