If something is so expensive, why not short it? I can't tell you how many times I get that email from all of you prospective shooters of Liberty Valence out there. Last week I mentioned that the calls on the BKX index were too rich to play even though I thought bank takeovers were on the verge of occurring.

On Monday, I said that the

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index March 600 calls with a week left were at 9, way too expensive to play for a DOT breakout.

Immediately I was besieged with the obverse. Maybe they are a great sale. For the longest time, when I was a broker, I would do stuff just like that. I would look at an instrument and make a judgment. Too expensive to buy? Well, why not bang it out? That's consistency, and being consistent is what matters!


Consistency doesn't make you a dime. Flexibility and the ability to see what can go wrong -- ah, now those are ideals worth valuing. Knowing when you don't know enough, that's a good trait. Taking a pass on something is a valued commodity.

In both cases, as I knew would happen, the underlying index went up. The call went up too, but not enough to make it worth the risk. In the meantime, if I had sold these two, all I would be thinking about is the noose tightening around my neck as each index shot up. It's the latter, the human emotion of being short something with no conceivable hedge, coupled with the infinite capacity for loss, that keep me from shorting what I perceive to be expensive calls.

And just because something is expensive doesn't mean it should be sold. There are plenty of expensive goods in a retail store. Yes, the concept is the same and transferable. It may be expensive to you on some mathematical model, but maybe it is nirvana to another buyer who is desperate to hedge his Amazon short.

Here is my rule of thumb: I don't sell calls naked. To me it is a vicious distraction and a totally limited bet to the upside. Had I sold the DOT calls, I knew exactly how much I could make; but how about the loss? Unquantifiable.

Instead, I take it as a "tell." I accept that the call is more expensive than it should be because someone, or many people, know something I don't.

In both cases, in just a handful of days this analysis was right. You will meet many people in this business who will take the other side of the logic of this whole piece. All I can say is the laboratory that is Cramer Berkowitz has lost far more times than it has won playing stuff like this.

So, call me inconsistent. I'd rather be called profitable.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. 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 by sending an email to letters@thestreet.com.