Options aren't just puts and calls -- let's take a look at three advanced options strategies that look promising.

Butterfly/Iron Condor Trade
The butterfly and Iron Condor strategies are good for stocks with high implied volatilities and the expectation of relatively small future movement. These are the safest of the option selling strategies when used properly.

Strictly defined,

the iron condor uses consecutive strikes with a minimal gap in the middle. However, you will see some options traders use wider gaps. I recommend sticking with the consecutive strikes, as this offers the best risk to reward ratio.

Today's iron condor is found in May options for Dendreon (Nasdaq: DNDN).

Even though this stock is presently highly volatile, this iron condor can be had for a very small debit, and therefore has an excellent profit probability.

The May implied volatilities are in the 200% range, while the April implied is in the 150% range. The 30-day historical volatility is at 275%, while its normal volatility is in the 50% range.

A May iron condor can be set up using the 22.5/20 call spread and the 17.5/15 put spread for a credit of almost 2.20. With a margin of 2.50, this is only risking .30 on the trade. The full profit is made anywhere from 17.5 to 20, with breakevens at 15.30/22.20.

The call butterfly is another way to take advantage of this situation. The 15/20/25 call butterfly can be purchased for .70 or less, giving an excellent profit/loss ratio and good probability of profit. These are both great trades if you believe that Dendreon will "return to normal" at some point in the near future (in terms of its giant price swings) and will stay in something of a range.

As the implied volatility is below the historical volatility, selling strategies would not normally be used. But as this is a $20 stock presently, volatility is "mean reverting" -- meaning it should come back in line with where it normally is, and the butterfly and iron condor can be had for such small debits, these trades seem to make good sense.

Calendar Spread
Calendar spreads take advantage of the difference in decay rates. Options premiums decay at the fastest rate in their last month. By selling the front month strike against the same strike in the next (or subsequent) month, you take advantage of the difference in decay rates.

In Greek terms, the front month has a greater theta, and so the trade itself has a positive theta. It is often possible to find options where the front month also has a higher implied volatility than the next month, and these offer the best opportunities.

Furthermore, calendar spreads have a positive vega, meaning that they benefit from an increase in volatility. Therefore finding stocks with generally low implied volatility is important.

Today's calendar spread is Google (Nasdaq: GOOG). At the 470 strike, the April implied volatilities are roughly 34%, while the May implied volatilities are roughly 27%. This is a good differential. The 30-day historical volatility is 23%, but is definitely in the low range for Google.

The ideal situation is if Google stays close to the strike price by the April expiration and the implied volatility rises. This will often be the case as earnings approach. Google's earnings are on the 19th, and you will want to exit this trade before the release, as volatility usually drops and the stock often makes large moves on the announcement.

You could buy the June 470 strike, as the implied volatility is slightly lower. I recommend making sure that the option you sell is worth at least half of the option you buy. I also recommend using double calendars -- utilizing both the calls and the puts at the same strikes, as it gives a better profit potential.

The criteria for all of these buying strategies is basically the same. You are looking for cheap options. This means different things to different people. Some people look at the price alone. This is a mistake with options.

Inexpensive options are not necessarily a good value. Value is determined by the level of the implied volatility and the historical volatility. Some people just look at the ratio of the two. It is also important to look at the current implied volatility level to the recent range of implied volatilities.

When simply buying options, it is important to keep your time frame in mind. Because of the rapid decay of options in their last month, you do not want to buy options in their last month and hold them for any length of time. Therefore, it makes the most sense to buy options with at least three months left until expiration.

The Oil Service Holders Trust (Amex: OIH) is reasonably "cheap" right now. The July 150 strike has an implied volatility of 25%. The 30-day historical volatility is at 22%, but these volatilities are at the very low level of the year, only breaking below 25% in the last month and a half. The IVs over the last year have been mostly above the 30% range and as high as 44%.

Purchasing the 150 straddle can be done for roughly $16.50 presently. A significant move in either direction and/or a significant rise in implied volatility will produce profits. Make sure to exit the trade with or without gains with four to six weeks remaining, as that is when decay increases the most.

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