Edward McQuarrie – Never Ever Sell Naked Calls

<p><strong>BIO: </strong>Edward McQuarrie is Professor Emeritus at Santa Clara University. He writes on market history and personal finance, and his research has been mentioned in columns in the Wall Street Journal, Marketwatch, and Barron’s.</p><p><strong>STORY: </strong>Edward opened an account to trade naked puts. When the financial crisis of 2008 hit, he thought it was a good time to sell his puts. He ended up losing almost all the money in his account.</p><p><strong>LEARNING: </strong>Keep your play money small. Never trade your treasury bond until maturity to avoid losses.</p><p>&nbsp;</p><blockquote class="ql-align-center"><strong>“I find intermediate treasuries to be superior to total bonds, especially for new investors.”</strong></blockquote><blockquote class="ql-align-center">Edward McQuarrie</blockquote><p>&nbsp;</p><h2>Guest profile</h2><p><a href="https://www.linkedin.com/in/edward-mcquarrie-8a08a515/" rel="noopener noreferrer" target="_blank"><strong>Edward McQuarrie</strong></a> is Professor Emeritus at Santa Clara University. He writes on market history and personal finance, and his research has been mentioned in columns in the Wall Street Journal, Marketwatch, and Barron’s. His papers can be downloaded from <a href="https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=340720" rel="noopener noreferrer" target="_blank">SSRN.com</a>, and he posts as McQ at Bogleheads.org, where you can view some of the charts mentioned today.</p><h2>Worst investment ever</h2><p>Years ago, Edward gave himself a small play account to keep his hands off the money in his 401(k) account. In that play account, which he opened with a broker, Edward began to trade options, and more particularly, he began to sell naked puts.</p><p>Then the great financial crisis of 2008 hit. Edward had been trading puts and calls for four or five years at that point. By November 2008, the Lehman Brothers had already gone bust, and the markets were going down, so Edward thought this was an excellent time to sell a naked put.</p><p>At that