RESOURCES#

This is the site’s annotated bibliography: the sources I cite throughout the pages and the material I built the site with are all in here. Where a PDF is distributed freely and legally by its authors or institutions (AQR, NBER, arXiv, university sites), I keep a local copy on this site next to the original link — papers have a bad habit of vanishing from the web. Books, videos and paywalled articles are only linked to their source. As with everything else on this site, the Disclaimers page applies: this is study material, not an invitation to trade.

Textbooks#

• John C. Hull — Options, Futures, and Other Derivatives (Pearson). The standard derivatives textbook, “the bible” of finance courses: if the Futures and Options pages felt too fast, the rigor lives here.
• Robert E. Whaley — Derivatives: Markets, Valuation, and Risk Management (Wiley). A comprehensive treatment with a strong focus on index options; this is the same Whaley of the net buying pressure cited in Volatility risk premium.
• Sheldon Natenberg — Option Volatility and Pricing (McGraw-Hill). The practical vocabulary of the trade — greeks, skew, term structure — written by someone who taught it to pit traders; the investment skew on the Options page comes from him.
• Jean-Philippe Bouchaud, Marc Potters — Theory of Financial Risk and Derivative Pricing (Cambridge UP). The econophysics of tails: the power-law exponents on the Tail risk page come from here, and with them the sizing against the power-law tail of the Kelly criterion.
• Richard Grinold, Ronald Kahn — Active Portfolio Management (McGraw-Hill). The Information Ratio book: the reference scales on the Risk measures page (0.5 good, 1.0 excellent) are theirs.

The ERN method#

The single most important source of this site: Karsten “Big ERN” Jeske has been publicly documenting since 2011 the strategy I call tail risk protection selling on the TRPS page.

• The “Passive income through option writing” series on Early Retirement Now — the full series index, including the case studies on XIV, OptionSellers and UBS. The starting point is Part 1 from 2016.
• “Why the Wheel Strategy Doesn’t Work” (Part 12) — the well-argued takedown of the wheel that I endorse on the Strategies page.
• Video — 15 Years of Selling SPX Options: What Big ERN Actually Does (Option Omega channel, 2026). The most technical and recent conversation: fifteen years of track record told first-hand — this is where the idea of the overnight futures hedge on The TRPS bot page was born.
• Video — Retired Early? This Options Approach Protects Your Portfolio (Theta Profits channel, 2025). The big picture: options as an overlay on an early-retirement portfolio.

Foundational papers of volatility selling#

• Israelov, Tummala — Which Index Options Should You Sell? (2017). The paper behind the DHCS and the STAR methodology of Risk measures: the SPX surface measured in alpha per unit of stress.
• Israelov, Nielsen — Covered Calls Uncovered (FAJ 2015) — local copy. The factor decomposition of the covered call cited in Strategies: half equity, some short vol, and an involuntary market timing that pays nobody.
• Gârleanu, Pedersen, Poteshman — Demand-Based Option Pricing (RFS 2009) — local copy. Why the demand for protection distorts option prices: the theoretical foundation of the structural edge on the Edge page.
• Constantinides, Jackwerth, Savov — The Puzzle of Index Option Returns (RAPS 2013) — local copy. The “unexplained quarter” of OTM put returns that I treat, on the Tail risk page, as the price of the event missing from the sample.
• Bates — Post-‘87 Crash Fears in S&P 500 Futures Options. How the market has priced crash fear ever since that October 19; in Volatility risk premium I also cite Bates’s work on delta-hedged put selling.
• Bandi, Fusari, Renò — 0DTE Option Pricing. The academic paper on ultra-short-dated options — the playing field of the TRPS 1DTE trades.
• Ilmanen — Do Financial Markets Reward Buying or Selling Insurance and Lottery Tickets? (FAJ 2012) — local copy. The insurance/lottery framework of the Edge page: markets reward those who sell insurance and those who sell lottery tickets, and punish those who buy them.
• Hull, White — Optimal Delta Hedging for Options (2017) — presentation, local copy. The minimum-variance delta that corrects the Black-Scholes delta for the price–volatility correlation: the refinement the bot’s monthly cycle keeps under observation.
• Whalley, Wilmott — The best hedging strategy — local copy. The no-transaction band around the theoretical delta: the foundation of the rebalancing band on The DHCS bot page.

