Just want to update this thread with a correction (because it comes up as a top result in Google).
In my somewhat extensive experience, Craig's advice is backwards.
Woolly Nylon, which is still widely available from sewing supply shops (it's used for serging the edges of fabrics, look at the hem of many t-shirts), is the source for NON-ELASTIC IT. This can also be found in pantyhose. A fat spool (maybe a km or more) of Woolly Nylon (also spelled Wooly) will cost you a few dollars. And it comes in many colors.
Woolly Nylon feels a bit stretchy (because it's bunched up), but the individual strands are just nylon, which isn't stretchy at all.
For Elastic IT, you need some version of spandex (brand names include Lycra, Dorlastan, etc.). As far as I'm aware, this isn't available to consumers by the fat spool. Magic dealers buy huge industrial spools for dirt cheap and resell small quantities for a huge markup.
However, elastic IT is available from any pantyhose that has spandex (or a brand name spandex) on the material list. You will find very stretchy yarns in there that look like woolly nylon, but have a thin spandex thread at the core. When you find one of these truly elastic threads, you will know it. Stretchy as all get-out, but still strong---a really remarkable material. There is no confusing it with nylon.
My understanding is that different thicknesses of spandex are used in different brands of hose. Look for low-denier hose if you can find it. And different parts of the hose may have different compositions and thicknesses of spandex. The panty vs. the waistband vs. the leg.
For example, I found some "hose footies" (like little hose slippers) at the dollar store that listed 4% spandex, but then I couldn't find any stretchy fibers in the foot part at all, so I gave up. Later, I looked in the cuff, which felt much stretchier, and extracted black spandex from there. Sadly, this was too thick to be usable, but I'm guessing that on the legs of more expensive hose, thinner spandex can be found.
Finally, if you get the hose to run just right, the knitting is spiral, so you can pull off very long threads round-and-round the leg... essentially extracting as long of a woolly, spandex-core thread as you want, probably hundreds of feet in one stocking. Then, from that, you can extract whatever length of spandex you want.
The only non-industrial source for pure spandex fibers that I can find are these spools on Ebay:
http://www.ebay.com/sch/i.html?_fro...stan+fiber.TRS0&_nkw=dorlastan+fiber&_sacat=0
These used to be only $6 per spool, but after magicians drove up the demand, they are going for $50 each. Also, they are white. Apparently, they can be dyed somehow, though.