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Old 08-28-2015, 06:47 PM   #41
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I do not personally know anybody with that kind of money, but I suppose that there are a lot of them. Looking around me at mansions, airplanes, and huge yachts, I am sure that the owners must have the kind of net worth that you describe. Yet, they are still peons in the stratosphere, and do not get mentioned in Forbes or the media.

Many years ago, I picked up a boat magazine at my dentist office to read. It described a humongous yacht being built in Italy for a guy who flew his personal 727 there every month to monitor the progress. I did not recognize his name at all. How many people like that in the world? Amazing.

You have to remember that in the early 80s there were not that many billionaires.... we did have a client that was on the 400 list, but I never did anything with his return... just looked him up and he is on the billionaires list now, but not in the top 400... again, this is not the other two people that I mentioned... I would bet that both have already passed...
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Old 08-28-2015, 07:13 PM   #42
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We are drifting far from talk about selling puts, but as we have so much fun talking about how some people are so rich...

What I meant was that one does not have to have a billion to have impressive wealth. What about just a "few hundred millions"? A report I saw said that in 2012 there were 31,000 centimillionaires in the US.

They must be all over the place. As I am not in their circle, I never run across one. Not even know one indirectly. How many degrees of separation to get from me to one of them, I wonder. Two? Three? No, must be two. I know the executives at my former megacorp. They were certainly not centimillionaires, but their bosses were.
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Old 08-28-2015, 07:37 PM   #43
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What I meant was that one does not have to have a billion to have impressive wealth. What about just a "few hundred millions"? A report I saw said that in 2012 there were 31,000 centimillionaires in the US.

They must be all over the place. As I am not in their circle, I never run across one. Not even know one indirectly. How many degrees of separation to get from me to one of them, I wonder. Two? Three? No, must be two. I know the executives at my former megacorp. They were certainly not centimillionaires, but their bosses were.
Now that I think about it, my former boss probably is one. His Beverly Hills home was $20M and I've seen several buys for 100,000 AAPL shares among his holdings. He's also the biggest tightwad I've ever met.
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Old 08-28-2015, 08:27 PM   #44
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Just remember that the way we think/talk about those centimillionaires/billionaires is probably the way our struggling non-FI friends think/talk about *us*.
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Old 08-29-2015, 08:38 AM   #45
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We are drifting far from talk about selling puts, but as we have so much fun talking about how some people are so rich...

What I meant was that one does not have to have a billion to have impressive wealth. What about just a "few hundred millions"? A report I saw said that in 2012 there were 31,000 centimillionaires in the US.

They must be all over the place. As I am not in their circle, I never run across one. Not even know one indirectly. How many degrees of separation to get from me to one of them, I wonder. Two? Three? No, must be two. I know the executives at my former megacorp. They were certainly not centimillionaires, but their bosses were.
I had actually forgotten this was a thread that I started when reading this. As usual around here, the segue posts can be as entertaining (though, maybe not as informative) as the ones on topic.

To your degrees of separation question for myself, I think I know a billionaire and his immediate family fairly well if you include all of the charitable and family foundations that he effectively controls but are not technically counted in his net worth. You would never know he was anything more than middle class if you met him or his wife outside their home. His best friend is definitely on the list of Forbes billionaires; but, I do not know that family myself.

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Just remember that the way we think/talk about those centimillionaires/billionaires is probably the way our struggling non-FI friends think/talk about *us*.
I know this is true for some of my extended family speaking about me, and was true long before my NW ever even crossed the seven figure mark.
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Old 08-29-2015, 09:03 AM   #46
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OK, back on selling puts.

Writing naked puts is very dangerous, no different than buying on margin. You can lose more than the amount that you bet. Having money to back up the puts is safe, but then the money you make must be compared with what you can make buying the stock itself with that cash.

In a flat market, writing covered puts or calls can enhance your return. And as clifp pointed out earlier, even if you are wrong, it reduces your gain in good years, but also reduces your loss in bad years. Kind of like buying insurance. So, done right it is not at all risky.

PS. Some will say that they can close out a naked put to limit their loss the same way one can stop loss on a margin trade. That takes discipline to capitulate instead of hanging on hoping the market will turn around. And I wonder if you can be fast enough in a flash crash.
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Old 08-29-2015, 09:36 AM   #47
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What does a flash crash have to do with selling puts? A flash crash implies a severe and sudden crash and then almost immediate recovery. Why would you need to be fast to do anything?
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Old 08-29-2015, 10:23 AM   #48
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I don't know how long it takes for them to assign the puts to you. I guess even if they do, a quick recovery still limits your loss, if any.

So, maybe not a flash crash, but a steep and deep descent, like what we saw in late 2008/early 2009.
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Old 08-29-2015, 10:27 AM   #49
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I don't know how long it takes for them to assign the puts to you. I guess even if they do, a quick recovery still limits your loss, if any.

So, maybe not a flash crash, but a steep and deep descent, like what we saw in late 2008/early 2009.
Even when the puts are WAY in the money, they normally dont get assigned unless they are very close to expiration, like they expire that day. Ive only had puts assigned early twice, but even if they were assigned and you owned the stock, when the flash crash was over and the stock vaulted back up, you would be back to even or close to it.

Now, yes, if you sell puts and there is a prolonged deep market correction or bear market, you will get slaughtered if you just sit there and do nothing. There are all kinds of options strategies to limit the damage when that happens
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Old 08-29-2015, 10:34 AM   #50
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I wonder why the option clearing house has not updated their computer to do option assignment in real time. They are behind the HFT guys who trade stocks in milliseconds.
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Old 08-29-2015, 10:43 AM   #51
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I just looked at my record. From Friday 2008/10/03 to Friday 2008/10/10, the Dow dropped big every day, and went from 10325 to 8451. That's 1874 points. It bounced up 937 points on Monday 2008/10/13, then went down again.

I was shell shocked looking at my stocks. I don't know how option trading guys would feel. I would think people on the other side of the trade would want to exercise their option. Many big name stocks lost 1/2 or more of their values in a very short time.
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Old 08-29-2015, 12:42 PM   #52
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I could be wrong but, I don't think most people who buy puts have any intention of exercising them. They are mostly used as trading vehicles that allow you to control massive amounts of stock for very little money and with a lot of leverage.
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Old 08-29-2015, 01:45 PM   #53
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It is true that most people trade options looking for gains without having to exercise them. It takes much cash to exercise them, compared to selling them and passing them on. Eventually, someone has to exercise them at expiration.

But I wonder if it ever happens that you hold an option deep in the money, and there's no buyer at the price you want, so the only way you get the option value is to exercise it. Some options I have traded were not very liquid.

More than once, I have had some LEAP call options assigned to me long before the expiration date, and it was not during any turmoil. The option holder wanted to own the stock for some reason.
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