The CTA library: trend following and managed futures#

The portfolio’s third leg (CTA trend following and The third leg pages) rests on a literature as vast as that of volatility selling, and I have collected it here in full: forty-nine papers, each with its local copy under the policy declared at the top of this page (the canon’s fiftieth, Szakmary, Shen and Sharma 2010 on trend following in commodity futures, is not freely distributed and remains citation-only; for Lintner 1983, never published in free form, there is the CME synthesis). For those who want only the essentials, the minimal path is five reads: Moskowitz for the recipe, Hurst for the century of evidence, Harvey for the crisis alpha, plus the two devil’s advocates — Bhardwaj on the fees and Huang on the econometrics.

The foundations: managed futures and CTAs.

• Abrams, Bhaduri, Flores — Lintner Revisited: The Benefits of Managed Futures 25 Years Later (CME Group 2008) — local copy. The verification, twenty-five years on, of Lintner’s 1983 thesis: managed futures improve the portfolio because they are uncorrelated when it counts.
• Elton, Gruber, Rentzler — Professionally Managed, Publicly Traded Commodity Funds (Journal of Business 1987) — local copy. The historical warning: retail commodity funds with dizzying costs and negative net returns — the only persistent statistic was volatility, the empirical basis of vol sizing.
• Fung, Hsieh — Empirical Characteristics of Dynamic Trading Strategies: The Case of Hedge Funds (RFS 1997) — local copy. The framework for reading the returns of dynamic strategies, and the warning about the diversification implosion behind the leg’s sector caps.
• Fung, Hsieh — The Risk in Hedge Fund Strategies: Theory and Evidence from Trend Followers (RFS 2001) — local copy. The synthetic straddle paper: trend followers’ returns replicate a lookback straddle — the structural basis of the third leg.
• Fung, Hsieh — Hedge Fund Benchmarks: A Risk-Based Approach (FAJ 2004) — local copy. The seven risk factors of hedge funds, with the trend’s option factors in the front row.
• Kat — Managed Futures and Hedge Funds: A Match Made in Heaven (JIM 2004) — local copy. Adding managed futures cures a portfolio’s skew and kurtosis — exactly the two pathologies of whoever sells options.
• Hurst, Ooi, Pedersen — Demystifying Managed Futures (JIM 2013) — local copy. The CTA industry explained with a three-lookback TSMOM recipe: the direct progenitor of the 1/3/12-month ensemble of the CTA leg.
• Hurst, Ooi, Pedersen — A Century of Evidence on Trend-Following Investing (JPM 2017) — local copy. The trend premium positive in every decade since 1880, world wars included — and the 20-25% drawdowns as part of the contract.

The evidence on time-series momentum.

