Options Outlook for the Week of October 7: Markets Are In No Man's Land

Markets continue to gyrate after the government shutdown.

Although unexpected, markets responded positively via the indices, but the underlying stocks acted very strange and not in sync. While high flyers like Google (NASDAQ: GOOG), Facebook (NASDAQ: FB), Apple (NASDAQ: AAPL) and Priceline.com (NASDAQ: PCLN) all started making fresh highs, many of the banks were faded strongly.

VIX levels rose the entire time although we made more highs, showing the increase in volatility and headline risk.

Traders should push the government shutdown action right into earnings and the debt ceiling talks. With so much going on, investors should look to sell premiums into Fridays, as the likelihood of markets finding a trend are very low.

If looking to play options, consider sticking with at the money options (ATM) one strike away, or just play pure stock. Don't be surprised if this action continues for the rest of the month.

Watch high flyers like Priceline.com and Facebook as shares make new highs; this could be ideal shorts if markets tank or ideal longs if markets decide to push higher.

Right now, it's no man's land.