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Hottest Thing On Wall Street

If you’re not trading options contracts you might be missing out on some hot action. Options volume is setting multiple records this year amid the market turmoil. Just look at the figures below.

Total Option Contracts Traded

2006: 2 Billion Contracts Traded by December 22
2007: 2 Billion Contracts Traded by September 25
2008: 2 Billion Contracts Traded by July 22 (Yesterday)

Considering the explosive volume it probably comes as no surprise that the Chicago Board Options Exchange, the largest U.S. options market, reported some eye-popping results. In a nutshell they said profits surged 36%after taxes.


Clearly, more and more people are trading options. “We like to call it a perfect storm,” says CBOE Chairman and Chief Executive William Brodsky on Fast Money. “There’s been a combination of technology, increased tightness of the spreadand investor education.”

Of course, there are may ways to trade.

Pete Najarian loves them. "Options are all about leverage," he says. "For example if you think the bottom is close in financials but you're not 100% sure, buy the putand sell the callagainst it. That way you can participate to the upside and limit your risk to the downside."

"I buy them as insurance for my portfolio," says Karen Finerman.

“My favorite strategy for serious investors who are long term investors is to own the stock andsell covered calls,” adds Brodsky.

But not everyone is rushing to trade options. That includes Fast Money's Lone Wolf.

Pete Najarian is the Mark Spitz of the options world, Macke says. "If you don’t know what you’re doing you can drown. It’s a very sophisticated prodct.