Many short term traders would like to take a stand on volatility, i.e. get long the VIX at let's say 16 or perhaps get short the VIX at 22. But let's face it, speculating on the direction of volatility is really no different than speculating on the direction of a stock. Traders spend hours researching the fundamentals, maybe some technical analysis, some investor sentiment, etc.They then put on the trade and watch as it goes against them.

Trying to forecast the direction of the VIX or volatility is challenging and executing a long or short in the VIX can be challenging as well. As most VIX traders know, the underlying index is simply a metric and cannot be purchased as such. Some of the ways traders can get long the VIX, for example, is through the purchase of VIX Call Options and/or purchasing the futures on the VIX. However, purchasing

A sound options trading idea always begins with a sound analyses of the underlying security or stock. Whether you like or dislike a particular stock you can devise many fun ways of constructing an options trade. Weight Watchers International (WTW) is one particular stock that always appears on my radar screen especially in the weeks prior to its Earnings Release Date. During this time the implied options volatility (IV) rises or even spikes, lifting premiums on WTW options . The trader in me typically, has me screening such options for a short-term trade. However, WTW has recently attracted the investor in me. Even as an investor I like to deploy options; I would simply use a different options strategy.

Stock Analysis

I like Weight Watchers from the long side for the following reasons: Shares currently trade at 11.5 times forward earnings, the stock pays a 1.3% yield,

Last week I wrote an article making a case for an Eli Lilly (LLY) takeover. One day later, the Indianapolis Business Journal reported that Lilly's shareholders will take aim at the removal of an 80-percent approval poison-pill provision at the April 16 shareholder meeting. If passed the proposal would require just a bare majority of shareholder votes to approve key moves commonly used in hostile takeovers.

As such, Lilly and its board could find itself in a defensive mode. One defensive move could be to make a purchase of its own, specifically, to bid for Forest Labs (FRX). Such a purchase would allow Lilly to cut someone else's expenses and preserve its own jobs. Also, Forest is vulnerable because Carl Icahn owns 10% and the chief executive, Howard Solomon is 83.

Lilly's expertise clearly is drugs for central nervous system. Prozac for depression and Zyprexa for schizophrenia built the

Last week I described an options strategy to profit from the potential success of Eli Lilly's (LLY) drug for Alzheimer's, solanezumab. The key to my thesis is an assertion Lilly shares would decline no more than 10% -- and probably much less-if the drug fails. If it works, Lilly shares could rally 50%.

Today I highlight a safety harness for investors were solanezumab to fail: a takeover of Lilly. Lilly's bloated expenses ripen it for a buyout. In the 10 years ended December, the Indianapolis-based drugmaker spent $35 billion on research development. Yet it hasn't produced a significant, internally-developed new chemical since antidepressant Cymbalta won approval in August, 2004. The company is wasting shareholders' money.

This year Lilly plans to spend at least $12.4 billion on operating expenses, including at least $5 billion on research and development. Were an acquirer to cut half Lilly's operating expenses, it could

I have always been attracted to stocks that could potentially move significantly higher based upon a positive event but would move down minimally on a contrary outcome. Stocks that have discounted the "absence of positive news" can be quite appealing. After all, what's to lose if the discount sticks?

Such is the case for Eli Lilly (LLY). Lilly is currently trying to develop solanezumab, a drug that will attempt to halt Alzheimer's progression. Results from the trials are expected late this year. If the drug proves promising and clears the FDA, the impact could be enormous. There are an estimated more than five million Americans alone afflicted with the disease, and the number could grow as our baby boomers continue to age. The estimate for the globe is that over twenty-five million people are affected worldwide.

The benefits of such a positive event on society would be priceless, and

Sometimes you just feel good about a company and its stock and then you just noticed it pays also pays 3.62 percent in dividends. This would certainly grab my attention. Specifically, I am speaking of ConocoPhillips(COP). The reason I like this stock fundamentally is because it is undervalued on every key metric. The forward p/e is just over 8.25 and its book value 49.56. The upcoming split-off of the Refining and Exploration is a positive for the stock.

Having said that, I believe the stock has a high probability of closing north of here by year's end. As such, I could take advantage of the high dividend payout of $2.64. One strategy I would consider is to buy COP stock and placing a protective collar on the stock through puts and calls. The collar requires selling a call and a buying a put as well. I prefer an at-the-money,

One of the most classic arbitrages involves buying a convertible preferred stock or bond and shorting the common. If you know and understand the terms of the convertible vis-a-vis the common, you could easily try to do a little old-fashioned arbitraging.

But in this day and age of computer trading, it would be difficult for the individual investor/trader to make more than a few pennies, if you're lucky, on such a trade as computers keep such arbitrages in line. Trading firms with deep pockets could do this trade many times over and could afford to carry such a trade if it needed to be carried for any length of time.

However, for the small independent trader like myself, I would consider writing calls against a convert, especially in a stock that has been beaten down like Citigroup (C).

The particular convertible security I am referring to is the C Pfd.

Pharmasset (VRUS) is currently trading at a price of $128, a substantial discount to the offer made by Gilead (GILD) to purchase VRUS for $137 in cash on November 21st. The deal is expected to close in Q1 2012, possibly as early a January 12th which is when the voluntary tender offer expires.

VRUS shareholders were spooked on December 16th, when VRUS announced that it would discontinue one arm of the Phase IIb QUANTUM trial, specifically, the arm associated with PSI-938 as the company detected laboratory abnormalities with liver functions in subjects. Although laboratory abnormalities where not detected in PSI-7977, which is what GILD is interested in, investors and traders sold off VRUS to $120 in the premarket announcement.

Even though the announcement did not trigger the “key product event” clause set forth in section 4.1(t) of the Agreement and Plan of Merger entered into by VRUS and GILD