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.
This article was originally published in The Option Strategist Newsletter Volume 16, No. 5 on March 9, 2007.
One of the things that one hears from “old-timers” when the market declines sharply as it has recently, is that money managers are so young they’ve never seen something like this before. Personally, I don’t buy that. You can’t tell me that the hedge funds and large institutional money managers don’t have someone in a supervisory or risk control role that isn’t at least old enough to have seen the 2000-2002 bear market, the October 1997 and October 1998 mini-bear markets, and probably even the Crash of ‘87. At the very least, they saw the correction in May-June, 2006. I think what prompts “old-timers” to say such things is that each time the market peaks before one of these sharp corrections, it seems that these big money managers are buying with total abandon – as if they don’t remember the lessons of the past. And that may be true. Perhaps these money managers were operating during past corrections, but they think this time “it will be different.”
This article was originally published in The Option Strategist Newsletter Volume 18, No. 4&5 on March 5, 2009.
We have been using the hedged strategy between volatility and the broad market for over a year now, and the results have been good. But there’s more to this strategy than meets the eye. So, perhaps it isn’t useful only when $VIX futures are sporting a big premium or discount. It might make sense in a broader array of situations.
This article was originally published in The Option Strategist Newsletter Volume 18, No. 13 on July 10, 2009.
Everyone enjoys a good speculation now and then – even the most confirmed hedged trader. However, there are a lot of ways to handle a speculative position once it’s in place. In this article, the main focus is going to be on when and where to take profits – as opposed to cutting losses. We’re going to look at several partial profit strategies in an attempt to show what one is really doing to his position in the name of taking profits.
This article was originally published in The Option Strategist Newsletter Volume 6, No. 3 on February 6, 1997.
At the Futures South Conference last month, there was a lot of talk about delta neutral strategies. We're going to take a look at what these strategies are, and why they're not as profitable and easy to operate as some advisors would have you believe. I have mentioned in the past that I have some trepidation that too many traders are embarking on delta neutral strategies without understanding that — like any other strategy — they involve work to operate profitably.
This article was originally published in The Option Strategist Newsletter Volume 9, No. 16 on August 24, 2000.
It is somewhat common knowledge amongst option traders that the CBOE’s Volatility Index ($VIX) can be used as a predictor of forthcoming market movements. In particular, when volatility is trending to extremely low levels – as it is doing now – it generally means that the market is about to explode. In this article, we’ll put some “hard numbers” to that theory and we’ll also look at alternate measures of volatility (QQQ and the $OEX stocks themselves) to see what they have to say.
This article was originally published in The Option Strategist Newsletter Volume 15, No. 2 on January 26, 20006.
The time is nigh for us to once again consider one of our most reliable seasonal trades – the January Seasonal. Simply stated, the system is this: buy “the market” at the close of trading at the close of the 18th trading day of January, and sell your position at the close five days later.
This article was originally published in The Option Strategist Newsletter Volume 16, No. 3 on February 16, 2007.
Last month, we saw the standard put-call ratio experience some very herky-jerky movements on its chart. As we pointed out at the time, those distortions were due to heavy dividend arbitrage in Altria (MO), JP Morgan (JPM), and AT&T (T). Since dividend arbitrage has become much more prevalent in recent quarters, we feel it’s time to examine this issue to see if there is something that needs to be done to “cleanse” the data of this extraneous, but extremely heavy, call option volume.
This article was originally published in The Option Strategist Newsletter Volume 19, No. 24 on December 24, 2010.
The “January defect” is the first seasonal trade of the year. The “system” states that the NASDAQ-100 usually falls from about the 8th trading day of January to the 18th trading day. The system’s results are shown in Table 1, in the next column.