I had a margin call in excess of one million dollars on my account, which is what I would have had to put up if I wanted to hold the short stock position instead of buying it back. Technically, you are supposed to have five days to meet the margin call, but the firm was on me to cover the position right away. That night I called my mother, which was the hardest phone call I ever had to make. I felt like a complete failure. I felt like I should be put in shackles and hauled away. "Mom," I said, "I need to talk to you." "What is it?" she asked.
"I think you need to come over to the house tomorrow morning to discuss it."
"It'll have to be pretty early," she said, "because I have to get to the college."
"That's okay Mom, the earlier, the better." The next morning, around 6:30 A.M., I looked out my window and saw my mom dragging up the walk at a snail's pace, which was very uncharacteristic for her. She came in and asked, "Mark, what is the problem?"
"Sit down on the couch, Mom," I said solemnly.
She sat down and asked, "What's wrong, Mark? Is it something serious?"
"Yes, I'm afraid it is," I answered. "Mom, I lost $100,000 of your money."
She didn't flinch at all. She looked me straight in the eye and asked sympathetically "How much did you lose, Mark?"
"I lost half a million dollars," I said.
"But you don't have half a million dollars."
"I know, Mom."
"What else?" she asked.
"What do you mean, 'what else'?" I asked.
"Besides losing all this money, what else is wrong?"
"That's it, Mom," I answered.
"Oh, is that all! I thought you had cancer."
Did that ever put things in a different light. Her next sentence to
me was unbelievable: "How long will it be until you make it back?" she asked.
If she would have said anything else, I would have quit. But she had said just the right thing, at the right time. I straightened myself up a bit and said, "Five years," picking a number out of the air because I had no clue how I would make the money back "If you make the money back in ten years, that's okay," she said. "Now go ahead and do it."
From that point forward, I never again sold any naked options.