Subject: Re: Getting complicated
I think the quote is probably referring to people who are writing puts without the cash backing, then thinking of the premiums as income. In effect, using an infinite amount of leverage. In my analogy it's like taking a perfectly innocent hammer and throwing it up in the air above your head with your eyes closed.


The analogy would be a good one, if most people writing puts were NOT using leverage and had 100% of the necessary funds to cover the potential losses. Hammers are usually used for sensible things like hitting nails - puts, I'm not so sure. The use that the quote is referring to ("make a few bucks that you get to keep if you’re right, but you lose your home if you’re wrong") is clearly what most investors should not be doing, so it's more like saying throwing hammers up into the air, with one's eyes closed, is a good way to eventually come to grief...


DTB