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By Jason Stipp | 09-03-2009 02:26 PM

Two Option Picks for a Still-Volatile Market

Though overall market volatility measures have declined dramatically, derivatives strategist Phil Guziec has found option opportunities in financials and health care.

Jason Stipp: I'm Jason Stipp with Morningstar. After a nice, strong run-up from March lows, the market seems to have paused to take a breather as some questions about the nature of the recovery and how sustainable it is have come into the marketplace.

Here with me to talk about some of the levels of uncertainty in the marketplace and some opportunities that that might present for investors is Phil Guziec. He's Morningstar's derivatives strategist and editor of Morningstar OptionInvestor. Thanks for joining me, Phil.

Philip Guziec: Thanks for having me, Jason.

Stipp: So volatility levels have seen a little bit of a wild ride over the last year or so. So tell me, where are we now versus where have we been about a year ago?

Guziec: Well, over the past year, we've seen implied volatility twice what it is now, let's say. Morningstar Volatility Index, which is the average of the implied volatility of all the options in the U.S. option market, had gotten over 100% in March, when the market was undergoing its convulsions. We don't have a long enough history to know the exact historical average or norm for that measure, but now we're looking at something in the 60% range. It had gotten down into the low 50% range just as recently as a few weeks ago.

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