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The Options & Spreads article that follows has been written by an expert who trades successfully for a living. He also offers a course on trading Options & Spreads. For more info on the course click here.

The following article is very educational, informative and well-written.


OPTIONS & SPREADS: Trumpets, Lobsters, Champagne

Logan Pearsall Smith (1865-1946) was a Philadelphia Quaker whose love of everything English beckoned him to cross the ocean. He became a British subject, an Oxford scholar and a London man-about-town. Receiving one or another party invitation, Smith sometimes attended and sometimes sent his imagination. He wrote:

"When I see motors gliding up at night to great houses in the fashionable squares, I journey in them: I ascend the stairways of those palaces; and ushered with eclat into drawing rooms of splendor, I sun myself in the painted smiles of the Mayfair Jezebels, and in that world of rouge and diamonds, glitter like a star.

"There I quaff the elixir and sweet essence of mundane triumph, eating truffles to the sound of trumpets and feasting at sunrise on lobster-salad and champagne.

"But it's all dust, it's all emptiness and ashes. Ah! far away from there I retire into the desert to contend triumphantly with Demons; to overcome in holy combats unspeakable Temptations, and purify, by prodigious purges, my heart of base desire."

Yes, occasionally Pearsall Smith's deep-rooted Quaker austerity would resurge, connecting opulence with sin and transforming him into a fancied ascetic on the desert. The Mayfair referred to was and is the fashionable, carriage-trade section of west London.

You may have heard the velvet fog voice of Mel Torme sing, "Autumn in New York--transforms the slums into Mayfair."

Enraptured though Smith was by those "great houses in the fashionable squares," he ignored the fact that they could contain character-building and exchequer-strengthening qualities, qualities that a successful financial trader or a would-be success should not ignore. Here we raise the curtain on the key question of this piece: What is "good for" or "helpful to" or "appropriate for" an ace financial trader?

Think twice before you call anything "not important" or "not relevant." During World War I, General "Blackjack" Pershing was a stickler for discipline, even on seemingly minor matters not related to combat. He said, "The soldier who lets his shoes get dirty might let the firing mechanism of his rifle get dirty. The soldier who forgets to salute an officer might forget to obey him when ordered to go over the top."

Traders in stocks or futures or options need discipline and a clean firing mechanism; something akin to a good shooting eye; mapping and strategy skills at battalion headquarters in the field. Also, just as there is "conduct unbecoming an officer" there can be "conduct unbecoming a class-act trader."

In British naval terminology, the phrase "ship of the line" originated in 1706 and referred to a warship large enough to have a place in the line of battle. In the splinter-their-topsails-and-grab-their-gold realm of speculation, the "real pro" should and must be a "ship of the line" with heavy weaponry mentality-wise and ability-wise. Anything less gets smashed instantly and even the mightiest take their chances.

The jeweled clock in the captain's cabin may hold a significance other than time and more than sentiment. The naval officer who uses a Grub Street grog shop timepiece might also use junky maneuvers or gunnery technique. Far from "all emptiness and ashes," those "drawing rooms of splendor" that Pearsall Smith wrote about may well serve as a model. Keep a bit of the crystal and tapestry inside your soul. Also some Bank of England fiscal conservatism will not hurt. Several desiderata apply:

1. Try for Class

Who is not aware of the aura of distinction that surrounds the tycoon or the mogul? Phoning your broker certainly sounds classier than phoning your bookie. However, you err if you leave it at that and do not develop the idea further. Webster defines a "class act" as "something of outstanding quality or prestige."

Webster's numerous definitions of "class" run for 12 lines. Let us focus on one portion: "social rank. especially high social rank; high quality; ELEGANCE." The dictionary listing for "elegance" turned out to be a verbal jewelry store: "derived from the Latin 'eligere'--to elect, eligible, to select. Noun. Urbanity; tasteful richness of design or ornamentation (the sumptuous elegance of the furnishings); dignified gracefulness or restrained beauty of style--polish (the essay is marked by lucidity, wit and elegance); scientific precision, neatness and simplicity (the elegance of a mathematical proof)."

