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To: Bill Jackson who wrote (72980)	3/2/2002 5:12:28 PM
From: Elmer	Read Replies (1) \| Respond to of 275872

Elmer, Since you have been doing this for years, why are you not richer than Gates? I'm working on it. Life is a learning experience and it takes time to learn. For commission to be a small factor you need a discount brokerage of some kind. Sure. Why give your money to someone to place an order for you when you can do it yourself for a lot less? BTW, these options plays are not sophisticated by any means. They are pretty basic. It can get a lot more complicated. EP

To: Bill Jackson who wrote (72980)	3/2/2002 7:55:49 PM
From: minnow68	Read Replies (7) \| Respond to of 275872

Bill, The reason that Elmer is not richer than Gates is that he is probably playing a game that carries a risk of catastrophic loss. If he plays it long enough, it can blow up pretty badly. Some stories I find somewhat relevant. I hope you find them entertaining. Someone I know through a consulting job has a brother who thought he had found the formula for endless riches in options. As I understand it, he started with a couple of million (successful engineer with lots of money from options in the company he worked for), and turned it into just shy of ten million over the course of a year. He then managed to turn it into about one million in the course of a few months. Ouch. Have you ever heard of Joe Granville? He made a spectacular market call a long time ago (in the 1970's perhaps?), and to this day makes quite a bit from his newsletter. At one point, he also believed he found the magic formula with options. He made millions in one year. And then he lost it all in the next tax year. So he wound up in tax hell since he no longer had money to pay the tax on the gains and the losses could not be used to offset since losses cannot be carried backwards. If someone doesn't know what the mathematical term "gambler's ruin" means, they probably shouldn't be trading options in any meaningful way. I've written many books on horse racing, and a side effect of that has been that I've talked to many people in the gambling industry. The most relevant to this discussion was a psychiatrist who liked my books and called me up to chat. It turns out he specialized in treating people who have systems like Elmer's. Did you notice that Elmer has calculated his annual ROI at some where between 25-35%? Someone could easily live on that, at least until it blows up and leaves them penniless. Well, sometimes systems like this can work for _decades_ before the blow up happens. And when someone has been living off their "perfect system" for a long time, the blow up can be very hard to deal with. The doctor told me about systems like Elmer's that people have come up with involving horse racing, casinos, stocks, options, commodities, and just about anything you can imagine. There is one main common factor. These systems typically create a risk profile of a high probability of relatively small gain in exchange for accepting a non-zero chance of devastation. Another common factor is how people mentally respond to the blow up. If they haven't been living off of the money, they seem to do OK. But if they were making their living off the system, particularly for a long time, they quite often had _extreme_ troubles adjusting to "post-system" life. The thing that shocked me was that there are so many people like this that this doctor was able to specialize his practice on this type of patient! He accepted no other kind of person, and he was turning people away. Now Elmer, before you protest that you know what you are doing and this can't happen to you, I concede that you are that one person in a million who, while staying on the wrong side of Black Scholes, still manages a long term profit from option activity. I have no doubt you will be richer than Gates eventually. I'm just trying to keep the rest of the thread from joining the 99% of people who try their hand at options and lose money at it. Mike