Tim Bourquin: Hello everybody and welcome to TraderInterviews.com Thanks very much for joining me for another episode. My guest today is Seth. He's a trader at SMB Capital and specializes in options. We're going to talk to Seth about kind of how he finds good opportunities and his overall philosophy about trading in general. So first of all, Seth, thanks very much for joining me on the phone today.

Seth Freudberg: It's my pleasure, Tim. Good to be here.

Tim Bourquin: Good, good. Talk a little bit about if you can, describe, if you have one, an overall philosophy about how you trade options. Are you a technical trader, fundamental, day trader, that sort of thing?

Seth Freudberg: Great. I'm what they call an options spread trader, Tim, which basically means that we are net short options pretty much throughout the entire trade. And what that takes advantage of is the fact that options spreads take advantage of the time decay that is embedded in options. In other words, every option as you know has a premium associated with it and it literally is almost like an insurance premium. If for example you thought IBM was going to hit or you wanted to buy a call for IBM, you had a feeling that it was going to skyrocket up to 250, I don't even know where IBM is right now, then that call would have a certain value to it. But as the call gets closer and closer to expiration, that value will deteriorate as the market starts to believe that it's less and less likely that IBM will hit 250 and finally one minute before expiration, you know, it will become essentially worthless unless the market has hit 250. So if you are long that option, you're going to lose money, but if you're short that option, you're going to make the premium that you received for having sold that option in the first place. So options spread traders...

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