Synonym group: "choice, choicer, choicest. Adjectives. Selected with care; well-chosen; of high quality; worthy of being chosen. Syn. for 'elegant'." Check your own dictionary for "urbanity," "suave," "debonair." The speculator who incorporates essences from the preceding paragraph into his or her life and thinking and market schemata will acquire several more quail toward a full buffet, figuratively or literally.

You need not belong to a polo team or a yacht club. The Cartier gold-plated fountain pen for $800? The Rolex YachtMaster wristwatch for $19,000? Any investor who cannot find better things to do with the money deserves to buy Florida swampland. Involved are both the invisible and the visible, both the attitudinal and the tangible.

Horse racing is called "The Sport of Kings" but we all know that the kings are far outnumbered by the empty-pocketed horse-players who sit up nights thinking of ways to fool the pawnbrokers. This is conduct unbecoming a class-act trader. Also recall the adage, "The reason you never see any horse manure on the race track is that all the horses' asses are at the betting windows."

In a previous article on option spreads, I stated that the strategist is in effect a horse-owner at the long end of the spread and a bookmaker at the short end. I did NOT liken him to a blow-the-bankroll, adrenaline-junkie horse-player. The first two each take a risk in that no guarantee exists beforehand of the thoroughbred or the betting parlor proving profitable. Yet they cannot rightly be compared to the gambling degenerate who has wagered for years with nothing in the bank to show for it. The W. D. Gann maxim still stands: "Handle speculation like a business, not like a gamble."

Risk? Sure, but the businessman's risk, not the crapshooter's. The calculated risk. The limited-exposure risk. A tad of horse-betting may be all right as one of the trappings of Logan Pearsall Smith-type Anglophilia. Unless you tie your cravat like Lord Asquith at the derby, think twice about playing the ponies. If your love of things English is that pronounced, then you should also possess a sterling silver ewer and tureen, a Lord Macaulay or Thomas Carlyle hardbound first edition, and an antique chess set dating back to the Tudors or the Stuarts. Elegance!

2. Be tuned in to the psychology of "what makes it interesting."

Again the hot-blooded gambler provides a good example of what the class-act trader should avoid. How about a side bet on the football game to "make it interesting?" A card game is "no fun" unless money changes hands. In the throes of speculation fever, a trader in stocks or futures or options possesses a similar temperament. A business-like approach requires a certain detachment. It is fine to enjoy being the financial explorer or detective and great to make money at what you enjoy. The game is afoot, Watson! But . . . . too often, however, entertainment-value edges profitability off the road. The horse-player tingles at the sound of the bugle and the starting bell. Thrill upon thrill and, alas, empty pocket upon empty pocket. He would have done far better over the years by banking all that wagering money, but then no electricity through his nervous system. A speculator can likewise let electrical thrills eclipse profits. The successful trader may be compared to the distiller who makes money off of intoxicants but cannot be drunk while handling the complex equipment.

Investor psychology figures crucially, and within that, the psychology of what is interesting and why. That often confounds people. During my high school days, a fellow student mentioned to me that Mrs. Hagen, the math teacher, planned to take graduate courses that summer. Then he said, "How much can anybody love math?"

When diabetic neuropathy disabled my father, his brother, Dr. Dominic A. Donio, M.D. brought him some books and periodicals on the Civil War, a passion of doc's. My mother said to me, "How much can you love the Civil War?" People have asked the same question about everything from astronomy to model airplanes to Babylonian/Sumerian archaeology to avant-garde cinema to antique cars, full-size or shelf-miniature to the life of Disraeli to bird-watching to rococo paintings to mood & atmosphere photography to haunted Scottish castles to music from allegro on the Vivaldi violin to blues on the New Orleans saxophone.

