"Stock market assumptions can lead to a long fall " by: John Sample

   I am sitting at the computer on the anniversary of one of the most memorable days in my life.  
   It has nothing to do with birthdays or weddings. 
      Those are vastly important but October the 19, 1987, was a day for the ages. I had gone out on my own opening my independent brokerage office. 
   I had several very large clients and we had been buying options betting against takeovers promoted by Boone Pickens.  
   That was the era of “greenmail.” 
   Pickens would take a position in a company then offer a takeover financed by debt. 
   In almost every occasion the management of the takeover target would buy Pickens out.  
   At the point of the takeover proposal, the target stock would run up in price. 
   It was easy to buy out of the money put options. Put options are a way to sell 100 shares of a stock. 
   You don’t have to own the shares as they are borrowed from brokerage firms. 
   Moreover, you pay a fraction of the value of the 100 shares. The problem is that the options to sell have a time limit and a price. 

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