A lot of people who think that buying puts is ,,too expensive''.
Nassim Taleb made money by understanding that out of money call options were underpriced, not overpriced how people think generally. People don't learn from the past.
Taleb made money in 2008 by buying options that were way out of the money and hoping for a crash. All other years, his fund lost money.
That strategy would have lost money over the last decade, because there wasn't a crash.
Whether that strategy is a net win over a business cycle isn't known. Taleb's funds never published their full results.
I guess you're probably talking about Universa, which Taleb is closely affiliated with? Taleb also ran his own shop Empirica for five years, 2000 - 2005. It beat the market on an absolute basis in year one (incidentally, during the dotcom crash) then had mostly negative results all other years.
I don't specialize in derivatives so I can't speak to how compelling his industry work is versus his writing. But my understanding is Taleb's strategies were explicitly designed to lose small amounts of money often and win huge amounts of money occasionally.
The idea is basically to go long vega and gamma waiting for an apparently rare event you believe will happen somewhat more frequently than expected. In the meantime you'll eat the theta and usually lose money, but ideally within certain risk parameters.
This paper talks about a strategy of buying OOTM options and the massive returns it would (occasionally) generate, and how to properly judge such a strategy.
And in addition considering everyone has read Taleb's books there has been accelerating interest in options which make the prices quite high and IV crush painful.
End result, even harder to win with OOTM options even if you are correct.
Taleb's strategy doesn't depend on a crash per se, but on unusual volatility in either direction. He accumulates a portfolio of puts or calls that misprice tail risk.
And yes it sometimes takes years to pay off, during which time the fund is paying management fees and options purchase prices. So it bleeds money over time, and then makes it back and more at random intervals.
That's by design. In fact it's a similar model to Venture Capital in that way.
Nassim Taleb made money by understanding that out of money call options were underpriced, not overpriced how people think generally. People don't learn from the past.