It is no loss for you as either a person or trader if the depth of your fascination for and knowledge of various things puzzles the bored and directionless people, i.e., most people. If financial trading can prove both profitable and entertaining, fine, but if you must do without one, do without the latter. Too many traders and practically all gamblers have found the latter while doing without the former. The Renaissance man or woman--the person with a variety of interests and acuities--has the advantage. You need not float cash to "make it interesting." Ponder this. Expert on Italian Renaissance art Bernard Berenson wrote in his book The Venetian Painters of the Renaissance:

"In Venice there had long been a love of objects for their sensuous beauty. At an early date the Venetians had perfected an art in which there is scarcely any intellectual content whatever, and in which color, jewel-like or opaline, is almost everything. Venetian glass was at the same time an outcome of the Venetians' love of sensuous beauty and a continual stimulant to it. Pope Paul II, for example, who was a Venetian, took such a delight in the color and glow of jewels, that he was always looking at them and always handling them.

"When painting, accordingly, had reached the point where it was no longer dependent upon the Church, nor even expected to be decorative, but when it was used purely for pleasure, the day could not be far distant when people would expect painting to give them the same enjoyment they received from jewels and glass. In Bassano's works this taste found full satisfaction. Most of his pictures seem at first as dazzling, than as cooling and soothing, as the best kind of stained glass; while the coloring of details, particularly of those under high lights, is jewel-like, as clear and deep and satisfying as rubies and emeralds."

Contrast this. Turn-of-the-century steel magnate John W. Gates of American Steel & Wire Co. would be riding with a friend in a passenger train in the rain. They would bet each other a thousand dollars over which raindrop would reach the bottom of the window first. Under other circumstances, Gates and a horseplaying buddy would wet two cubes of sugar and bet each other a thousand on which cube a fly would land on first. Tacky curbstone wagering on a big budget. A pitiable way to make life interesting.

Had he been an art-lover, admission to a Venetian gallery or the Ducal Palace would have cost a few lire. Class need not be expensive, nor does an unlimited bank account always generate class or elegance. Gates could have bought an art collection but instead gravitated toward saloon bets near the brass cuspidor. A piano-roll object lesson. For better than government (bond, CD) profit, financial risk stands essential. But it is lousy entertainment fit for a drudge. Have other ways to "make life interesting" if you value your bankroll or your life.

3. Be the researcher and the learner.

At a writers' conference, author Gerald Green (Last Angry Man, Holocaust) lectured on the value of research, of sifting informational materials well and knowing Your subject-matter thoroughly before you write. To his surprise, the audience was visibly hostile toward him. Green had overlooked the tendency of writers' conferences to attract daydreaming incompetents. They envisioned fame and wealth as successful authors but he talked homework and sweat.

They the would-be mountain-climbers who never leave the house, he the real scaler of the Alps. How dare he open the door and let the chill in! Struggling would-be actors wait on tables and drive cabs during their quest for the Oscar or the Tony. However, you cannot expect self-proclaimed John Steinbecks or Margaret Mitchells to inconvenience themselves by doing research or to endure anything difficult. No wonder publishers are perennially deluged with smelly manuscripts. Sadly, this resembles the performance of many would-be millionaire traders.

At least 98% of humanity would rather eat barbed wire than dig for information. All homo sapiens like to think themselves knowledgeable--human ego being what it is--but only the tiniest percentage hunts down knowledge. The financial arena, like the publishing arena, is murderous to those who are long on hopes and short on the knowledge, the knack, the know-how.

The comic strip "B.C." stated the proverb, "Never get on a roller-coaster that leaves full and comes back half-empty." That could be a description of trading, writing, acting, gambling, considering how many quest forth and how few come back with anything. Also, some fields are worse than others in their coaxing. Major movie studios used to take out ads in newspapers nationwide, ads urging young people NOT to come to Hollywood in search of stardom.

