Hi Marcus,

Below are several posts where I talk about the Average True Range (ATR).

How to Set Stops Using the Average True Range (ATR)

How Many Successful Traders Incoporate Indicators When Placing Their Stops

How to Up Your Chances For Profits When Setting Stops

Money Management: How to Determine an Initial Stop Level

As far as using this in option trading it is a good volatility guage so you could incorporate into your strategy that way in order to get a general feel for where the current volatility of the underlying security sits in relation to the past volatility. You could also use it as a part of your money management strategy as I have outlined above.

Best Regards,
Dave