• Brock, Lakonishok, LeBaron — Simple Technical Trading Rules and the Stochastic Properties of Stock Returns (JoF 1992) — local copy. The first statistically serious test of technical rules, with a result I reuse: the non-trading band improves execution in every case.
• Moskowitz, Ooi, Pedersen — Time Series Momentum (JFE 2012) — local copy. The strand’s foundational paper: 58 futures, a 12-month signal, vol scaling — the canonical formula the whole recipe descends from.
• Baltas, Kosowski — Momentum Strategies in Futures Markets and Trend-Following Funds (2013) — local copy. TSMOM explains the returns of real CTA funds; its dowry is the OHLC vol estimator and the warning that sub-monthly trends have been dead for decades.
• Lempérière, Deremble, Seager, Potters, Bouchaud — Two Centuries of Trend Following (JIS 2014) — local copy. Two centuries of data, a t-stat of about 10: the most persistent anomaly ever documented, with an estimate of the physiological length of the flat stretches.
• Clare, Seaton, Smith, Thomas — The Trend is Our Friend (JBEF 2016) — local copy. Trend following and risk parity in global asset allocation: the trend filter improves almost everything it touches.
• Levine, Pedersen — Which Trend Is Your Friend? (FAJ 2016) — local copy. All linear forms of trend measurement are equivalent: the reason the recipe uses the simplest one.
• Georgopoulou, Wang — The Trend Is Your Friend (Review of Finance 2017) — local copy. TSMOM on international equities and commodities, with the signals correctly computed on excess returns.
• Babu, Levine, Ooi, Pedersen, Stamelos — Trends Everywhere (JIM 2020) — local copy. Trend also works on 82 alternative markets never used to discover it: the strand’s most convincing out-of-sample test.
• Babu, Hoffman, Levine, Ooi, Schroeder, Stamelos — You Can’t Always Trend When You Want (JPM 2020) — local copy. The autopsy of the 2010-2018 decade: engine statistically intact, markets simply without trends — the mandatory reading before the first drawdown.
• Géczy, Samonov — Two Centuries of Multi-Asset Momentum (2017) — local copy. Multi-asset momentum since 1800 — and the demonstration that on commodity spot prices the signal flips: rolled futures series or nothing.

Crisis alpha, convexity and inflation.

• Neville, Draaisma, Funnell, Harvey, van Hemert — The Best Strategies for Inflationary Times (JPM 2021) — local copy. Eight US inflationary regimes in a century: trend following is the liquid strategy that crosses them best — the scenario in which short puts and bonds fail together.
• Hutchinson, O’Brien — Is This Time Different? Trend Following and Financial Crises (JAI 2015) — local copy. In financial crises the strategy returns more than in normal times, with commodities as the engine exactly when equity sinks.
• Hamill, Rattray, van Hemert — Trend Following: Equity and Bond Crisis Alpha (Man AHL 2016) — local copy. The protection in crashes comes from the short lookbacks, and in equity crises trend wants the bonds long: two of the leg’s design choices come from here.
• Dao, Nguyen, Deremble, Lempérière, Bouchaud, Potters — Tail Protection for Long Investors: Trend Convexity at Work (JIS 2017) — local copy. The mathematics of the smile: trend is long the long-term variance and short the short-term one — cheap protection against prolonged declines, blind to gaps.
• Harvey, Hoyle, Rattray, Sargaison, Taylor, van Hemert — The Best of Strategies for the Worst of Times (JPM 2019) — local copy. The eight worst equity drawdowns since 1985: trend profitable in all of them, and a mere 10% allocation improves every historical drawdown of the portfolio.

The critical side.

• Bhardwaj, Gorton, Rouwenhorst — Fooling Some of the People All of the Time (RFS 2014) — local copy. The gross premium of the CTAs was there; the fees ate it whole. The do-it-yourselfer’s defense is the absence of that wedge — and the ban on recalibrating after losses.
• Huang, Li, Wang, Zhou — Time-Series Momentum: Is It There? (JFE 2020) — local copy. The main econometric critique: much of the foundational papers’ t-stat is drift plus vol scaling. Hence the mandatory benchmarks and the honest quantization in the backtest.
• Daniel, Moskowitz — Momentum Crashes (JFE 2016) — local copy. Momentum’s crashes arrive in post-panic rebounds, on the short leg; the zero-parameter countermeasure is the strategy’s vol scaling.
• Park, Irwin — What Do We Know About the Profitability of Technical Analysis? (JES 2007) — local copy. The data snooping survey: thousands of rules tried on the same data always produce an apparent winner. The vaccine: zero optimized parameters.
• Ilmanen, Israel, Lee, Moskowitz, Thapar — How Do Factor Premia Vary Over Time? (JIM 2021) — local copy. A century of factor premia: a 20-50% out-of-sample haircut and macro timing with negative alphas — the two numbers that calibrate the honest expectations.

Momentum, carry, commodities and portfolio construction.

