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Juicy premium. Salable, juicy, marbled premium, done Pittsburgh rare, just like at the

Hilltop Restaurant

outside of Boston.

That what the

DOT May 640 calls looked like to me at one point Tuesday when I wrote that I would love to bang out some of that sumptuous premium. But I couldn't pull out the steak knife.

In 10 minutes, my mailbox was filled with letters about what a chicken I was for not selling the calls or, better yet, buying the puts.

So call me chicken. Let me tell you why it is too dangerous for me.

First, let's dispel one suggestion -- buying puts on the DOT. The DOT's correcting here, big time -- like you need me to tell you that. We've got stocks that have come down 30, 40, 50, 60 and, in a couple of cases, 80 points from their highs. Yeah, I know, they are Net points, but they get cashed out in U.S. dollars. So they are points.

But to buy puts on the index, given the premium -- that is, the amount over the intrinsic value you would have to pay -- you have to believe that the DOT case is terminal. I don't think that. The growth is still there. It's just that this market at this very moment likes the growth of





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more than it likes the growth of







I think we are in more of a classic, healthy (but by all means brutal) correction, getting rid of some excesses. That's why it would not surprise me if the index went down and then came back -- not with the snapback of previous rallies, but steadier and less crazed.

In other words, I think call premium is going to shrink. That's why I would want to sell calls, not buy puts. I can't time the snapback, and it may be so sudden that I could never sell the puts without incurring heavy losses.

Let's take the May 640 calls. With about a fortnight between us and expiration, there were trading yesterday at about 35 with the index at 630. (Betting, ultimately, that the index closes above 675 two weeks from now -- 640 plus 35 equals 675.)

Why not stick a fork into that juicy premium? Why not bet that the fat gets reduced to lean over the course of the coming days? Because if I am wrong -- and we know that happens -- the consequences could be very serious, because the spread, the amount of vig I have to pay, is



Let's say I sold 200 calls that looked like I would get 35 for them going in. Only a couple of firms would facilitate that trade, meaning only a few would help me execute it. I would have to take quite a haircut, hopefully getting filled at 32, down 3. Still, that's a ton of premium. But if 10 minutes later


reports a great number (I picked that one because it's not even in the index) and I wanted to buy them back, the offering might be as high as 38. That's six bucks lost from the get-go.

It's that frightening spread that makes these calls too dangerous to sell. I guess I have done enough trading to know that I am fallible and that I need an exit plan from the moment I put on the trade.

With the DOT's spread between bid and offer, there is no exit plan. You are making one decision. You are going to ride that sucker out to zero, or you are going to pay the consequences (meaning get cashed out at expiration day for what you are still short). Otherwise, you are going to have to pay an egregious amount of premium and spread, making the trade too risky for me.

I am used to paying a buck spread in the

S&P 500

index or even a buck-and-a-half spread for

Morgan Stanley Hi Tech

index calls or

Morgan Stanley Cyclical

index calls, but six bucks -- that's just too high a toll. I would much rather trim my DOT holdings, play lean and wait for the correction to end.

And that's what I am doing.

Random musings:

Does the end of this



saga augur good things for those who were going nuts buying this property? At least for the short term, you have to figure that calling off a disastrous -- to earnings, that is -- bidding war between


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and everybody else is good news for the participants.

James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund had no positions in the stocks mentioned, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. 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 invites you to comment on his column at