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shokwave comments on Buy Insurance -- Bet Against Yourself - Less Wrong
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So it is extremely important that you critically evaluate whether the market is sufficiently non-rational, and that you attempt to find out the possibility of a third outcome that doesn't satisfy the bet but still makes you financially miserable (eg User:Kevin bets on not-Obama, Obama wins, Obama cracks down)
Yeah.
I strongly recommend The Quants. It's very interesting about how the guys who invented the systems (notably Edward Thorp) understood the theory underlying the math better, and had clear ideas about how much it was safe to bet. The later mathematicians and (iirc) physicists just looked for the big win.