First This, Then That

Late start today because I did an on-camera thing this morning for Jim Cramer's thestreet.com. I'll be sure and post a link to it tomorrow.

Another great way to use options is if you see a move coming, but later on down the road. Or you see a combination of moves coming. A sharp sell off followed by a recovery. Or a sideways market followed by a breakout. Or a rally followed by a retracement. You get the picture.

Let's take an example. Let's say you think the market will sell off after Thanksgiving as fund managers lock in some profits from The Great Rally of 2013. And then in January when the books are cleared and the cash guns are reloaded the rally will resume.

We'll use a diagonal time spread (see my column from May 22) in the S&P 500 ETF (SPY). You can sell the November 178 call at 1 and buy the January  183 call at 1.10.

If the November call expires worthless with SPY below 178, you have the January 183 call for an effective price of just 10 cents!

Another, and perhaps even better, diagonal is to sell the December 180 call at 1.30 and buy that January 183 call. Then if the December call goes out worthless you own the January call for negative .20. Better than free!

Once again, another testament to the enormous flexibility and mu