Is this the beginning of an even larger bull rally or is this the end of a bear rally? Or could this be the start of a long sideways move, creating a lengthy period of 'wait and see,' until a clear catalyst can get the market moving convincingly in one direction or another?

I'm sure these questions are asked by millions of people everyday.

And while it would be great to know what THE answer is, it may not be all that necessary to make money in the market, especially if you're an options investor.

Know Your Options

While it's important to plan for the inevitable market rebound (the market won't go down or sideways forever), not all stocks are created equal. Regardless of the overall market direction, some stocks will go up, some will go down and some will just go sideways.

And that's perfectly alright.

With options, you can take advantage of all of these scenarios.

Buying Calls and Buying Puts

Buying calls and buying puts is one of the most common ways investors trade options.

If you believe the price of a stock will go up, you can buy a call option on it and make money as it goes higher.

If you believe the price of a stock will go down, you can buy a put option on it and make money as the price goes lower.

Buying options also provides great benefits too such as increased leverage and limited risk.

For instance, buying $100 shares of a $90 stock would require a $9,000 investment.

But instead, you might be able to buy a $90 call option for $8 (which means $8 x 100 shares or $800). That's a significantly smaller investment with a guaranteed limited risk.

If, for example, the price of the stock fell $20 to now $70 a share, your stock investment would have lost $2,000.

However, at expiration, the maximum you could lose on your option investment would be $800 (plus your commission and fees).

The option gives you great upside as well.

A $20 move up in the stock price to $110 would mean a $2,000 increase in your stock investment.

However at expiration, that $90 call option would be $20 'in-the-money' and be worth $2,000.

$2,000 less your $800 premium is a $1,200 profit, or a 150% gain.

The $2,000 gain on your $9,000 investment represents just a 22% gain.

Now let me say that options aren't a panacea. Too many people use options recklessly by loading up on cheap out of the money options that ultimately expire worthless. And even though they have a limited risk (limited to what you put in), if you put everything in there, you run the risk of losing it all.

But smart options trading in my opinion has a respectable place in one's portfolio.

And only invest in an option what you absolutely can afford and would be 'willing' to lose if your assumptions on the market are incorrect.

A put option works the same way except you're profiting if the market goes down.

And buying puts is a great alternative to short-selling.

Covered Call Writing

Covered call writing is an excellent strategy to use in both up, down and sideways markets.

This is a strategy used to reduce risk and generate income.

In fact, you can even execute a strategy like this in many retirement accounts.

Writing an option is different than buying an option in that you're collecting premium instead of purchasing it. Someone else is buying the right to own 100 shares of a stock at a certain price within a certain period of time. If the option expires worthless, the buyer of the option loses what he paid for it, but the writer of the option profits that amount.

For a covered call strategy, this is who we're going to be -- the writer.

For example: let's say you have 100 shares of a stock at $110 for instance.