• Han, Yang, Zhou — A New Anomaly: The Cross-Sectional Profitability of Technical Analysis (JFQA 2013) — local copy. Moving averages work best where information travels slowly: consistent with the behavioral explanation of the premium.
• Jegadeesh, Titman — Returns to Buying Winners and Selling Losers (JoF 1993) — local copy. The paper that gave momentum its name: 3-12-month winners and losers persist, then the signal reverses.
• Barberis, Shleifer, Vishny — A Model of Investor Sentiment (JFE 1998) — local copy. Cognitive conservatism as the first explanation of underreaction: why the premium should survive its own publication.
• Daniel, Hirshleifer, Subrahmanyam — Investor Psychology and Security Market Under- and Overreactions (JoF 1998) — local copy. Overconfidence and self-attribution: the second behavioral mechanism, with the warning that the tail end of the trend is correction.
• Rouwenhorst — International Momentum Strategies (JoF 1998) — local copy. Momentum replicated on twelve European markets: the first international confirmation that it wasn’t an American artifact.
• Hong, Stein — A Unified Theory of Underreaction, Momentum Trading, and Overreaction (JoF 1999) — local copy. The gradual diffusion of information: the mechanism is per single asset, which justifies the time-series version on a few futures.
• Asness, Moskowitz, Pedersen — Value and Momentum Everywhere (JoF 2013) — local copy. Momentum (and value) in every asset class, with the equal-vol across markets and the memento about funding squeezes that hit everything at once.
• Barroso, Santa-Clara — Momentum Has Its Moments (JFE 2015) — local copy. Vol targeting for momentum: same mean, half the tail risk — the direct source of the leg’s multiplier.
• Gupta, Kelly — Factor Momentum Everywhere (JPM 2019) — local copy. Momentum also exists in factors: persistence is a general property of returns, not an accident of prices.
• Ehsani, Linnainmaa — Factor Momentum and the Momentum Factor (JoF 2022) — local copy. Momentum as factor autocorrelation — and the breakdown of aggregate autocorrelations as an early warning of crashes.
• Gorton, Rouwenhorst — Facts and Fantasies about Commodity Futures (FAJ 2006) — local copy. Commodities as an asset class: equity-like returns, negative correlation with equities in the tails — the reason for six sectors and not three.
• Erb, Harvey — The Strategic and Tactical Value of Commodity Futures (FAJ 2006) — local copy. Commodity returns live in rebalancing and roll yield, not in spot: never GSCI-style concentrations.
• Miffre, Rallis — Momentum Strategies in Commodity Futures Markets (JBF 2007) — local copy. Commodity momentum buys backwardation and sells contango: much of the alpha lives in the short leg of markets in contango.
• Fuertes, Miffre, Rallis — Tactical Allocation in Commodity Futures Markets (JBF 2010) — local copy. Momentum plus term structure doubles the alpha: the reason the leg measures carry from day one.
• Menkhoff, Sarno, Schmeling, Schrimpf — Currency Momentum Strategies (JFE 2012) — local copy. FX momentum on the major currencies is nearly zero net of costs: currencies enter the universe as a diversifier, not as an engine.
• Koijen, Moskowitz, Pedersen, Vrugt — Carry (JFE 2018) — local copy. Carry as a universal premium, uncorrelated with trend — but short the global recession in all asset classes at once: the reason it stays measured and not traded.
• Bakshi, Gao, Rossi — Understanding the Sources of Risk Underlying the Cross-Section of Commodity Returns (Management Science 2019) — local copy. Carry and momentum are both needed to explain commodities; its dowry is the first notice day rule.
• Faber — A Quantitative Approach to Tactical Asset Allocation (JWM 2007) — local copy. The ten-month moving average as an asset-allocation filter: the benchmark of simplicity every added complication has to beat.
• Gârleanu, Pedersen — Dynamic Trading with Predictable Returns and Transaction Costs (JoF 2013) — local copy. With real costs you never chase the exact target: the theoretical foundation of the non-trading band — the same principle as the band of The DHCS bot.
• Baz, Granger, Harvey, Le Roux, Rattray — Dissecting Investment Strategies in the Cross Section and Time Series (2015) — local copy. The taxonomy of momentum, carry and value in their two versions: momentum returns roughly twice as much in time series as in cross section.
• Moreira, Muir — Volatility-Managed Portfolios (JoF 2017) — local copy. Reducing exposure when vol rises improves almost every factor; the version with a leverage cap delivers the same Sharpe with half the turnover.