Did you ever see an ad from a futures exchange or an options exchange, a race track or a casino, saying "Most of You Will Take a Pounding?" Of course, film studios made no profits from turn-downs or actor/actress over quantity. Those other places need loser dollars as much as winner dollars, perhaps more so since a winner is a minus on their ledgers, taking money out of the circuitry. To survive in such a milieu a speculator must be a man-of-war ship-of-the-line with an ample powder hold of knowledge and research data. Turn studying into a class act.

Financial and investment knowledge from the 1800's may be more applicable today than supposed. Data from today's financial news is sometimes relevant and sometimes not. Tons of informational rock hold only small specks of valuable radium. The amount of information needed is more than tiny but may be less than you think. Thus we arrive at the next rule.

4. Remember that you need not be an Einstein.

A fair number of physicists and engineers have taken up futures and options and have brought along calculus as the mathematical "hieroglyphics of the pharaohs." Do not feel intimidated by either the sheepskins or the abstruse symbolism. Stanley Yabroff, New York University professor of finance and manager of Gerald Commodities in Manhattan, said in a lecture, "You do not need calculus to trade successfully. All you need is the arithmetic you learned in fourth grade--add and subtract, multiply and divide."

I learned the fundamentals of calculus wall enough to receive a B in an NYU finance course that was heavy with it. In my trading, however, I found it to be excess baggage. My cousin Michael, a medical resident starting to invest in stocks, recently asked me on what basis I choose stocks for purposes of option spreads. I explained, "First, I look for stocks whose near-term options have meat on them, not nearly all devoured time-decay."

Since I specialize in horizontal calendar spreads or time spreads, I told him, I then look to see if the stock's far-term or farther-off-in-the-future options are lean or bargain-priced compared to the near-term ones, with the amount of time as a measuring factor. The time of our talk being early November, I pointed to Cisco Systems shares (stock symbol CSCO; option symbol CYQ) as an example. The December 55 put contract traded at about 2 while the stock was at 60.

The April contracts contained five times more time value than the December's. So did the CSCO/CYQ April 55 puts trade at 10, i.e., five time the 2? No, at 4-½. A bargain. Meaty near-term, lean far-term, enabling a spread strategist to sell the overpriced and buy the underpriced. I pointed out similar factors in the options of Microsoft (MSFT; MSQ), Netscape (NSCP; NQT), Compac (CPQ; CPQ) and IBM. Techno is beefy for now.

"Whether I use puts or calls depends on which way the underlying stock has been trending in recent months or weeks. A horizontal spread of calls above a rising stock, of puts below a descending one. If the stock crosses the "striking price" line and places the options 'in the money' buy back the near-term while the far-term gathers poundage. Fundamentals also help me to determine whether to choose puts or calls."

The most important fundamental in my calculations, though not the only one, is the PE or price-earnings ratio--the price of the share compared to the annual earnings per share. "You see, Mike? Cisco has a PE of 44, Microsoft 38, Netscape over 100. The average PE for exchange-listed stocks is about 18 so these shares appear inflated or overpriced. Compaq is 20 and IBM is only 13 which may sound good for call-buyers except that both those stocks appear to have hit a concrete ceiling in terms of upward progress lately." IBM soon climbed some, breaking 130.

Quarterly earnings reports must be termed a key fundamental because the day they come out they tend to shake a stock in one direction or another, temporarily or otherwise. A good earnings report in July launched IBM on what eventually became a 35-point-plus upward climb. A solid PE to start with helped much. Alas, the effect of the October quarterly report proved transitory. Netscape's October quarterly report scored a penny over analysts' expectations (.09 for the quarter instead of .08) so the shares climbed a few points then faltered, the PE still worse than 100. I currently have a put spread under it.

When preparing to take a spread position in either puts or calls, I find out from the broker WHEN the stock's quarterly earnings report comes out. Maybe I shall tolerate it amid my spread and maybe not. It adds to the risk. I use a discount broker who is theoretically an order-taker and not an information-getter but he can still obtain key fundamentals and news on a stock on his computer screen, i.e.; "First Boston upgrades Jones Consolidated stock from a hold to a buy."

