By Lawrence G. McMillan
This issue contains our annual analysis of the trades we’ve made in the past in The Option Strategist Newsletter. 2011 was a very good year for hedged positions, but a poor one for speculation. We’ll delve into the various strategies, attempting to analyze (if possible) why each one performed the way it did.
By Lawrence G. McMillan
...We still expect a bear market to unfold – one that will be far more severe than what we’ve seen in the last few months (although perhaps not so volatile). It is likely that the next bear market will take out the 2009 lows, thereby souring an entire generation (or two) on stock ownership for much of their lives – as happened with investors in the 1930's.
By Lawrence G. McMillan
With this newsletter, we have reached 20 full years of publication. Hopefully, there will be 20 more! As far as the stock market goes, it was a pretty wild year, but not necessarily out of character with the ever-increasing volatility that the market has exhibited much of the time in recent years. Ever since the manipulated interest rate environment and accompanying bull market of 2006, where $VIX repeatedly dipped below 10, markets have been volatile. It began with the volatility explosion in February 2007 and continues to this day.
By Lawrence G. McMillan
While I am a technician, I am the first to admit that not every form of technical analysis yields useful information. In fact, being a mathematician, I really like to know why a particular indicator works – other than “it backtests well.”
By Lawrence G. McMillan
When is it a good time to write naked options? When volatility is high and the market is “dangerous” or when volatility is low and the market is in a bullish mode? Or perhaps never, because one can always construct butterflies or condors to limit risk on all sides? In today’s article, we’ll take a look at these questions and more, because with $VIX remaining above 30 for over four months now, these questions are certainly pertinent...
By Lawrence G. McMillan
We have written about the subject of protecting a portfolio of stocks with derivatives several times over the years, although it’s been a while (Volume 19, Numbers 6 and 12 had articles on the subject). Recently, some subscribers have inquired about how to calculate the amount of protection they need.
By Lawrence G. McMillan
Once again, it appears the October has become the “bear killer.” Yes, volatility is still high and put volume is still heavy, so there are clearly worries out there. But it’s normal for there to be plenty of worries at the beginning of a new bullish phase. In this article, we’re going to look at some other similar October bottoms in the past to see how the market unfolded at those times.
By Lawrence G. McMillan
One often feels that the current market conditions are more difficult than he’s seen before, even though they’re usually not. It’s just that the past travails have been pushed further into one’s subconscious, perhaps merely because they’ve been survived. It’s like Army veterans fondly recalling basic training, when – in reality – it was a real pain when it was taking place; but a few years later, it doesn’t seem so bad.
By Lawrence G. McMillan
One of the reasons that we favor $VIX derivatives as a portfolio, hedge rather than $SPX (or SPY) puts, is that $VIX is much more volatile. Also, $VIX protection is more dynamic. However, there can be some problems with the timing of a market’s breakdown and the convergence of $VIX derivatives with $VIX. In this article, we’re going to look at the details behind these actions, so that those who buy $VIX derivatives for speculation or protection might better understand what the potential problems are.
By Lawrence G. McMillan
Vertical skews appear in option prices during times of panic and in futures prices in terms of euphoria. Since we have been experiencing a lot of both lately, we have gotten some requests from traders asking how to play these skewed situations without using naked options. This is a subject that we have covered in the past, but it might be a good time to review it, considering current market conditions.
