How to Get Back to Risk Compliance

The idea that LTCM had become too large is even further supported by their experience trying to exit trades in 97. There's a baked-in problem for people that make money from short-term mispricings. You need the market to be a little irrational, you just don't want it to be too irrational. If you sell 16% volatility vis-a-vis options, you're betting that the market moves less than 1%, kind of on average; if it moves more than 1%.