Lobster Mushroom
Hypomyces lactifluorum
Hypomyces insignis
Hypomyces purpureus
Sphaeria lactifluorum

This mushroom is a parasite on Russula or Lactarius mushrooms.  Scientists are not sure.  Some guide books warn to eat with caution.  They say that if the mushroom grew on a poisonous mushroom it too will be poisonous.  Others say that it is good to eat even if it parasitized a poisonous mushroom.  This is my second year eating them and I have had no ill effects.

Here is the orange colored variety as found growing.

Here is the red Variety.  Bottom view.

Here is the red as found growing.

Although other species of Hypomyces have an asexual (or mould) stage, H. lactifluorum does not. Despite many attempts at promoting asexual development of the Lobster, researchers have been unsuccessful at producing asexual spores.

Hypomyces lactifluorum (the parasite) is edible, but the host may not be. However, like other Hypomyces, this fungus is very specific as to which host it infects. Where the host can be determined with confidence, it has turned out to be the edible Russula brevipes or the extremely hot and edible Lactarius piperatus group. The parasite apparently neutralizes the heat, making the parasitized members of the L. piperatus group delicious.

Mushrooms belonging to the Russulaceae are the preferred host of Hypomyces, but other mushrooms such as Amanita, Pholiota, Crepidotus and Leptonia species, can also be infected. There are even some boletes and conks that can be infected by Hypomyces. Mushrooms parasitized by other Hypomyces species should not be eaten as hosts may be poisonous. According to the North American Mycological Association Mushroom Poisoning Case Registry, some people may have upset stomachs after eating this mushroom.

Hypomyces lactifluorum is popular in Mexico, where it is frequently sold in markets, and it is considered a preferred edible by chefs in the Lower Mainland of B.C. Used as a natural dye ingredient, it yields apricot to salmon pink tones, depending on the mordant.
 

HMG coA reductase, an enzyme inhibitor, has been isolated from the Lobster mushroom. HMG coA reductase inhibitors have been implicated in reducing plaque in large to medium sized arteries and thus reducing death from coronary disease. H. lactifluorum produces skyrin which may prove useful in treating diabetic hyperglycemia.