So the company-underpinnings fundamentals that I use I could jot on half the back of an envelope. Yet they blend well with charting and trend-following. At a certain stage of development, the successful trader attains the knack of doing research well. At a more advanced stage he learns what research not to do and what data to omit or ignore. The footnotes in the annual report and the elevator conversation with the executive no longer seem like earth-shaking discoveries.

The legendary Nicholas Darvas habitually skipped the articles and columns in Barrons and turned directly to the Big Board listings. He declared, "It is too easy to be influenced by factors that don't mean anything." I read all of Barrons but I agree that one must ignore many quantities of data as useless or misleading, and the data comes from everywhere. One need not be an Einstein to trade successfully because so much of the intricate stuff should be overlooked anyway. Also you do not need the mathematical sigma and epsilon to tell you which options have meat hanging off of them.

However, this does not lessen the importance of research, that place on the map where so many money-losers step into quicksand. Jesse Livermore wrote, "The average American is from Missouri everywhere and at all times except when he goes to the brokers' offices and looks at the tape, whether it is stocks or commodities. The one game of all games that really requires study before making a play is the one he goes into without his usual highly intelligent preliminary and precautionary doubts. He will risk half his fortune in the stock market with less reflection than he devotes to the selection of a medium-priced automobile."

5. Remember the dictum of Don Vito Corleone: "Keep your friends close but your enemies closer."

The enemies of Mario Puzo's fictional Godfather were rival gangsters plotting against him. The enemies of the financial trader are the things that can go wrong. Study them and know them well, their details, quirks and capabilities. Frequently compose worst-case scenarios and figure that occasionally the worst will happen. Although I have quoted it before, that statement of Nicholas Darvas bears repeating: "There is no such thing as 'can't' in the stock market. A stock can do anything."

Minimize the risk. Limit your exposure. Panic early and do not let a small loss become a big one. Do not wind up having to pray, "God, please make the market turn around. I promise I'll never do it again." Anticipate beforehand what the market can do and what you will do if it does. Be able to say afterward, "That really exploded on the launching pad. I'm glad I sunk only a small portion of my capital into it." Even better, be able to say, I'm glad I pulled out early when the reversal started, lost a few pounds of flesh instead of the whole side of beef."

I write this over a period of several days. A couple of pages back I said I had a put spread under Netscape. While other traders use mental stop-losses, I have evolved in my head tendency to form graded stop-losses. As Netscape shares hovered in the mid-40s price range, my put spread stretched horizontally at 40, with 10 November contracts at the short end and 10 Januarys at the long end. Time decayed the short November puts to just under half a point. My money in the "gap" was a trifle ahead.

I could have bought back 10 Novembers for less than $500 to close out the short end, then created a new short end by selling 10 Decembers with the same striking price of 40 for slightly under $2,000. Nearly a $1,500 gain with a couple of phone calls, one to buy back November's, one to sell December's covered as were the November's by the January's. Tempting, but I wanted nothing to do with puts unless the underlying stock was descending and nothing to do with calls unless it was climbing. Otherwise the far-term long end of the spread could shrivel into a skeleton.

Ergo, the graded mental stop-loss. I figured the stock price in the 46 & a fraction/47 & a fraction area to be okay but fence straddling, 44/45 good, 42/43 great, and with put options the lower the share price the better of course. On the upper end, 48 or higher even fractionally was forbidden territory. Well, on the first Tuesday in November--election day--Netscape rose to 48-_ bid/48-¼-ask late in the trading day. I pulled out of both the short and long positions (the former first as required since it is covered by the latter) for a tallied 20% loss.

With a businessman's detachment I accepted the minus. Then I voted--the president, the man in congress, the two women in the state legislature; occasionally I had written to the latter three and others in government. The vote, the letters, jury service if practicable, participation in the community--all are herein recommended as good ideas for the class-act trader.

