WOW..Johhnny coming unglued after taking a beating in the market. Interesting.

I really hate to start an argument with you Johnny, but your post is so full of areas to argue about its hard not to.


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I started putting my life savings in the market when the Dow was 3300. I have a degree in Finance, and a Ph.D. in Management and I undertand the markets as much as I need to in order to gamble. Investing in the stock market is not gambling. What school are your degrees from?

This is really simple. If you are dedicated to buying and holding large cap stocks as these funds are and I am, you know a correction is comingNO YOU DONT. Nobody knows when a correction is coming. If you could time the market, you could have sold out two weeks ago and bought back into the identical stocks now and you'd have more shares. Yes, thats true except if Fidelity tried to do that, the very act of them trying to sell out would cause those very stocks to immediatley start dropping and they wouldnt be able to get out at the prices the stock were trading it when the market was at 14000. If you wouldve seen the correction coming, that would work It is not just that this collective big selling makes the market go down temporarily, the collective buying back in sends the market on it's way back up. Again, when they sell, the markets would start dropping right away, they cant just try to sell 1 million shares of a stock at 45 and expect that order to get filled and then buy it back at 35. The million share order will cause the stock to drop and alot of those shares will be sold at 40, 38, 37..ect If anyone can time the corrections in the market, they could more than double their annual returns.Thats true for small guys like me and you, too bad its impossible to do consistently If you went a few per cent higher in cash two weeks ago at the high, you would be helping the owners of the shares. Fidelity Contra nearly always beats the S and P year after year yet they own a huge percentage of the same stocks. There is nothing illegal about selling when it hits 14000 and buying the same positions back at 13000. I would hope that Fidelity could time it right whereas an idividual is making a bad gamble as you did if they try to time it. I already explained why that is impossible. Conrta Fund owns too many shares to try to get out nimbly like you suggest

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No offense but this is all very elementary. Im sure you do have a degree in Finance, but that doesnt mean you know alot about the markets. My brother has a degree in business and has to ask me which funds to use in his 401k.

By the way, which way is the market going next week? Should we get out at 13000 and buy back at 12000 next week? Or if we sell now, will the market go up and be back to 14000 before we get a chance to buy back in? You know you could double your returns, right?

And I didnt call you a dumbass. I said you dont understand the markets very well, which is blatantly obvious no matter what you have a degree in. Go post this same stuff at Motley Fool or any other respected investing type forum and youll get the same responses.

As I type this SPY = 143.44. Not looking good for those naked puts at this juncture.

Obviously the naked put trade on the SP500 is not going well, but its impossible for it to go well when the market is taking. The trade losing money has nothing to do with Ed previous argument.

He was arguing that naked puts are very dangerous. Well, sure they can be but in this case they are no more dangerous than just holding shares of the index itself.

I sold 2 naked puts on the SP500. I couldve just bought 200 shares of the SP500. If the market tanks like it is doing right now, Im going to lose money both ways except with the naked puts, Im going to lose less. I sold them for $250 each so Im going to lose $500 less than I would have if I had bought the 200 shares.

So the naked puts are NOT more risky than buying shares in the index. Its just that the profit / loss potentials are different.

The market can do 5 things.

1) Go way up
2) Go up a little
3) Stay flat
4) Go down a little
5) Go down alot

In 4 of these 5 cases, Im going to have a better result with the puts than I would by buying shares of SPY. Only if the market moves up alot, (in this case "alot" means more than about 3% in one month) do I come out behiind. The market doesnt move up more than 3% in a month very often but even if it does, so what? I still make my 3% or so. I just dont make the full 4-5 % or whatever the market went up in that rare case month.

As I write this, the market is getting hammered like it hasnt in quite some time. When a naked put drops that far its exactly equivilent to me holding 200 shares of the index because Im most likely going to have to buy the 200 shares in 2 weeks when the put expires (unless I buy it back). So I make or lose $200 for every dollar that SPy rises or drops just like I would if I reallty owned 200 shares right now.....except I do have the $500 that I got up front. Make sense?

You might say...$500? big deal...youre getting killed. Yep..and it sucks..but if I had thought the market was going to tank I wouldnt have made the trade. Theres no debate whether or not the trade was a good one because in hindsight it sucks, the debate is whether or not the trade is riskier than buying 200 shares of the index and its clearly not. if I owned the shares I could sell them right now and take my loss. I can also buy the put back and take the same loss..but again I have the $500.

So I would have either a $1500 loss right now or a $2000 loss right now (plus I would owe markin interest if I had bought the shares). I'll take the $1500.

If you do end up buying the shares in 2 weeks when the put expires (as it looks like you will), what is your game plan for those 200 shares? Hold until moves back to a break-even price for the overall investment or hold until a certain return? Is there a time limit where you'll just take your losses so as to free up that capital for other investments? Oh, and thanks for taking the time to explain all of this. At least to me, it's very clear and makes sense.