Hey, everyone, this Kirk here again at Option Alpha and welcome back to the podcast today on

show number 240. We're going to be talking about thinking in probabilities and risk.

All right. So again, welcome back to the show. And thinking in probabilities and risk, this is one that I've had penciled in for quite some

time. So I'm actually not sure exactly where it's going to go, as is the case with all the

podcasts that I record where I have a nice little outline. And then I just kind of think of things as

we go and we go through things. But I think the key that I want to get through today is this new framework

or this new mental philosophy that you should have on all of your trading. And I don't think that

this exclusively applies to options trading, although of course we'll talk mostly options trading,

but I think it's just a framework that you should start to develop, and I certainly have tried to develop

and will continue to try to nurture and develop in myself. I'm by no means not perfect at it,

but it's something that I do really, really work on, and I'll talk about that here as we get

later towards the end of the podcast or middle of the podcast.

What I want to start off with actually is a quote from Eugene Fama.

Now, you might know that Eugene Fama, if you do some research and kind of read up on Eugene Fama, but he was a professor at the University of Chicago, was a Nobel Prize winner

in economics, lots of medals that he basically won.

And essentially, you could refer to him as the father of modern, or some people refer to him

as the father of modern financial markets and his hypothesis on efficient markets, right?

This idea that markets have all information,

therefore they efficiently price everything because markets have all information.

It's very hard to beat markets because markets broadly have all the information.

Now, we'll get to that here in a second, but this is a good quote from him.

And I think it's actually fascinating as we go through this, which is that life always has a fat tail. So that's a quote that's attributed to him. I believe he said it. I don't know. I didn't watch him say it. But why I think it's so fascinating that that specific quote was attributed to him because of everything that we're going to go through. But that's the quote that I want to start off this podcast with is that life always has a fat tail. Now, the reason I start off with this is because we want to start

...