The next day, Netscape rose to a Wednesday high of 50-½, more than two additional points of bad news for put-holders. As I write this on Thursday evening, it showed a high today of 53-_ and a close of 53-_, up 3-_. During this month of Thanksgiving, I feel thankful that I ventured only a limited amount of capital and that I "panicked early" instead of "sitting tight and awaiting a turn-around." And I give thanks that I kept my enemy close, knew him well, knew what he can do. My graded mental stop-loss mapped out good territory, the great and ecstatic zones, and in the other direction the forbidden territory. Toes across that boundary stopped a bad deal early. Time for turkey and gravy.

6. Be careful what you call superstition.

Netscape's fundamentals (a poor FE and a piddling quarterly increase) pointed downward but the Technicals of the immediate past pointed upward. Most people know of the tendency of investment fundamentalists to dismiss technical charting as a palm-reading diagram. Yet it is scientific thanks to its basis in evidence and observation.

For Jones to reach Tenth Avenue from First, he has to cross Third and Fourth. Having crossed them, there is no guarantee that he will reach Tenth. Nevertheless, for people who do reach Tenth, it is hard-as-iron essential that they cross the intervening space first. A stock that climbs some distance might not reach the top of the chart, but those that do reach the top must climb some intermediate distances first. Thus those intermediate segments--the chartist's "higher tops and higher bottoms"--provide a workable signal if not a perfect one. Due to the imperfection, stop-losses or bail-outs can be necessary.

The fundamentals of a thoroughbred are the facts about him before he runs the race--bloodlines, track record, trainers opinion. Technical charting is the early furlongs of the race. If the good-fundamentals horse makes a weak showing there he probably will not win the race. If a lesser-bloodlines stallion or a dark horse zooms, take notice. Financial trading allows you to place bets or switch bets while the ponies run. Do not bet everything because anything can happen and any horse can stumble. But let what is happening before your eyes count for something.

Forever more, the fundamentalist and the technical chartist will denounce each other as either the sham-wizard or the theoretician out of touch with hard reality. Remember that you need not be an Einstein to blend the two.

7. Cultivate a suitable amount of patience.

I said a suitable amount, not an endless amount. Just as you demand profits from your investments, you should also demand them within a reasonable length of time. You are not a fruit tree planter who will wait a couple of decades for those richly-laden boughs. Slow-growth stocks and 10-year bonds may have a place in your portfolio, but a trader is almost by definition someone who expects the action and the profits to occur faster.

However, trying too much for lightning speed is the mark of a gambling degenerate. Why do you suppose "The Sport of Kings" became a wagerer's sport? A horse race is quick. Little time lapses between placing the bet and the results. It is the sport that comes closest in rapidity to a roll of the dice or a turn of the roulette wheel or a hand of poker. If you handle the trading of stocks or futures or options like a business instead of like a gamble, you should not have to wait eons for a profit but neither should you be panting and anxious.

Each form of trading has its own tempo and time-frame. I have found with option spreads that if the underlying stock moves more than slightly, action can occur within less than a week. If the shares tend toward inertness, time-decay on the short end of at least a calendar spread is at least a two to three-week phenomenon. With options, thinking in monthly cycles practically "comes with the territory," as with, after expiration, selling the following month.

With scientific, business-like financial trading, as with the curing of hams or the birth of calves or the brewing of beer, you adjust yourself to the time that the processes require, not the other way around. The patience required in breeding three-year olds for a derby and the short patience of horse gamblers stands as an immense contrast fixed in concrete. If you want to be like the owner of Whirlaway instead of like the sucker phoning his bookie, then be sure you resemble the one and not the other in scientific-mindedness, business sense and patience.

