Anger => Incoherent Verbiage

[Jeffrey]

I been caught red handed using terms I’m only loosely familiar with. It’s a fair cop.

Edit: after reading my post, it occurs to me that it could be interpreted as disrespectful. I am trying to express embarrassment at being caught using technical terms incorrectly and gratitude for the correction.

[The Observer]

No need to be embarrassed. You owned up to your error. And I certainly did not see your post as being disrespectful, you were just posting your opinion based on what you thought was good knowledge. Its not as if you were tossing out lightning bolts in that post.

[.]

Not disrespectful at all. Options are relatively obscure, so I tend to point out inaccuracies in the interest of getting it right.

Only because I've been dealing in options since before options exchanges like the CBOE existed. (I bought my first option in 1968 in my old man's account, I was 16, it was all OTC back then, little one or two-column inch ads in the WSJ listing inventory for sale -- Thomas, Haab and Botts comes to mind.)

First and last option I ever bought, been selling them ever since. And that $800 purchase made a $900 profit in less than 60 days. Serious money (6,500 '17 dollars) to a 16 year-old kid, but all I was thinking about was how unlikely it was that I would ever duplicate that as I exercised the call and sold the resulting stock on a pay-phone (remember those?) in a high school hallway between classes.

Better to go with 95% odds of winning than 95% odds of losing. PT Barnum was right and the options markets prove it daily.

My conclusion is that Golub didn't know what he was doing and made the gigantic mistake of putting securities with big LTCG in an account where he then lost significant money on options trades -- enough to force the broker to sell him out.

So it goes.

[notorial dissent]

You are entirely right. As I've said previously, playing options is like playing Russian Roulette with a fully loaded gun for most people. I've known some really good options players, but I can also count that number on the fingers of one hand.

Incidentally, the only thing a brokerage loves more than people who buy stock on margin is people who play options on margin, almost sure fire money winners, for the brokerage.

[.]

Brokers like people who don't blow their accounts up. Or cause margin calls.

An account with a call could turn into a debit account, a debit account impairs the capital of the broker, enough of them puts the broker out of business. Brokers hate those kinds of traders. In this case, Kidder, Peabody asked him to take his business elsewhere.

Account implosions happen regularly -- using too much leverage, whether in commodities or stocks or options is just human nature, that is to say greed regularly gains the upper hand over reason or even reasonable speculation.

Great when it works, fatal to the account (and maybe the broker, see Bunker Hunt and Bache in 1980) when it doesn't.

Even Golub would probably admit that speculating his way into a margin call that resulted in positions with large LTCGs being liquidated was not a very good idea.

And then he goes semi-TP and totally off the litigation rails. And this guy is a freaking CPA.

Loss of a few bucks of LTCG tax advantage seems to affect some people disproportionately.