This view played out using options reminds us of the "once bitten, twice shy" expression.
"To the extent that people are using options in a rational way to adjust the risk-reward balance of their portfolio, they should be using options," he said.
At first blush, the notion of using options defensively may appear odd.
Both types are likely to be betting on oil price movements using options and futures contracts.
Furthermore, the whole point of using options compensation is the hope that the high-powered incentives it provides will change the future behavior of the stock price.
For months, he tried to reverse-engineer Madoff's stated strategy of using a basket of S&P 500 shares hedged against risk using options on Chicago's derivatives exchange.
Sanjiv Mirchandani, Fidelity's executive vice president for retail product development, said the service was "off to a great start so far" but declined to say how many more traders were using options.
Mr. Ramnarine showed at least a bit of understanding about how to engage in insider trading by using options, which can be far more lucrative because they require a much smaller up-front investment and can generate fat returns.
WALL STREET JOURNAL Traders Extend Bets Against Facebook | Some traders are making longer-term bets against Facebook by using options contracts expiring in August and September, after the company's first earnings report, The Wall Street Journal reports.
But using options for insider trading is also dangerous because there are far fewer traders in the market, so it is easier for the S.E.C. to single out well-timed transactions that can trigger a full-scale investigation.
How he generated these returns was always a mystery — he claimed to be offsetting the downside risks of his stock purchases by selectively using options to hedge the portfolio.
