Option shooters vs. spreaders
by Jerry Kopf
Option market timers and option relationship traders occupy major places in the spectrum of call and
put investors. Timers or "shooters" go for the "home run" by simply buying premium (i.e., going long a
put or call). Relationship traders grind out small but consistent yardage by stacking probabilities in their
favor. Because they are skilled at spreading and know beforehand what an option's price "should" be, that
is, its theoretical value, they capitalize on price discrepancies.
Market timers make subjective decisions based on:
News — Monthly trade and employment figures, the Producer Price Index and other external market
data. A few years ago, when the M1 was in vogue, market timers keyed into Thursday afternoon's money
Opinions — From the forecasts of newsletter advisors to predictions of the "elves" on television's Wall
Feelings — Intuition about whether the next 50-point Dow Jones Industrial Average move will be up or
down. Many market timers use charts or other technical indicators which "tell" them future market
direction. Recognize that charts or waves are subject to the ability of the interpreter to read them
correctly. In actuality, a subjective market call.