I am going to be exceptionally considerate and explain. If you are intelligent and think carefully my explanation will make sense to you. I will do my best, but if it still does not land...
Socrates got treated the way he treated every one else.
The success of his swan song effort to write naked put options was never proved
Quite the contrary. The operation was a success. Socrates stated that he would write "plain vanilla" options, naked puts, on an index, and all options would expire worthless or very nearly worthless compared with the premium received.
Socrates called around 20 trades, all at different expiry and strike, calling each trade in advance and stating that it would expire worthless.
All but one option expired worthless. The losing trade represented around 1% of the total profit from the operation. Socrates never wavered from his initial insistence that the options were a wasting asset, the buyer would lose, and they would be worthless at expiry.
He proved his point by getting 95% of his calls completely correct, with 1 trade in 20 showing a tiny loss.
I will explain why the general membership of T2W do not perceive the operation to be a success. If you put your attention on this closely, you will see that it says a lot also about how you see trading. (and also why the vast majority do not succeed - this post should interest you on the latter basis alone)
Socrates adopted a professional posture to the challenge he had set for himself. He was focused exclusively on Getting It Right - that is to say acting according to the information supplied by the market in accordance with his experience and without any emotions or other irrelevant considerations. As a result Socrates is able to read the market weeks in advance and will know which options will expire worthless
and why.
The T2W membership adopted an amateur attitude focused exclusively on money, and emotional considerations such as fear and doubt. Additionally, as a result of what you are all conditioned to believe by mainstream discourse, you are all frightened silly by the prospect of naked writing with the need for specialist knowledge, broker approval, titanium balls, and very deep pockets.
As an aside, because the chosen instrument required broker approval, nerves of steel, and deep pockets, almost all the T2W membership were unable to financially benefit by copying Socrates' trades. Guessers, gamblers, hobbyists, and spreadbetters playing £2 a point were excluded.
Margin is not a problem for the serious professional trader. The professional understands exactly how much exposure it is prudent to accept on a position, and deals the appropriate size. The professional also always has a plan to reduce and finally cut exposure if it is suspected that it is not correct or no longer correct to be so positioned.
The vast majority of people on this site are employees. A great portion of these employees have debt. From their frame of reference it is impossible to take positions which in the event of temporary volatility may require £150,000 in margin to hold. At no time did the SPAN margin exceed this amount on Socrates' positions. The positions were worth around £25,000 in profit at expiry, or 1/6 of the margin requirement at the peak. Further, a professional trader of decades experience is likely to have a large account with positions in various instruments including longer term investments etc, not just funds earmarked for options. For example Interactive Brokers allow the holding of T Bills and other government debt instruments, equities, etc in a single account.
As a result of either disbelief or envy the membership aggressively probed Socrates to reveal financial details. If is not your place to ask what a trader can afford, and exceptionally rude to presume that an experienced trader who is taking time to teach you a principle has recklessly overcommited himself.
Finally, Socrates called the size, strike, and expiry he was intending to write in advance, and
it was demonstrated by recourse to official exchange information that these opening trades took place. Where Socrates closed his trades is irrelevant - it is proved that he opened them, and it is also proved that he was completely correct on them all expiring worthless to the buyer. It can be presumed from the knowledge and experience it takes to predict the market that far in advance, the deep pockets, adn the steel nerve that he would not have made a mess of his exit.
However, the purpose was to demonstrate that the skilled professional writer has the edge. The opening trades were bought by someone, who lost if they held to expiry. Simple. Not about money, or margin, but correct market reading and professional posture. Have any other traders posted 20 correct calls in a row? How many here even could?
Socrates was challenged to explain his success, time and time again. He would only said, basically, that everyone around was a bunch of twerps and that he was too "bizzy". He had a few brownnosers but they all drifted away, either with him or from him, I don't know.
Socrates was disrespectfully challenged by those who ought to know to respect their elders and betters. This included one member who took live trades against Socrates view of market direction to make a point. (suffice to say he lost) Socrates did explain his success:
years of sacrifice and graft
repeated painful and tedious self auditing
merit, ability, and conduct
Most on these boards frankly were behaving like a bunch of twerps.
There was no practical way that he could write naked put options successfully at the time he did it, which must have been at the time the markets were beginning to topple. I do remember that if he had done what he said that he had done, then he must have lost a lot of money. Personally, I think that he was BSing everyone.
In reverse order. The opening trades (the initial writes) were called in advance and shortly after printed on the official LIFFE time and sales. The time he did it was early 2007 if I recall, before the February "mini crash". The markets continued to make new highs until October 2007. The practical way was demonstrated - if you had sold the options he suggested and held to expiry you would have kept the full premium. Please do not be obtuse and impose your own limitations on others by proclaiming something "cannot be done" simply because you cannot do it!
Perhaps this post could be added to the end of the Plain Vanilla thread?
I sincerely hope you are able to grasp what I have said, to your benefit and my satisfaction.
Finally, three years later, the professional traders hoo know wots wot are getting on with it - and the monkeys are still forming knitting circles and do not progress. Most of Socrates' "critics" were not and are still not highly skilled independent professional traders, and most look as though they have not progressed in this time.
Everyone gets what they deserve, exclusively on merit, ability, and conduct. No exceptions.
at the time the markets were beginning to topple.
I have highlighted something interesting. The vents in question were a small weakness in the larger context of a bull market which had not yet concluded. Despite the panic given by the media to those who did not know better, the market continued to rise as the portents were bullish. Put sellers should not have been worried. Equally in August 2007 - the bull market was nearing exhaustion but still had not concluded. Only one member here publicly posted that the markets would recover and make a new high after August, which Socrates saw and commended as an island of sense in a sea of nonsense.
Now consider the nonsense about Dubai or whatever in the news a few weeks ago, which also caused a small weakness in a bull market. Those hoo did not know panicked and sold positions to those hoo did. Prices continue to rise into new highs as conditions are bullish, therefore the direction is north. Again, skilled professional put writers need not have been concerned.
That is all.
