Options trading continues to be very active in this market, even though daily volatility of stocks moves has dropped in recent weeks. Index and ETF options remain popular methods for trading market direction. They are also very useful instruments for hedging long stock portfolios.

For instance, iShares Russell 2000 ETF (IWM) can be used as a hedge against a portfolio that has a significant number of small cap stock exposure. Buying puts or put spreads in IWM can protect your portfolio in the event of a second leg down in stocks, especially of the small cap variety.