Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Jurgis Bekepuris who wrote (33842)	3/18/2009 8:30:16 AM
From: MCsweet	Read Replies (1) \| Respond to of 78958

Jurgis, I just explained it vert simply to you. Selling a put you can lose many times your initial initial investment, which I am calling the put premium (your maximum profit potential). By its very design, selling a put is a speculation unless there is essentially no probability that the put will be in the money. Now you or Buffett may claim that markets always will be up 15 to 20 years from now. Explain that to the Japanese. It's been almost twenty years since 1990 and the market is what about a third of where it was? If you can demonstrate a realistic model that shows there is zero probability that these puts will be in the money, then I'll concede your point. You can't It also helps if you don't sell the puts at the height of the credit bubble, with low volatilities and overvalued equity prices, but that's just of timing not mathematics. So, yes selling a put is a speculation. QED, end of story. MC PS: Buffet was already down $6.7 billion on the trade in November, more than he could ever make on the trade blogs.moneycentral.msn.com Not a speculation???