For the last two weeks, ever since the October options expired, I have been selling AIG puts and calls at all strike prices from 33 to 43. I sold them at various times (e.g., 33 puts when AIG stock was at 34 or lower). I never got less than $3.50 for any put or call (one of my rules). At the moment I am short 190 calls and 200 puts, collectively. I like these options because of their fat premiums. I bullt a spreadsheet that tells me my loss/gain if AIG stock closes anywhere from 31 to 45 come Nov 20th. Yesterday, Friday, was a good day for this position as a lot of the air in the call and put premiums dissipated with the announcement of earnings (and resulting stock price movement). This position makes money if AIG closes anywhere from 33 to 43 on Nov 20th. Maximum profit occurs at 38-39. For protection, though, in case the stock were to gyrate out of its trading range, I bought out of the money puts and calls (bought Nov 31 puts when stock was at 43 and Nov 45 calls when stock was at 33).

This strategy has worked fine the last couple of months, as I let the stock price dictate the range of puts and calls I sell (one month involved strikes in the 50's, 55's, 40's, and high 30's). There will come a time (perhaps even this month) when this strategy blows up on a sharp downward or upward stock price movement.

I'm neither long nor short AIG stock nor on its prospects. I enjoy reading the battle here between the bulls and bears, and as long as there are roughly equal numbers of you, that's one clue that tells me that AIG may well continue to trade in some sort of trading range...for awhile.

I post this message for those who think AIG will trade in a range and who like to use options to make money. I learned some time ago that option buyers rarely make money, so I'd rather sell them and let the time decay work in my favor.