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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121482  
Subject: Re: One question tax quiz Date: 7/29/2000 5:46 PM
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<<From what I have seen you avoid any questions that deal with straddles, and TMFTaxes simply answers that he has no intention of learning about them because the Fools do not want to associate themselves with the members of the untouchable caste.>>

First of all, there is a difference between "not learning about them" and "not wanting to discuss them". Allow me to give you some insight into my philosophy. I've responded to this type of question in the past, it appears that now is the appropriate time to respond again.

Many of the people who walk into the Fool site are new investors. Many people who are just now taking over their financial affairs for the very first time. Some are young, some are old. But many are simply trying to grasp the knowledge that they'll need to direct their own financial future. So anybody with a TMF handle must be mindful of that fact.

I'm allowed to operate in the "Personal Finance" section of the Fool through the grace of the powers that be at Fool HQs. It just so happens that I believe in the Foolish Filosophy. The Fool has said things that I have always believed when dealing with investment strategy...I was just unable to formulate it and put it in the proper words and perspective.

Needless to say, I drank the Kool-Aid when it comes to the Foolish Filosophy. It's not difficult for me to follow the guidelines of the Fool when it comes to dealing with tax issues. Based upon my own personal experience and my knowledge of client transactions over the last 25 years, I understand that screwing around with options and all of the investment combinations afforded with option plays (such as writing covered calls) are a bad deal for the vast majority of the population. Especially the "newbie" population.

The LAST thing that I want to do in this folder is appear to provide information to any of the readers about how sexy and fun playing with options can be. That would be completely opposed to the Foolish Filosophy. And, like it or not, when you have a TMF "handle", many people give what you say additional creedence. We all know that it shouldn't be that way, but the reality is that a reader of a TMF post might give the information in that post more credit than it deserves. Or more thought. Or more consideration.

That being the case, I simply choose not to discuss option issues in any great detail. I compare it to giving a 5 year old a loaded pistol. I know what will happen if the trigger is pulled. But instead of telling the child what will happen, and then letting the child play with the new toy, I would much rather take the gun from the child and place it in a locked drawer. The child might be angry for a while, but in the long run it is the best action that I can take.

I'm not comparing you or anybody else that visits the folder to a child. Not in the least. But what I am trying to point out is that it might not be best FOR ME to deal with these types of option issues. Please remember that the answer to any question here in the folder can be read my many more people than just the person who originally asked the question. There might be new folks out there reading all about these groovie tax and options issues, and want to try one for themselves. Not something that I'd like to have happen.

So I simply choose not to deal with these type of questions in the folder. If that makes it appear that I don't know what I'm taking about on the issues, then so be it.

<< Well I'm sorry, but there are people who need to know this information. It is complex, it is frustrating, and I certainly do not pretend to know all the answers. I do at least know some of the answers, and I think others should be aware of at least some basic facts.>>

I don't necessarily disagree with you on this point. But we might disagree on the forum.

There are many tax and trading discussion sites out there that will gladly deal with these issues. Based upon your knowledge and experience, I'm sure that you would be a welcomed addition to these sites. You could teach and learn and have a great time. And if some newbie wandered into some site called "Shark Option Trading", and began to do some sexy option trading, that's fine. There is still much to be said for personal responsibility. But when somebody wanders into the Fool site, it wouldn't take but a few minutes of research to determine that if you want to talk about option plays, you've come to the wrong place.

And I, as a TMF staff person don't want to add any fuel to the option fire.

Do I object that you take the time to answer the various questions on options and strategies? No...not at all. In fact I very much appreciate all of the time and thought that you've put into the folder. You do a fine job, and your efforts don't go unnoticed by anybody who visits the folder on an ongoing basis. So please don't get the impression that I want you to take your answers elsewhere. I don't. I just would rather not participate for the reasons noted above.

I'm not going to jump in and criticize your work just because it might deal with option plays. I'm not going to have the posts removed. I'm not going to get on my soapbox and preach the evils of options. The Gardners and others on the editorial staff have already done that...much better than I could.

So please feel free to participate in the options tax questions to your heart's desire. All of the responses that you've provided so far have been professional and well thought out and researched. If you had gone to the level of "cheerleading" the use of options in a Foolish investment strategy, I would have certainly jumped in and provided rebuttal posts regarding the negative issues regarding options. But your responses have been straightforward...and well received.

One last thought. I realize that using options is one of a number of investment strategies. So is technical analysis. So are futures contracts. But you'll generally not hear me talking about tax issues relating to those strategies either. While they might be vaild investment strategies, they are not part of the Foolish Filosophy. So I will continue not to deal with them, or deal with them only on an overview basis.

Finally, the thoughts presented above are uniquely mine. They don't represent an official position of Fool HQs or the editorial staff. They are my own. For those of you out there who believe that they are shortsighted or wrong, I apologize. Sometimes you must simply live in the skin that you were given. If the readers out there believe that my philosophy should be changed by a mandate from the "higher ups", you can certainly send an e-mail to my immediate supervisor (TMF School@aol.com) or the head of my editorial section (TMF Hoops@aol.com). If I am being hard headed in my view of the TMF world, I'm sure that they will be happy to set me straight.

Thanks for allowing me the time to experss my position. Hopefully you now more fully understand where I'm comming from when dealing with option issues.

TMF Taxes
Roy

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