In conversation with a trans person I know well (we used to pretty much be family) I'll say '->-bleeped-<-' in jest or whatever. We call each other ->-bleeped-<-s, and we're both cool with that. I wouldn't refer to anyone else as anything other than trans man/woman, ftm/mtf etc to them, even if they had used it about their ftm boyfriend before me. I don't care about referring to myself that way, if I'm fine with it then people aren't going to try and use it as an insult. It's not a conscious 'trying to reclaim it' thing, it's just how I've always dealt with things, I laughed about how I was a crazy nutter who went off "to get my straitjacket fitted" (see my shrink) because I'd sliced up my arms "so I could look like a zebra", and no one turned around and tried to use those things as a way to hurt me. Doesn't mean I find them amusing or not serious, just self-preservation, and it's good to be able to put a lighter spin on things rather than always getting down about them.
When my girlfriend -- before she knew about me being trans -- used it in reference to someone who had come into her work I felt bothered more because I felt that I should than actual hurt/anger. I felt a little bit concerned because it didn't seem like a good omen to her being knowledgeable about it and supportive, but I was so, so wrong there. I am a little prejudiced in that case though. The only time I've ever heard someone else use it was insulting someone in my old class at school, because he let some girls put make up on him once and appeared to really be enjoying it throughout. They were basically friends anyway though, and he happened to be the person who sexually assaulted me when I was younger, so... I didn't really give a monkeys what they said to him.
I tend to forgive people who I know don't mean any harm by it, but don't know any better. My mind nags me to call them out on it because that's the right thing to go for everyone else out there, but I've never wanted to out myself by getting all up tight about it, when I did being trans as the idea behind a bit of writing I had to do in school on the theme of "Trapped" I kept saying "oh it's just some bull about a ->-bleeped-<- having a shower." Because of how I presented, a very, butch lesbian, I felt like it wouldn't be too hard for people to make connections and assumptions as to what I really was. I think someone still did work it out, because they kept telling me every time there had been a show on TV about trans people, but that could have just been because I'd let slip how much I knew about hormones, secondary sex characteristics and phalloplasties (I have no idea how that came up in conversation...)
Last Christmas I did spend a couple of hours on the phone yelling to someone (who I'd helped out when they were hallucinating, depressed and helped to convince them to see a doctor/not do anything crazy) that I was male, that my birthname wasn't me, and that calling me a '->-bleeped-<-' isn't going to get them anywhere in life. That was... fun... I've not forgiven them for that, although the trans people I mentioned earlier have to some extent, but then I can't understand why someone who is trans would still go anywhere near talking to some who screamed transphobic insults at me and tried to out me on facebook for three days, full stop.
TLDR; I use it to people I know won't be offended, and to refer to myself, or if the situation requires it or I'll be at risk of outing myself. Similarly I don't call people out on it if I think it's going to lead to them scrutinising me, it's just self preservation. People who don't mean to use it as an insult don't bother me, just those who think that they can use it to harm others.
