Times are tough in options-land for the pros.

Wednesday afternoon, one exchange official was opining about the absence of significant volume, and a trader was ruminating about the good old days when he actually had a clue about why the market did what it did.

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For average investors who use options, however, Memorial Day has traditionally had a meaning beyond the family barbecues at which our siblings and in-laws are free to revisit decades-old recriminations. It has meant that summer is upon us, and we needed to decide whether the market's all-important implied volatility levels would tell us to buy or to sell options. (Implied volatility is the measure of how much a stock is capable of moving in the life of any particular option. It's also a key ingredient in an option's price.)

A Different Season This Year

That issue has been a crapshoot since January -- actually since November, when the

Chicago Board Options Exchange Volatility Index

began falling (and couldn't get up). Over the past five years, the VIX has exhibited a kind of seasonality that causes it to fall around June and to stop slipping when traders return from summer getaways in September.

Season of the VIX
Here's the five-year pattern of the Volatility Index.

This means that options prices have generally decreased over the summer. More appropriately, it means that investors would've been wise to sell options in May and early June and watch their values waste away during the summer, as the market did little on light volumes. This year, however, the equation is different, according to one portfolio manager I spoke to Tuesday.

With the VIX in the low-20s and the specter of a potential terrorist attack in the U.S., he was thinking that it may be time to actually buy options, especially puts, because the summer holds so much uncertainty.

That said, the VIX has spiked this week, jumping around 10% Tuesday and Wednesday. Now, according to another options veteran, investors "shouldn't be rushing to buy volatility just yet."

Still, it's not an easy decision. Talk to three options traders, and you'll get three clearly different opinions. Some advise buying stock and buying options for protection; others say to dump your stock and buy calls to replace it; still others opt for the neutral-minded covered-call strategy to take in some income while waiting for a stock position to pop higher.

Watching the Tech Superstars

In the covered-call department, some former tech stars showed up on the

PowerOptions recommended list this week.

Yahoo!

(YHOO)

,

eBay

(EBAY) - Get Report

and

Lucent

(LU)

at-the-money calls were generating returns upward of 6%. If you want to go back to these names, that could be a good way to do it, especially because some of the implied volatility levels of tech stocks haven't declined as much as the broader market measures.

So, what are the rules for playing summer volatility slog? Tread lightly, for now, around selling anything.This week's volatility increase may be overdone, but there's the chance if you sell puts and something terrible happens either in the Middle East or in the U.S., you'll end up owning rapidly deteriorating options.

If you think something terrible is bound to happen (or that the weight of it

not

happening is good news), you may want to hold off buying any options until the VIX is around 20. That gives you a little breathing room, and it would take a level of complacency we haven't seen in quite a while to bring it too far below those levels for too long.

Dan Colarusso is a New York-based financial writer. His recent work has appeared in The New York Times, Barron's, Institutional Investor and Investment Dealers' Digest. At time of publication, he held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Colarusso welcomes

your feedback.