8. Be skeptical of what passes for "tradition" or "science" or "class."

In my April/May 1996 article in CTCN, I hatcheted the right-wing reactionaries for the simple reason that they have as much business calling themselves 'traditionalists" as a gypsy fortuneteller has calling herself a "scientific" palm-reader. The same is true of their pretensions toward what is "classy" or "scientific." Consider, for example, their anti-rook & roll witch-hunt hysteria. You will not hear talk like that at the opera house during intermissions of The Sicilian Vespers." Well over their heads, that level of culture fosters a certain tolerance and broad-mindedness.

Webster defines a "reactionary" as "one who advocates a return to certain customs or values of the past." The dictionary does not mention that reactionaryism is a short-range spyglass whose focus disintegrates beyond the barber shop quartet or the Model A or Laurel & Hardy or the Good Old Summertime sheet music at the dime store. A three-masted, iron-cannon trader requires heavier lading than this in his or her class-act cargo hold. "The solider who accepts dime novels about white-hat cowboys as "old-style literature" might accept barrelhouse rumors or huckstered land as a financial battle-plan."

While president, Ronald Reagan remarked that he "had doubts about the theory of evolution." At another time during his term, he said he "liked it better when actors kept their clothes on." Who was Reagan wooing when he made these statements? The archaeologists and paleontologists? The lovers of Dutch & Flemish paintings or Greco-Roman sculpture? Obviously he was courting the right-wing reactionaries and the fundamentalists, the lovers of "time-honored tradition" who saw every movie that Doris Day or Pat Boone ever made.

Anyone whose notion of tradition or elegance plunges deeper may be suspect. William F. Buckley, Jr.'s magazine The National Review (Sept. 16, 1996) carries a page 18 warning against "divisive multi-culturalism, and all the other symptoms of moral decay."

Rush Limbaugh made similar statements on TV. There are those who can appreciate why the city of Florence came to be called "the second Athens" and why Dresden with its art treasures has been termed "the German Florence."

But watch it. The Greek-American or Italian-American or German-American who embraces his heritage and advocates ethnic diversity in the US stands accused of "divisive multi-culturalism, and all the other symptoms of moral decay." Supposedly, the "ideal American" is the backwater Bible-thumper whose heritage includes Norman Rockwell homogeneity and covered bridges, candy kisses music, the white-hat cowboy who always won, and no bare navels on the film screen.

Venetian painters of the 1500's showed fine detailing that Richard Muther called "the delicate shades of red hair and the soft gleam of powdered skin." Yet did anyone ever hear William F. Buckley mention Titian or Tintoretto, or for that matter Rachmaninoff or Balanchine, to his "old time religion" fans or his tobacco-growing fans or his blue-collar fans? He knows enough not to talk over their heads.

Bill Buckley's smattering of Anglophilia tend more toward Prince Albert on the tobacco can than toward Thomas Gainsborough or Christopher Wren. Even worse than robbing Peter to pay Paul is robbing Benjamin Britten to pay the Moral Majority. Anglo-American traders who want ship-fittings of elegant English brass are advised to skip The National Review and go straight to the writings of Sir Joshua Reynolds, John Ruskin, Samuel Johnson, Thomas Middleton and Joseph Addison. Macaulay and Carlyle have already been mentioned.

How exquisitely authors' inks and ale blended at the Mermaid Tavern in London's Cheapside district. How adeptly the Venetian artist captured the sapphire and turquoise of the lagoons in his pigments. My fascination with word origins brought me to the discovery that "exquisite" derives from Latin and originally meant "to quest after" or "to search out." "Adept" sprang from late Latin and referred to the alchemist who discovered how to transmute base metals into gold. They thought he existed.

Questing and searching, adeptness and gold--all fit into the financial trader's mission or strategy. Slice off a part of the class and elegance from Mayfair's "world of rouge and diamonds." Trumpets and lobsters and champagne can sit pleasantly on both the digestive system and the soul.

Recommended Readings: McMillan on Options by Lawrence G. McMillan and Options - A Personal Seminar by Scott Fullman both deal with spread strategies in greater depth than most books on puts and calls.


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