How much do you know about playing the stock market with options?
The following are highlighted options insights and ideas from
Jud Pyle (Mad About Options, ONN.tv):
If not obvious by the carnage today
Oct. 9, fear is evidently a dominant force.
CBOE Market Volatility Index
(VIX), which was initially tracking lower, is through the 60 level! This implies option investors are paying premiums for options that imply a nearly 4% move each day.
Huge option volume is being seen in
, which is down 4.50 today to $12.70. The October 7.50 and 10
have seen more than 100,000 contracts trade between them today. On Monday, MS shares closed at $23.50 share, or 85% higher than the current levels.
These puts, which expire next Friday, are trading near a 550 volatility (!) and may indicate traders expect further risk to the downside for Morgan Stanley in the immediate future.
Mad About Options: Google -- Then vs. Now (Video, Oct. 8)
Jud Pyle and Matt Buckley take a look back at Jim Cramer's comments about
and how different options strategies played out.
To watch the video, click the player below:
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Plus, don't miss these other recent Mad About Options videos on
(Oct. 9) and
For more information about Mad About Options, visit
Option Traders See Promise in Battered AK Steel
Continued dour share-price action in steelmakers follows a rising consensus of expectation of a long, drawn-out recession (or worse) in the U.S. Amid yesterday's cascade of 52-week lows in commodity (and other) stocks, even the World Steel Association succumbed to the uncertainty, delaying its 2009 forecast for steel companies.
With that in mind, we're interested in the action taking place today in
, which derives 100% of its revenue from the production of steel, 86% of it from the U.S. (per 2007 figures). Shares are down 3.6% today at $17.44, indicative of a year that has seen the company give up some 62% of its value. And with implied volatility at 52-week highs (178% vs. 136% historic volatility), it's clear that the option market en masse feels that the uncertainty surrounding steelmakers justifies a higher price for
and put protection.
Oct. 7 volume, however, tells a somewhat different story. Evidence of fresh 1-by-2 call spreads in the November contract between
20 and 25 suggests that some traders are positioning for a bounce back from the lows into the month of November. This ratio call spread involves the sale of twice as many higher-strike calls as purchased lower-strike ones; this helps the trader control costs and also resolutely caps any upside.
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This article was written by a staff member of TheStreet.com.