The Summer of Our Discontent

This can be quite attractive if it can be done in sufficient volume, but as Wingate says, there are very few names that have the consistent liquidity to move easily in and out of combination (stock and option) trades. For his part, Wingate has been focusing on earnings releases and hopes that business and volatility improves in the fall. Indeed, the fact that the CBOE has listed and begun trading November index options three weeks ahead of schedule highlights the belief and hope of traders that the election and the October earnings seasons will bring expanded trading opportunities.

Looking for Clarity, Finding Solidarity

When I hear traders and pundits say they are looking for "more clarity and confirmation" before committing capital, I picture a bunch of kids standing on a dock at a lake; everyone is pretty excited to jump in and swim, but nobody wants to go in first.

Indeed, stocks look cold and uninviting right now and the market contains some potentially dangerous undercurrents: the upcoming election, health care, interest rates, inflation and, of course, terrorism.

Elliot Spar, an options strategist with Ryan Beck, thinks like many others that if the market can hold the May lows and form something of a double bottom here, it will bring money back into the market and the ensuing momentum will become somewhat self-fulfilling.

So, rather then diving in head-first, let's look at some options strategies that will allow you to put a toe in and get acclimated while we wait for others to jump in.

Mike Greenberg, vice president of Institutional Sales at Midwood Securities, told me that many of his clients, which include professional arbitrage traders and highly capitalized individuals, "are reluctant to make bets and have moved a lot of cash over to the sidelines." He says that most of his clients prefer to use strategies that sell premium, such as covered calls or some form of calendar spreads, and that "these have simply stopped working as the market has come down in terms of price and I.V. and there is a general malaise" among traders.