Uh oh.

My mailbox is full of people who are thanking me for turning them on to options. Guys bragging about 100% returns over a two-hour period. People sharing successes with me that have them taking down a home equity loan to buy

IBM

September 110 calls.

Hold it! Please, some of you options neophytes are teenagers playing with daddy's new

BMW

. You won't learn your lesson until you smash it into the retaining wall of options expiration.

I ought to know. I first discovered options while killing time between classes at

Harvard Law

. I would sit in my dorm, watching the ticker on

FNN

, and buy 2 and 3 lots of

Motorola

and

Texas Instruments

calls, typically out of the monies. I based my trading on pure instinct. My first six trades were nothing but wins. Big wins.

I would place my order before my morning Corporate Law class, check in during the break, and then ring the register while on my way to Corporate Tax in the afternoon. I would spend most of my classes poring over the options pages in the

Journal

looking for anomalies and pouncing if I felt good about the tape.

Then the market soured right after Christmas break. I had my first wipe-outs, calls that I bought for one and two bucks that went out worthless. In three trading days I had taken almost all my profits and wiped them out. I had to plead with

Alan Dershowitz

for more paid legal work to get back in the game -- thanks

Claus

!!!!

TST Recommends

No matter. My losing streak continued. If I bought calls on a stock, it immediately went down. If I bought puts it went up. When I thought the oils were hot, I would buy the wrong oil. I picked the wrong direction in

Data General

four straight times. Faked out worse than an East Carolina linebacker in Gainesville.

Fortunately, the von Bulow appeal required a massive amount of 4th amendment work, and I got refueled to the tune of thousands of dollars. Finally, in a heroically stupid bet, I decided that instead of wagering $200 to $300 at a time and losing it all, I would take all of the money I had left and make one colossal bet (at least for me) and I bought 10

Motorola

deep-in-the-money calls for about $8.

I never forget how I shook when I entered that trade for what amounted to a whole semester's living expenses. Motorola had been so good to me. During the whole losing streak I had not bet on Mote once and I had a slew of winners in the name before my debacle began.

I jaunted off to class thinking that the losing streak just had to end, that I wasn't that bad. During a break between one of those law and the banana gut classes they offered, I sneaked out to a pay phone and hit the bridge code to hear how Motorola was doing. The stock had dropped two points. I debated doubling down -- but with what? I was cleaned out. This trade had to work.

I went back to class and skipped out near the end to check in again. Mote was down four.

I was a dead man.

I ran back to my dorm room and called to get a quote on the option. It had dropped in half. My heart sank. I said I wanted to sell my 10 lot.

And then it happened. My broker said I could not do the trade. Why I asked? Had I violated some federal margin law? Had I screwed up on my ever dwindling account balance?

No, the broker said, I had "sold the call to open." I would now have to buy them back.

No way, I protested. You can't sell to open. Sure, she said, you can and did. "You sold 10 Motorola deep calls at 8 short and now they are at five, oops, make that four."

No, I insisted, not realizing that I had a windfall. I meant to buy that call. You can't short calls.

She became insistent: I had sold it short. My god, I had sold a call short, by mistake.

"Buy it back," I said. And I did. And then it hit me: I had made four points on a 10 lot: $4,000. I had done my most successful trade ever and it had been a mistake. Talk about humbling.

I didn't trade calls for myself again for another six months. And I never again traded just off the tape. I tried to make sure I knew something, that I believed in something, that I had some small edge before I plunged.

And, never again was I as cocky about making money in options as these guys who are urging me to slap them on their backs now for their incredibly winning ways.

My advice. Don't make any big bets until you've had your clock cleaned at least once. Then, if you can stomach it, be my guest.

James J. Cramer is manager of a hedge fund and co-chairman of

TheStreet.com

. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Mr. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he welcomes your feedback, emailed to

jjcletters@thestreet.com.

This story was originally published Aug. 25, 1997.