Why Index Options are Like Fruit

Staying Calm and Focused...
Being a Fruit Vendor

Stocks or options are just like inventory, and owning them is just like having your own wholesale distribution company.

• Every morning you buy the best fruit you can

• You try to sell it that day for the top price

• If you hold the fruit overnight, it causes spoilage

• As the fruit ages it loses much of its value

As a fruit vendor you know:

• You want to get the best price for the fruit you bought wholesale

• Some fruit is more in demand, some less

• Goal- to sell all, no matter what, by day end

• Experienced fruit vendors hope to make good money on 3 of every 5 pieces of fruit they own and are selling

And as the fruit vendor “trades” through the day he realizes:

• He might get a few more pennies for the bananas

• He should have bought more oranges

• Kiwis aren’t selling well. Just because one rich lady came by and bought a little Kiwi, he knew it would be a mistake to raise his price, and risk ending the day with the a lot of decaying fruit.

Buying and selling index options is just being a fruit vendor of OEX options. When day trading especially, remember the simple beauty of this lesson.

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