This article was originally published in The Option Strategist Newsletter Volume 15, No. 6 on March 30, 2006.
As our regular subscribers know, the CBOE recently listed cash-based options on its Volatility Index ($VIX). We have published several recent articles describing the details of these options, so we’ll review those only briefly in this article.
This article was originally published in The Option Strategist Newsletter Volume 7, No. 6 on March 26, 1998.
In the course of conversations with other traders or customers, there will occasionally be subjects that come up repeatedly. In this article, we’re going to look at three of them – sort of an article of short subjects. The first is probably the most complicated, as it addresses what volatility to use when trying to project the profitability of an option position. Second, we’ll share some practical insights on trading in futures options – particularly in the New York markets. Finally, we’ve had a lot of questions about one particular usage of our oscillator, so we’ll address that topic as well.
This article was originally published in The Option Strategist Newsletter Volume 13, No. 13 on July 8, 2004.
This subject of risk is one that we have addressed in the past. In this article, we’ll not only review the basics of risk management, but will also introduce a more advanced technique designed to even better assess your risk and adjust your position size accordingly.
There are two facets to trading: position selection and risk management. Many traders feel that the latter is more important than the former. In fact, some have gone so far as to say that any reasonable method of selection will work as long as one has an excellent method of risk management.
This article was originally published in The Option Strategist Newsletter Volume 9, No. 19 on October 11, 2000.
Many sophisticated traders use ‘expected returns’ to analyze the profit and loss expectations of their investment strategies. In this article, we’ll define what that entails and then point out some of the benefits and difficulties in using such statistics to predict how a strategy will perform.
This article was originally published in The Option Strategist Newsletter Volume 1, No. 12 on June 11, 1992.
With myriad investment advisors and the media trumpeting the fact that the market is overvalued, and with scary comparisons to the summer of 1987 abounding, an owner of stocks might justifiably be concerned with how he can safeguard his portfolio. He may not want to sell out his portfolio and go into an all cash position, but he would like to have some "insurance" in case the market takes a nosedive. Most investors in today's markets are familiar with the fact that index futures or index options can be used to protect one's portfolio. However, few know exactly how to adequately and correctly protect their portfolio of stocks. In this week's feature article, we'll describe the way in which one can compute the number of futures or options that would be needed to properly hedge his portfolio.
This article was originally published in The Option Strategist Newsletter Volume 6, No. 2 on January 22, 1997.
In this article, we're going to take a look at the strategy of selling options. Just how profitable it is, and some of the considerations for naked selling or for using credit spreads. With option premiums inflated in many markets because of increased volatility, this seems like a timely topic. I'm not specifically including covered writing in this discussion, but since a covered call write is equivalent to selling a naked put, you can apply any of the commentary that pertains to naked put selling.
This article was originally published in The Option Strategist Newsletter Volume 19, No. 12 on June 25, 2010.
Options have many uses, but a primary one is that they are built to be a hedge for many investors and traders – in order words, to take some uncertainty out of a particular trade or strategy. This is a well-known fact for professional traders, but less so for the novice option trader or – even worse – the investor who doesn’t use options because he considers them to be strictly a speculative vehicle.
This article was originally published in The Option Strategist Newsletter Volume 17, No. 13 on July 11, 2008.
The decision to set up a hedge to protect one’s stock portfolio is never an easy one. When times are good and stocks are rising, investors are loathe to spend the money required to hedge their positions. When times are bad, and the market is dropping, the cost of hedging increases. However, that fact is usually understood by investors, who might not mind paying a little more for insurance once it is obvious that stocks are no longer rising, in general. However, another impediment to hedging usually surfaces at that time: an investor fears that he has waited too long, and thus doesn’t want to buy insurance right at the bottom of the market’s decline.
This article was originally published in The Option Strategist Newsletter Volume 18, No. 4-5 on March 5, 2009.
I’m a numbers guy – degrees in math and all that – so I get a lot out of looking at charts, tables, and so forth that show past market behavior. That also makes me a technician. But it always amazes me how people can look at the same set of data and come away with very different conclusions.
This article was originally published in The Option Strategist Newsletter Volume 18, No. 15 on August 7, 2009.
It is generally accepted that volatility decreases in a bullish market phase and increases during a bearish one. Even on a daily basis, CBOE statistics show that 75% of the time, if $SPX moves one way, $VIX moves the other. When longer periods are considered, the percentage changes (see page two for exact statistics). Yet, recently $VIX has begun to increase even while $SPX is blowing out to the upside. This is unusual action, and we’ll try to examine it in this article.
