There are times when stocks and bonds move in the same direction, and times when they move in opposite direction. However, the U.S. dollar almost always moves opposite to bonds. Yet, in the last few weeks – ever since stocks topped out – all three markets are under pressure. This is creating a very unusual situation, both in terms of sentiment and probably in terms of economics, as well.
Neutrality, as it applies to option positions, means that one is non-committal with respect to at least one of the factors that influence an option's price. This isn't quite the same neutrality that governments display -- theirs being a much more diplomatic undertaking -- but it is a viable approach to trading options. Simply put, this means that one can design an option position in which he may be able to profit, no matter which way the underlying security moves.
The “collar” is an interesting and useful strategy – at times. This might be one of those times. With many high-yielding stocks having risen to dizzying heights, holders of those stocks may be somewhat leery of the gains that have taken place, but might also not be willing to sell the stocks because of the capital gains taxes that might be due on long-term holdings at low cost bases.
It’s almost unfathomable to me that it was 40 years ago that listed option trading began on the CBOE: April 26th, 1973. Many of the people associated with the inception of option trading are still active – or at least alive – today, which makes this a very unique market.
By Lawrence G. McMillan
The new mini options began trading on March 18th. We held off writing about them for a little while so that we could see how volume and open interest were trending. A mini option is for 10 shares of the underlying stock or ETF, rather than 100 shares as is the case with “regular” options. So far, there are mini-options only on five stocks: Amazon (AMZN), Apple (AAPL), Google (GOOG), Gold ETF (GLD), and S&P 500 SPRDs (SPY).
By Lawrence G. McMillan
If there wasn’t such incessant media coverage today, one might have a somewhat different opinion of what’s happening in the current market. I say this with some degree of experience, having seen the early 1973 market firsthand.
By Lawrence G. McMillan
In December, we presented a strategy for trading the highly leveraged ETFs. At that time, we said that perhaps an option strategy would be a better approach. In this article, we expand on that original research by examining one option strategy (and discarding a few others). This deeper I dig into this subject, though, the more possibilities present themselves.
By Lawrence G. McMillan
Most professional traders tell novice investors not to chase earnings. I have felt that way throughout my trading career. However, I never actually did any statistical work, nor did I come across any papers of statistical work by others, that actually document this fact. That statistical work – or at least some of it – has now been done by us, and the results are presented in this article.
