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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: MrGreenJeans who wrote (1857)10/28/1998 12:17:00 AM
From: Lars   of 15132
 
MrGreenJeans,

>>>
That is exactly my point. One must be fully prepared for the 3 standard deviation move. The move that has a zero chance of happening according to the probability tables; the move that will not happen in your lifetime. Well guess what...these moves happen more often than the probability table suggests. When they happen people lose their homes, lose their children's education funds and lose their retirement accounts. Some go bankrupt. Some are out of business permanently. All because they think the move will never happen to them. People who hedge against these moves are wise people indeed! It is the rare move that you must hedge against to avert financial ruin.
>>>
Excellent point. I know of a story where a person wrote naked calls way out of the money. This was back in the late 80s. The person did this strategy over and over. It was like printing money. They were writing tons of these naked calls.

One time the price moved violently to the upside and cost the person close to a half million. OUCH!
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