Like racing fans, options traders seem to be spending most of their time watching from the infield as stocks lap around their six-month trading range, rather than getting behind the wheel themselves.

The two main reasons for this hesitation to push the pedal to the trading metal are the current low-volatility environment, which limits opportunities, and uneasiness about further declines attributed to a host of factors, such as terrorism and interest rate hikes.

I spoke this week with a handful of people who represent a cross-section of the industry to see what strategies they were using. While there was a nearly uniform long-term bullishness and a general consensus that the market is approaching its lows for the year, none of the people I spoke to seem ready to call a bottom, and they all offered different approaches to position one's self for an improved market.

Not Like It Used to Be

Even independent, active traders, who should be the beneficiaries of the leveling of the playing field provided by online brokers, electronic exchanges and sophisticated analytical tools, are finding short-term trading more difficult.

Bill Wingate, an independent trader and former member of the Chicago Board of Options Exchange, who now trades from his home office, said, "Between efficient pricing and a lack of no volatility, you've basically removed the edge from being a full-time or active daytrader."

This is forcing Wingate to use more directional-based strategies and hold positions longer. He explains that "the pool of stocks that you can count on to move a buck a day is probably less then 100, and the ones that have enough liquidity in both the stock and options to trade sufficient size is really just maybe a dozen. That's not enough for everyone to make a living, locking in short-term price on a daily basis."

Consider the challenge of carving out a profit if a stock moves by a $1: the at-the-money options' price is expected to move 50 cents, the bid/ask spread for a liquid options market will be a dime (thinner markets can see spreads of 25 cents or more), meaning you might have to give up 20 cents of the option's "fair value" in executing the two or more transactions required to close out or lock in a profitable trade. This leaves you with just a 30-cent margin for profitability if you catch the exact top and bottom of a daily trading range.

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