The contract specifications (CME Group). Direct links to the official contract spec sheets. Indices: MNQ, M2K, MYM. Rates: 2YY, 10Y, 30Y. Energy: MCL, MNG. Metals: MGC, SIL, MHG. Agriculturals: MZW, MZS, MZC. Currencies: M6E, M6B, M6A.

Tail risk and fat tails#

• Taleb — Darwin College lecture on power laws — local copy. The densest short introduction to fat tails and to what they mean for whoever sells them.
• Taleb — Statistical Consequences of Fat Tails (arXiv, distributed freely by the author). The technical version of the Incerto: why standard statistics fails under power laws. The PDF is too heavy to keep a copy here: download it from arXiv.
• Gabaix, Gopikrishnan, Plerou, Stanley — A theory of power-law distributions in financial market fluctuations (Nature 2003). The cubic law: the tail of returns decays with exponent 3, stable across markets and decades, and crashes — 1987 included — are not outliers to the law. It is the distribution on which the Kelly criterion page calibrates the sizing tails.
• Nair, Wierman, Zwart — The Fundamentals of Heavy Tails (Cambridge University Press 2022). Properties, emergence and — above all — estimation of heavy tails: the technical manual behind the tail calibration of the Kelly criterion.
• Litterman — Who Should Hedge Tail Risk? (CFA Institute video, 2013). The right question asked from the other side of the table: who should buy the protection that the volatility seller offers — and who pays for it for no good reason. The paper of the same name (FAJ 2011) is the written version.
• Ilmanen — Investing Amid Low Expected Returns (Wiley 2022) — official AQR excerpt, local copy. Where risk premia — VRP included — fit in a portfolio when everything yields little.
• Ilmanen — Expected Returns (Wiley 2011). The encyclopedia of risk premia; the chapter on volatility selling is worth the price on its own.

The Universa Investments case#

The sources of the chapter The curious case of Universa Investments: the investigation into how returns are reported, the denominator analyses, the CalPERS affair and the defenses.

• Justina Lee — Why One Firm’s 3,612% Return Is Drawing the Ire of Hedge Funds (Bloomberg News 2023, free version at Financial Advisor Magazine). The pivotal investigation into the cherry-picking accusations: the voices of Weinstein, Kaufman and Asness, and the finding that 7 out of 8 tail managers use conventional metrics.
• Aaron Brown — Those Astronomical Returns Aren’t What They Seem (Bloomberg Opinion 2020) and Universa’s 3,126% Black Swan Return Is Legit (But With an Asterisk) (2023). The two technical analyses of the denominator: the fire-insurance analogy and the recalculation on the protected portfolio.
• Bloomberg News — Nassim Taleb-Advised Universa Tail Fund Returned 3,600% in March (2020) and Black Swan Author Spars With Quant Legend Over Tail Risk Hedges (2020). The article that spread the original number and the chronicle of the Taleb-Asness clash.
• Nir Kaissar — Taleb-Asness Black Swan Spat Is a Teaching Moment (Bloomberg Opinion 2020) and RCM Alternatives — The Great Tail Risk Debate (2020), with the original tweets (opener, reply). The May 2020 tweet war told in the chapter: the third-party analysis, the chronicle and the exhibits.
• Antti Ilmanen — Chasing Your Own Tail (Risk) (AQR 2012) and Chasing Your Own Tail (Risk), Revisited (2019), with AQR — Tail Risk Hedging: Contrasting Put and Trend Strategies (2020) and Asness et al. — Portfolio Protection? It’s a Long (Term) Story… (JPM 2021). AQR’s side of the debate: systematically buying puts costs more over the long run than it protects.
• Leanna Orr — The Inside Story of CalPERS’ Untimely Tail-Hedge Unwind (Institutional Investor 2020) and CalPERS CIO Called Out By Ex-Head of Tail-Risk Program. The policy cancelled a few weeks before COVID, told from both sides.
• Michelle Celarier — Nassim Taleb — and Universa — Versus the World (Institutional Investor). The big picture of the controversy.
• Risk.net — The Universa approach to hedging tail risk and Wikipedia — Universa Investments. The technical description of the strategy and the overview of the facts.
• Jackwerth, Rubinstein — Recovering Probability Distributions from Option Prices (JoF 1996), Bondarenko — Why Are Put Options So Expensive? (QJF 2014) and Gârleanu, Pedersen, Poteshman — Demand-Based Option Pricing (RFS 2009). The academic evidence on tail pricing discussed in the chapter: the SPX market has priced fat tails since 1987, index puts turn out overpriced if anything, and real mispricing lives in thin markets with one-sided demand.
• Mark Spitznagel — Safe Haven: Investing for Financial Storms (Wiley 2021). The defense in book form: cost-effective risk mitigation must raise the portfolio’s CAGR.
• Michael Edesess — Empirical Support for Tail Risk Strategies (Advisor Perspectives 2020), Federico Carrone — The Tail Hedge Debate: Spitznagel Is Right, AQR Is Answering the Wrong Question and Asymmetric Finance — Ignore AQR, You Must Hedge Your Portfolio. The independent and partisan defenses, for the cross-examination.

