As a professional trader options, two things I remember most of what you think of this bear market of 2008 and it is, and A. ) The option premiums How many investors are covered important call to take risks and B. ) How is the certainty of a "buy and hold" approach to a well diversified portfolio structure has not been spared the devastating effects of liquidation of a bear market. REIT, raw, large-cap, international, emerging markets, convertible bonds, defensive stocks took a beating in 2008. Each company was deemed "too big to fail", or so conservative he should not have failed, did exactly that. Who said "No two down markets alike" certainly has that right. Even Warren Buffett, Berkshire Hathaway shares (ticker: BRK) has experienced a peak of -54% through trading range since December 2007. Never more uncertainty among investors who are nearing retirement, CFA and mathematically minded participants in financial services market as nervous reaction to all "to take the" bank of Arbitration in 2008 has been disconnected. Author Roger Lowenstein has spent considerable time analyzing the people who come to the negotiation through the traditional route. In his book, When Genius Failed: The Rise and Fall of Long Term Capital Management1, Lowenstein wrote that "those who are attracted to the mathematical analysis and are attracted to fixed income and convertible bond arbitrage, as many what determines its value is easily quantifiable. "I suspect that financial planners and sophisticated investors in general are a similar breed. Financial planners I know are well educated, mathematically minded, and contemplative. They are attracted by the certainty of planning, and his vocabulary is peppered with expressions such as rent, CAA, estate planning, the efficient frontier, MPT, asset allocation, risk-adjusted return and diversified portfolio. Moreover, those who are attracted to trading floor, like me, are often emotional, anxious and very intuitive. As hungry street children, we rely on quick reflexes and the general belief that it is more important to be the first trade of what is right. And like any merchant account, we want a little excitement. In fact it can be described as Liar's-poker-filled double espresso-ADD-diagnosed patients-to-trade Triple-beta-ETF-for-nothing less-than-a-volatility index level-70-is -too-boring orphans of the industry. Conditions for a contractor may use stock options in any given day are somewhat different from those of a typical financial planner and include tilt, kurtosis, EDGE theoretical risk of the investment, I-Wham (Russell 2000 ETF Symbol: IWM) , implied volatility, the assignment, the dollar weighted deltas and sedimentation. When I started in the floor of the CBOE in 1982 was 22, and most professionals these days were blue collar, Irish families who have managed a trading day with the same mentality as a plumber lays pipe or a carpenter who frames a wall: it was a job. I spent most of my years at the mouth of the CBOE OEX, where the practice of hiring MBAs discouraged - even despised. Why? We could not teach anything that is a great company. That might be true: they are not flexible enough for the mentor. Floor traders should have an intuitive sense of risk management and reflexes to maneuver around short-term market movements. With an eye toward disaster, often fall out of place money. Many arguments erupted between quants, who understood the mathematical impossibility of movement of 23 deviation in the 1987 crisis and the floor traders had no idea what standard deviation was, but knew they would lose their homes if the market has decreased significantly. And they realized - without using a calculator - that his wife would be very, very crazy. Lowenstein, indicating that Nobel Prize winners Fisher Black, Myron Scholes and Robert Merton, who created the famous option pricing model known as the Black-Scholes in accordance with fat tails and volatility stiffness asymmetric price that operators of land outside the - the money placed. For the creators of Black-Scholes option pricing, volatility has been a constant, a lognormal distribution. "Merton made the hypothesis a bit more," said Lowenstein. "He assumed the volatility was so constant that the commercial price in continuous time, without breaks. "Today, options traders need a solid understanding of the nuances of asymmetric volatility, kurtosis, dollar weighted deltas, and Vega. Yes, we have high-speed computers that processes tens of thousands of theoretical value in hundredths of milliseconds and seven million shares and options quotes sent daily trading. However, it is emotional and often volatile pit offer something for the merchant structured, well-educated financial planner? The answer is yes. The truth is that needs nothing more than a simple calculator, the kind of experience, and often a little outside the box thinking to achieve a fantastic rate of return. After all, it is said that some of the best inspirations come from outside the box. And that is outside the zone options trader? I was struck by a comment made by the CFA Adrian Cronje, who was quoted in the Journal of Financial Planning, January, 2009 issue, as saying: "The good news is that for the first time in many years, investors are now paid to take risks. "2 The investors are paid to take risks. Imagine. Nowhere is this more true than the statement in the current context of options trading, covered call writing. More specifically, investors are paid handsomely to take fewer risks. Recent market volatility has created a once in a perfect storm of production, a history of Blizzard for individual investors and the following characteristics: 1. Unprecedented levels of option volatility due to the credit crisis 2. The failure of investment banks to participate in exchange for debt reduction 3. Clearing firms to reduce the risk evenly across all market participants 4. Fear continues to decline Cronje, Adrian, Journal of Financial Planning, "Markowitz's wrong?" (January 2009) 5. Massive deleveraging of hedge funds and 130/30 strategies 6. Generations of low interest rates 7. Pensions and endowments rumors that the sale of assets to meet cash obligations rather than to balance the strategic benefits of financial planners and investors may want to update the theory of options based on resources, especially targeted the tactics of writing and reading newspapers on the risk of higher academic targets adjusted returns covered call options, provided that the nations 76 million baby boomers will turn to planners and advisers to help rebuild their portfolios while making his "buy and hold" portfolio of growth stocks in a vehicle that provides significant income for retirement. Retirees are tired of hearing the endless hum of experts reviews the benefits of increased asset allocation, reducing monthly expenses and promoting the benefits of being a Wal-Mart welcome. Notes: Lowenstein, Roger, When Genius Error: The Rise and Fall of Long Term Capital Management (New York: Random House, 2001), 67-68, 76-77.