Blowing Up - by MALCOLM GLADWELL (Taleb vs Niederhoffer)

[Clement]

Exactly. Newsworthy, but can't make you enough money.

For the record, Victor Niederhoffer is still doing more than ok.
http://en.wikipedia.org/wiki/Victor_Niederhoffer

Nonetheless I love Malcolm Gladwell books and this Taleb v Niederhoffer read was interesting but you have to take alot of insights with a pinch of salt.

I disagree about the profitability bit. The greatest trade in recent financial history (John Paulson's subprime trade) follows the same negative carry, high payoff characteristics as Taleb's options buying strategies.

The difficult part of these strategies is in the timing. People tend not to like investments structured as small periodic payments for large potential payoffs and it can be quite difficult to stay the course.

That said, Taleb is mainly warning against bearing "blow up" risks, where the possible losses are much larger than an investor thought was feasible. Having worked at a corporate treasury where fx options writing and use of structured products were common day to day activities, I have a deep appreciation for the Taleb's line of thinking.