Ergodicity#

• Ole Peters — The ergodicity problem in economics (Nature Physics 2019). The paper behind the Ergodicity page: why the ensemble average is not your time average.
• Peters, Gell-Mann — Evaluating gambles using dynamics (Chaos 2016) — local copy. The formalization: evaluating gambles by their time-average growth rate instead of their expected value.
• MacLean, Thorp, Ziemba (eds.) — The Kelly Capital Growth Investment Criterion (World Scientific 2011). The definitive anthology on the Kelly criterion — the founding papers, Samuelson’s objections, half a century of applications — co-edited by Edward Thorp, who actually used the formula for real: the optimal leverage and the fractional Kelly of the Ergodicity and Kelly criterion pages have their complete source here.
• Kelly — A New Interpretation of Information Rate (Bell System Technical Journal 1956). The original paper: ten Bell Labs pages, born for information theory and ending up governing position sizing — the Kelly criterion page descends from here.
• Thorp — The Kelly Criterion in Blackjack, Sports Betting, and the Stock Market (2006). Thorp’s summary essay: the binary formula and its generalizations, the fractional version and the real cases, from the casino to Wall Street.
• ergodicityeconomics.com — the blog of Peters and the London Mathematical Laboratory group, with their publications and the 2025 textbook.

Popular science#

• Veritasium — The Equation That Beat Wall Street (2024). The story of the Black-Scholes-Merton equation told in half an hour, from the physics of Brownian motion to the Nobel prize to LTCM: the most pleasant first encounter with the concepts of the Options page.
• Veritasium — You’ve (Likely) Been Playing The Game of Life Wrong (2025). Power laws explained with sand, fires and networks: why the world is not Gaussian and why extreme events are the rule, not the exception — the popular-science version of the Tail risk page, featuring the St. Petersburg paradox so dear to Ergodicity.

Narrative voices#

• Emanuel Derman — My Life as a Quant (Wiley). From particle physics to Goldman Sachs: the memoir that explains, better than any textbook, what models can and cannot do.
• Edward O. Thorp — A Man for All Markets (Random House 2017). The autobiography of the man who beat blackjack first and the markets afterwards: the Kelly criterion of the Ergodicity page applied over an entire lifetime, with a foreword by Taleb.
• Nassim Taleb — the Incerto: Fooled by Randomness, The Black Swan, Antifragile, Skin in the Game. To be read before selling your first put, so you know exactly which distribution you are on first-name terms with — and to be re-read afterwards, so you don’t forget.