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A comment on Trader Made Billions on Subprime. Parent comment

Re:Trader Made Billions on Subprime by timr on Tuesday January 15, 2008 @08:41PM (#98999)
If the article is correct, and Paulson was actually short on ABX and mortgage-backed securities, the downside of his strategy was unlimited. Taleb's strategy (option trading) had a bounded loss.

It's unclear how balanced Paulson's fund was/is, but the article makes it sounds like he was playing with fire.

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Re:Trader Made Billions on Subprime by vitaminj on Tuesday January 15, 2008 @09:39PM (#99029)
Yeah that was half his scheme, which is unbounded as you say.

The other half of the strategy, which the quote was about, was related to purchasing credit-default swaps, which are derivatives like options. The losses on CDS contracts are bounded.

But you're right... without knowing the balance between CDS contracts and short selling, it's hard to gauge how exposed he was.

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Re:Trader Made Billions on Subprime by mhb on Tuesday January 15, 2008 @08:53PM (#99008)
He was talking about the downside loss strategically - not in the pedantic sense you are using.
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Re:Trader Made Billions on Subprime by kingkongrevenge on Tuesday January 15, 2008 @10:52PM (#99060)
> he was playing with fire.

You only make $15 billion with a shit-ton of leverage.

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