OkMan

Unpacking financial mechanisms through real stories.

[OkMan @HeroOkMan]

https://t.co/NkjJFjJsOd

[OkMan @HeroOkMan]

@0xTimQ the stove is the options chain
Ross just tried to name the two ingredients

[OkMan @HeroOkMan]

Every option price on every exchange secretly encodes two different things mixed together: what traders actually think will happen, and how scared they are of being wrong. For decades, nobody could separate the two. You could see the mixture. You couldn't see either ingredient alone.

MIT 18.S096, Topics in Mathematics with Applications in Finance, Lecture 25. Guest lecturer Peter Carr walks the room through the Ross Recovery Theorem, a 2015 result from economist Stephen Ross that claims to do the impossible: pull the real-world probabilities of future market moves out of option prices, without ever needing to know how risk-averse investors are.

Here's the problem it solves. Option prices give you risk-neutral probabilities, a mathematically convenient fiction where every investor is treated as indifferent to risk. Real investors aren't indifferent. They pay extra to avoid bad outcomes, which distorts the probabilities baked into option prices, and nobody could reliably say by how much.

Ross's trick, and the part Carr spends the lecture unpacking, borrows a piece of math called the Perron-Frobenius theorem, normally used for things like ranking web pages, and applies it to the matrix of prices for options expiring at different times. Under a specific set of assumptions, that matrix has exactly one way to split apart into a real-world probability piece and a risk-preference piece. Not an estimate. A unique answer, sitting inside prices that already exist.

Carr doesn't sell it as magic, though. He's upfront that Ross's assumptions, a stable, well-behaved market structure that doesn't change over time, are strong ones, and whether real markets actually satisfy them is still argued over by researchers years later.

The lecture is free. Realizing that somewhere inside every options chain sits a hidden equation for what the market actually expects, not just what it's currently scared of, is the kind of detail that separates reading prices from understanding them.

[OkMan @HeroOkMan]

https://t.co/NkjJFjJsOd

[OkMan @HeroOkMan]

@tolik12308 the quote was always in the chain
Ross claimed there’s only one way to read it

[OkMan @HeroOkMan]

@Pixel_Neuron unbake only works if the oven stays the same
Ross needs a market that doesn’t change its mind mid recipe

[Arion @ar10nx]

Three failed rocket launches. A car company fighting to survive.
In 2008, Elon Musk’s biggest bets weren’t about changing the world yet. They were about surviving long enough to try.
Here’s what happened next. https://t.co/Vv7c7xiTF1

[OkMan @HeroOkMan]

@veraxlab 51% is nothing until you can place it 10,000 times. most accounts are built for the first hundred and then get bored.

[OkMan @HeroOkMan]

@0xmarginman the check didn’t fund a company. it forced one into existence. that’s the part people skip when they retell the porch story.

[OkMan @HeroOkMan]

@carbonyxxx 36 to 1 means the firm was never investing. it was renting time. one weekend late and the lease is over.

[OkMan @HeroOkMan]

@OxVolta people audit the coffee because it’s daily. the raise happens once and nobody wants to ask. that’s why the $3 wins.

[OkMan @HeroOkMan]

@politikonio he didn’t beat the tanks. he made driving through the crowd more expensive than leaving. that’s the whole 4 days.

[OkMan @HeroOkMan]

@m444k_ the daughter asked the only good question. if it happens every 5–10 years, surprise is just a career choice.

[OkMan @HeroOkMan]

@DN_degen the missing steering wheel is the product. everything else is just a nice room that happens to move.

[OkMan @HeroOkMan]

@DN_degen glad it landed
the trick is sitting in prices you already look at

[OkMan @HeroOkMan]

@AIInitiator appreciate it
next one is the same idea with a different machine underneath

[OkMan @HeroOkMan]

@MadCrash_X split only works if the market’s structure stays still
Carr’s warning is that real markets rarely sit still long enough

[OkMan @HeroOkMan]

@VVMotyka the planes are the headline. 5,000 empty regional airports is the actual product.

[OkMan @HeroOkMan]

@0xFinrex the $3.25 is the only number that still matters. everything after that is just the company mailing him rent.

[OkMan @HeroOkMan]

@Miko_Broski that’s the whole napkin. the result is what happened. the five numbers are whether you were supposed to take it.

[OkMan @HeroOkMan]

@Allx032 the 55% is the trap. over ten trades it still feels like a coin. that’s why people blow a real edge sizing like they already won.

[OkMan @HeroOkMan]

@ClementDelangue “open, independent and compute agnostic” is a lot of words for a company just bought by the chip store.