Vertical Option Spreads: A Study of the 1.8 Standard Deviation Inflection Point, + Website

CHAPTER 1

Introduction

Several decades ago, I was a young recruit in the U.S. Army. Most military veterans forever remember their drill sergeants. Mine was Sergeant First Class Milner—we called him “Yes, Sergeant Milner!” He was a big, burly combat veteran who always appeared to be absolutely angry at the world and especially angry at each of us. I'll forever remember the feel of his hot breath blasting into the side of my face as he bellowed at me for some seemingly imperceptible, but to him heinous, crime that I had committed, such as a speck of lint on the front sights of my M-16 or a bunk that he didn't consider to be perfectly made.

I'm not sure of this, but I suspect that drill sergeants go through a special course of training that equips them with one-liners designed to inflict lasting psychological pain. Sergeant Milner rained many of these one-liners down on me and my fellow soldiers. Probably my favorite insult from Sergeant Milner, which was always issued at a roar, was “What do you think we're running here, some kind of Girl Scout camp?”

In the 38 years since I've been through basic training that epithet has stuck with me. I want to share that epithet with you today. If you are an investor, and surely you are if you have chosen to read this book, then you need to be very serious about investing. It is said that the stock market is a zero-sum game. This implies that in order for me to make a dollar you have to lose a dollar. In order for someone on Wall Street to make ...