Book Review - The Dao of Capital

So why not a book that mix Taoism with Options financial tool? It can make a lot of sense! Lets dive a bit.

Lets begin from why Taoism and why it looks linked to Austriac economic school model... And what all that has to do with options, right?

First on taoism, Lao Tzu, "Tao Te Ching" 's author, talks a lot about wu-wei, non action or effortless action, and that approachs many dualities similar to it, the correspondence of opposite polarities... Leading to insightful metaphors.

Actions are causes of effects, so its somewhat the question of what kinda of dharma you are creating, turning into a matter of balance, equilibrium.

Ok, so on Austriacs, going a bit on macro, they follow more of a libertarian concept of less economic intervention... Low taxes, low interests, no monetary expansionism... Then a debate on fiscal policies for an hypothetical inflation...

But anyway, the book's metaphors on Siegfried farm tale is awsome, it got me immersed, basically it distinguish economic consequences from farmers starting at same conditions and taking different actions, so it shows how efficiency or irrationality can act over the society (even if evenly).

So anyway, the author is known for having worked with Taleb, that wrote his cover review and they are one of main specialists in options and probabilities with these statistics, for Im not an expert and still need to read some more technical books... I understand overall terms and greeks, although it can be more of a complex operational on streaddles, delta neutrals e.g...

So my take was, for options you kinda need volatility, or track the VIX index and do an investigative search on black swan events that happens yearly for arbitrages...

So there is a lot of non action here and turns into a game of patience, discipline, and then decision to act over facts by a confluence of factors... Like in value investing itself... Or even due macro conditions...

Options are actually used a lot for swap of interests rates between economies, banks, funds... Or in the US10Y itself e.g.. And there are even LEAPS (long term options), right? Although I don't understand much how liquidity is worked in that float... Probably what main impacts the trade balance and exchange ratios...

The book also helps you to think at asymmetrical positive payout curves, like strategies where you could use options as hedge or insurance.

Anyway, I recommend it a lot! The language is actually light and understandable, it doesn't go much in all these boring terms...

I love books!! This isn't meant to be a critical review, just an informal subjective talk... My favorite topics are philosophy/religion, mythologies, investments, biographies, fictions... Might write some more subjects on future. Hope you found informative!!