This article was originally published in The Option Strategist Newsletter Volume 6, No. 2 on January 22, 1997.
During expiration week, we often talk about the importance of monitoring option activity in OEX because it can have an influence on the overall market. This is especially important for stock traders and stock index futures traders. Whether you're short-term oriented or merely wanting to know what's going on, you should understand the ramifications of an early exercise of OEX options.
This article was originally published in The Option Strategist Newsletter Volume 4, No. 12 on June 21, 1995.
With the market being so high, many individual investors and institutional money managers as well are wondering what to do with these profits. Completely exiting the market is not a viable alternative for many, and is prohibited by charter for some institutions. However, there is a way in which one can reduce his downside exposure while still retaining upside profit potential — he can sell his stock and replace it with LEAPS call options.
This article was originally published in The Option Strategist Newsletter Volume 14, No. 5 on March 10, 2005.
One of the recurring themes in option-oriented media articles is that the $VIX Index is “too low.” Since many observers – media and traders alike – view $VIX as solely a contrarian indicator, this is a danger sign for the market. These observers figure that such a low $VIX implies that traders are, in general, too complacent, and thus the market is ripe for a beating. There are a lot of errors in these observations and opinions, and so we’d like to set the record straight. We have written articles about similar topics in the past, but with $VIX hovering near nineyear lows for such a long time (at least three months now), it is perhaps more timely now than ever.
This article was originally published in The Option Strategist Newsletter Volume 18, No. 06 on March 26, 2009.
We have written about this topic many times in the past, but the $VIX futures’ ability to predict broad market movements has been called into question recently. For example, at the recent CBOE Risk Management Conference in Laguna Niguel, California, there was some discussion that the $VIX derivative products had lost their ability to “predict” movements in $SPX. That is not entirely true. What has spurred this sort of thinking is the fact that $VIX did not spike up to a peak and snap back down again when $SPX most recently declined sharply into what is so far a “V” bottom at 670. Also, discrepancies in the term structure, which at one time resulted in immediate movements in $SPX, have taken much longer to materialize in recent months than they used to.
This article was originally published in The Option Strategist Newsletter Volume 5, No. 2 on January 25, 1996.
It's been almost a year since we addressed this topic. If this article is the springboard for a market like we had last year, then you won't need portfolio insurance. However, it never hurts to know about it, especially with the market being at such lofty levels, and many investors sitting on large unrealized gains in their stock portfolios.
This article was originally published in The Option Strategist Newsletter Volume 5, No. 19 on October 11, 1996.
We often refer to implied volatility and its uses. However, it's been some time since we actually discussed the use of implied volatility as a predictor of market movement. Consequently, we have received number of subscriber requests for this information and have decided to satisfy those requests with this article. The gist of this article is to use implied volatility as an impetus for directional trading — i.e., to use it to predict where the underlying market is going to go, and then to make an outright buy or sell in that market. This is as opposed to trading volatility itself, which is a neutral strategy (that theoretically doesn't try to predict the direction of the underlying market at all). This latter concept results in the type of strategy offered under "Trading Volatility".
This article was originally published in The Option Strategist Newsletter Volume 4, No. 2 on January 26, 1995.
One of the most important features of options is that they can remove some or all of the risk of stock ownership (or futures, where futures options are concerned). This is particularly attractive to stock owners who want some form of "insurance" against a steep or prolonged market decline.
There are several ways in which options can be used as an insurance policy for one's portfolio of stock. One might sell calls, or he might buy puts, or he might do both. In any case, these option transactions would profit if stocks fell and that profit would offset some or all of the losses incurred by stocks owned during the market decline. These concepts are not complicated and are used by many stock owners, particularly professional money managers.
The recording of Larry McMillan and Ken Calhoun's recent "Option Indicators & Breakouts" webinar is now available. In the video, Mr. McMillan discusses the current state of option-oriented indicators and delves into the trading systems behind the recent successful buy signals. Check out the video below or click here.
This article was originally published in The Option Strategist Newsletter Volume 4, No. 11 on June 8, 1995.
One of the facets of an option's description is when that option may be exercised. This is usually called the style of the option. For example, American style options may be exercised at any time during the life of the option (in reality, they may be exercised at the end of any trading day). The term, style, is applicable to all options although many investors are not too concerned with it. This is because all listed stock options and all listed futures options are American style, and thus the average investor who trades those types of options is quite accustomed to being able to exercise whenever he wants (or, if he has written the option, he knows that he can be assigned at any time).
