Option Traders Gaining Interest in Matrixx Initiatives Inc.; MTXX, HSP, FLML

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Option Traders Gaining Interest in Matrixx Initiatives Inc.; MTXX, HSP, FLML

Option traders are pushing implied volatility levels higher at an accelerating clip on Matrixx Initiatives Inc.'s (MTXX) options. MTXX's implied volatility levels jumped from 48.40 percent yesterday to 58.27 percent today---a day-over-day gain of 20.40 percent, which sets MTXX up for some interesting option trades.

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Of course, it is always important to keep implied volatility levels in perspective relative to what they have been in the past for a specific stock because what is considered high implied volatility for one stock may actually be considered low implied volatility for another stock. Looking back at the implied volatility levels for MTXX during the past year, we can see that the highest level MTXX has seen is 204.63 percent and the lowest level MTXX has seen is 30.72 percent. So MTXX's current implied volatility level of 58.27 is closer to its low for the year.

Seeing that MTXX's implied volatility is rising and that it is closer to its low for the year, you now have to determine if you are bullish or bearish on the stock.

If you are bullish and want to be more conservative, you may want to look at doing a pairs trade---buying a call on one stock and buying a put on the other stock---between MTXX and Hospira Inc. (HSP) or between MTXX and Flamel Technologies SA (FLML) to hedge some of the risk you may take on by trading MTXX alone. FLML and HSP are both part of the Drug Delivery industry.

You may also want to look at employing one of the following strategies if you are bullish:

- Selling a naked put

- Entering a vertical spread by buying an ITM call and selling an ATM call

- Entering a vertical spread by buying an OTM put and selling an ATM put

On the other hand, if you are bearish, you may want to look at employing one of the following strategies:

- Selling a naked call

- Entering a vertical spread by buying an OTM call and selling an ATM call

- Entering a vertical spread by buying an ITM put and selling an ATM put

Want to learn how to trade these strategies? Check out Learning Markets Options Coaching for Only $5.