Quiet week for stocks heading into a holiday shortened trading week. The Dow ($INDU) did manage a gain of 48.07 points, or 0.47 percent, to close the week at 10,318.54. The S&P 500 ($SPX) lost 2.10 points, or 0.19 percent, to 1,091.38. The Nasdaq ($COMPQ) gave up 21.84 points, or 1.01 percent, to 2,146.04. Despite Friday being option expiration, volumes remained light.

Economic news was heavy this past week as earnings reports tapered off. Retail sales got things off to a good start last Monday, but concerns about the jobs market continue to keep the bulls in check. An unexpected drop in housing starts did create some selling Wednesday, but traders were pleased to see that pricing pressures remained contained as measured by the PPI and CPI. Tech stocks suffered during the week thanks to a downgrade of the chip sector at Merrill Lynch and Dell's (DELL) disappointing earnings report. Volumes were light this past week and this is expected to continue with the Thanksgiving Holiday on Thursday.

The fear indices continued to see declines despite some weakness on the week. The CBOE Market Volatility Index ($VIX) fell 4.45 percent to 22.32 and the Nasdaq Volatility Index ($VXN) declined 1.88 percent to 22.49. The bulls saw a key resistance point at 1,100 broken on the SPX, but this break couldn't hold. The general consensus is that the major market indices will see sideways trading as volumes fall during the holiday season. Fortunately, option traders can benefit from this by using the appropriate neutral trading strategies.

High Volatility: MJN shares have been on a roll since their inception in February. The stock closed Friday's session at $44.31, but the stock looks poised for some consolidation. MJN was trading near $48 in early October, but has since come down to support at its 200-day moving average. With IV high on MJN options and the stock looking to consolidate, traders can enter a neutral strategy like a butterfly or condor to profit. MJN has been in the news due to Bristol-Myers Squibb's announcement earlier in the month that they would split off their holdings in MJN. A Dec. 40-45-50 put butterfly can be set up with a max reward of $360 for only $140 in risk.

Low Volatility: Normally, we look at high IV stocks when wanting to use a neutral strategy like a butterfly or condor. However, with the SPX looking to move sideways throughout the holiday season, traders can still see solid profits using these strategies on the SPY. Though IV has come off on SPY options, consolidation could send IV down even further. For those wanting more information on using these strategies, most notably an iron condor, check on the Real World Trading articles on Optionetics.com. When using an index like the SPY, we can usually keep a tight lid on possible losses since we don't tend to get huge gaps in daily prices.

Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site

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