Editor’s Note: Jim writes today about using elevated options premiums to profit from Iran-driven market volatility — and he’s not the only one. This Monday, April 27 at 3:00 PM ET, Robert Rapier is hosting a free live briefing on his own options-income strategy: 30 trades closed in 2025, 35.5% average annualized return, and only one realized loss in four years. No encore scheduled. Reserve your free seat →

A reader challenged my recent assertion that “the war in Iran is an options trader’s paradise.” How can you know which options to buy, he asked, if you have no idea when the war will be over?

That’s a fair point, but it also reveals the reason why options trading can be so lucrative while the outcome of the war is unknown. That’s because premiums for both call and put options have soared since the closing of the Strait of Hormuz in early March. In other words, it is the stock market instability caused by the war in Iran that makes this an option trader’s paradise.

If you are an options seller, that means you are receiving a lot more income in exchange for agreeing to sell your stock to someone else, or allow them to sell their stock to you, at a predetermined price. That approach is the forte of my colleague Robert Rapier, who’s covered call writing strategy is raking in a lot of cash these days.

Also Read: “What to Do When Markets Turn Irrational“

The inverse of that equation is also true. If you are an options buyer, that means you are paying more for those same privileges. That’s because the share prices of the underlying securities could move quickly once the Strait of Hormuz reopens.

Package Deal

Last week, I explained why I recommended buying a call option on Expand Energy (NSDQ: EXE), a natural gas producer that took a dive a few weeks ago after Mad Money host Jim Cramer expressed a preference for Cheniere Energy as a natural gas play.

It’s too soon to judge how that trade will turn out. Next week, the company will release its fiscal 2026 Q1 results along with updated guidance for this year. If those numbers surprise Wall Street to the upside, then I may be able to close out that trade at a big profit in just two weeks.

A few days ago, I opened a similar trade on packaged products manufacturer Sonoco Products (NYSE: SON). The higher oil prices caused by the closing of the Strait of Hormuz have increased the cost of petrochemicals used in making some of the materials used by Sonoco in its packaging products.

Since nobody knows when that condition will subside, the company decided to play it safe by assuming it will persist throughout the remainder of this year. That news sent SON down 16 percent (as shown in the circled area of the chart below), putting it back to where it was a year ago near $47.

According to my PF Pro stock screener, algorithms on Wall Street overreacted to the company’s conservative guidance and the stock is now fundamentally undervalued. From a technical perspective, its relative strength index (RSI) of 29 suggests that SON is oversold and should soon rally up towards its 50-day moving average price around $54.

If that happens, we will make a very nice profit on our call option trade despite paying a higher premium for it than we would have under normal circumstances. But circumstances are anything but normal these days, which is why both the risk and reward of putting on this trade is greater than it otherwise would be.

Performance Enhancement Tool

As much as I would like to believe that the war in Iran will end soon, I doubt that is the case. The current cease fire is tenuous at best and likely to give way to more hostilities in the days or weeks to come.

Until there is a lasting cease fire that reopens the Strait of Hormuz without further interruption, option premiums will remain high. That is especially true for underlying securities that are directly affected by the price of oil.

The longer the war goes on, the bigger of an impact it will have on other sectors of the economy. The increased manufacturing and transportation costs caused by high oil prices will eventually be passed on to consumers, which in turn will influence their behavior.

Exaggerated share price movements are only a problem if you don’t know how to use heightened volatility as a performance enhancement tool. During times like these, it is important as an investor to make volatility your friend. Rather than fight it, put it to good use in your overall portfolio strategy.

The volatility Jim describes isn’t just an options buyer’s advantage — it’s also exactly when options sellers collect their biggest premiums. Robert Rapier’s Income Accelerator is built around precisely this dynamic: selling covered calls and cash-secured puts on quality dividend stocks to generate income regardless of which way prices move. His system delivered a 35.5% average annualized return across 30 closed trades in 2025 — with only one realized loss in four years. Today at 3:00 PM ET, he’s hosting a free live briefing where he walks through the complete system. Reserve your seat here →