BUS 600-SP10, Day 6: Finance

Finance is my favorite part of this book.
I learned the three kind of firms in US, which are Proprietorships, partnerships and Corporations. I understand they are difference in liability. Right now I have a Proprietorship firm, I plan to incorporate it in future.
As for investment, I learned how to use beta, probability distributions to quantitize risk. The CAPM give us a method to estimate the value of an investment.
I am amazed about this risk factor.
This remind me a lesson I learned in the financial crisis. In year 2008, I read a book called "how to make money by selling put option". It seems selling put option is a very easy money. The author list how he made money by selling put option. According to the author, when you sell option, you will gain in three situation, if the market go up, stay flat and go down but not too much. You only lose money when the market goes down too much.
I was so excited, I put $100k account into this venture. I sold many put option. One example shows my logic. Due to the bearish view of wall steet, stock has been down from October of 2007. Until the middle of year 2008, many stock already dropped a lot. MGM is one of them. I am very confident about MGM, because I know half of the Las Vegas belong to MGM, and its capital size drop to only $5B. When MGM dropped to $47 from $100, I sold put option at $30. And this lead me to the journey to the hell. Whenever MGM drop, I said it's manipulation, and I hold it. Guess what, this stock all the way dropped to $3!
Same thing happen in other stock which I sold put option, such as STP, LVS, OIH, and even INTC.
I got numerous margin call, and finally my whole account was wiped out.
What's wrong here? Because I don't know the risk factor!
If I came to study in Calmat earlier, I can save the $100k!
Now I fully understand the put selling is so called naked put. As what my friends told me, selling naked put is like operating an insurance company for stock market. In normal case, you make money by collecting premium. But whenever disaster hit, you will pay back all your premius and end up with big loss. No insurance company will insure your stock, that's the reason.
Last week, a stock with a symbol ITMN dropped from $45 to $10 in one day after FDA rejected their medicine application. I saw a guy in message board said he lose $70k in one day due to selling naked put of $20. The $1 option at $20 level is very attractive, but actually that is because market make already consider the high risk.