NEW YORK: Whether you believe the rally in U.S. stocks has run out of steam or expect shares to soar on to new highs, the recent slump in stock market volatility has opened up big opportunities for traders in the options market.U.S. With options underpricing risk, they provide a more attractive way to trade these uncertain markets than sitting in cash, BofA Merrill Lynch Global Research analysts said in a note on Tuesday. "Using options, investors can profit regardless of which way markets break, and there is a strong chance they move more this year than what options imply," the BofA Merrill Lynch note said.Market experts recommend a stock replacement strategy that may appeal to traders looking to add a dash of options to their portfolio.The strategy involves selling a part of a portfolio of shares and using some of the proceeds to buy call options. The purchase of a call contract conveys the right to buy shares at a fixed price in the future. "It's a nice way to take advantage of the situation while still being positioned for a bullish market," he said.- Reuters

Source: The Star February 02, 2017 21:22 UTC