To find a week with a comparable litany of bad news we need to go all the way back to the week ending September 22, 2008, a week that included the Lehman Brothers Chapter 11 petition of Bankruptcy and then after reducing their credit lines, Bank of America announced it would buy Merrill Lynch.

The updated weekly chart of the S&P 500 Index shows both a developing falling wedge outlined in green and the location of a potential right shoulder (RS) of a possible developing Head & Shoulders Top.

Although European sovereign debt still occupies a large portion of the financial news space there is little doubt that the crude oil bellowing up from the bottom of the Gulf of Mexico is about to take top billing on the list of economic concerns. Like the inverse of decaying option time premium, every day the rupture spews more crude oil, the risk of permanent supply disruption due to political exasperation increases exponentially.

Volatility, one of the darlings of the options marketplace, has been all over the map this year. If you look at a sample of headlines from the first five months of 2010, you might think that either the market cannot make up its mind, or volatility has multiple, competing personalities.

In the recent weeks of market volatility, the hyper focus has been on global economies. In the short-term what's going to happen with Europe and the Euro Zone? Is the US immune? Is the "jobless" recovery going to sputter?

Over the last few weeks traders have experienced a sea change in the volatility environment of the market; we have gone from a milieu in which implied volatility (IV) was low and was perhaps establishing a new long term reality to the current state of accelerating IV in a wide range of underlyings.

Although the relative strength of the iShares Russell 2000 Index (IWM) over the SPDR S&P 500 Index (SPY) has diminished recently it still has the advantage for upside moves.

Last week's flight to the safety of the dollar, the yen, and US Treasuries was a driven by more than just the comments of Germany's Finance Minister.

When the markets swoon, traders are making people pay (volatility premiums go up as they should in these conditions) and buyers are hitting the exits.

The Euro shivers still resonate. No doubt. Usually for a day or two lately but they are very real and drive our equity and volatility markets to hair raising swings. The stock market does not seem to care about fundamentals or earnings anymore. Does any of the recent volatility moves make anything standout as a possible opportunity?

In our May 3rd post, we began exploring the concept of having an edge, or advantage and its importance in trading. Today's post looks at the edge from the options perspective.Many people are familiar with the leverage advantage of options however, some are not familiar with the disadvantages including time decay and how changing volatility influences options values.

Since our last market review, the character of the equity market has abruptly changed from a likely correction of the major uptrend to something of greater concern for the bulls.