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Outlook 2012: Trading with options

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Volatility in U.S. equity markets hit a 50-year high in 2011, ultimately leaving the S&P 500 with smallest the price change in 40 years despite several violent market moves. Joe Cusick, Senior Market Analyst at OptionsXpress Holdings, tells BNN the volatility allowed options traders to profit while buy-and-hold investors were treading water

"As an options trader, you were able to put on spread strategies," Cusick tells BNN. "This is a strategy that fits in a volatile environment. We're looking to mitigate some of that volatility by buying a call option at one strike price - say 25 - and selling another at 30."

Cusick sees options pricing coming down in 2012 and says investors should watch for a rotation into dividend-paying stocks in the first half of next year.

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