We'll resume our discussion of stock options from where we were here. The above photographed felon will come into our discussion soon enough. Options can be part of broader strategies that limit exposure in either direction. You can combine puts and calls to create a “collar” around the market price of the underlying stock, limiting both your own profit and your own risk. The word “straddle” has connotations similar to “collar,” suggesting that options allow the straddler to be on both sides of the same underlying asset at the same time. Yet “straddle” has a more aggressive sound to it. As it happens, Bernie Madoff used to tell prospective clients that he was following an options-based straddle strategy. Of course, he wasn’t following any strategy, but he needed to sell a story, and that was it. Such a straddle strategy, by the way, can work when carried out legitimately. It can do roughly what Madoff claimed that he was using it to do – produce a slow-but-...