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The October Seasonal Trade - 2020 Update (Preview)

By Lawrence G. McMillan

One of our favorite seasonal trades – and one of the most rewarding – is the October Seasonal Trade. It will be coming up at the end of October. It calls for buying “the market” on October 27th and selling out your position on November 2nd . BUT...the trade is only taken if there has been a 3.2% or larger decline sometime during the month of October. So far, we don’t have that last criterion satisfied, but it’s still early in October.

How the stock market may react to a Contested Election (Preview)

By Lawrence G. McMillan

There has only been one contested election since listed options have been trading – the 2000 election between George W. Bush (43) and Al Gore. Election day was November 7th, 2000. The accompanying charts, courtesy of tradingview.com, show the pertinent time period. The three months August, September, and October “+” – as shown in the table at the beginning of this article – are noted in blue on the $SPX chart of 2000. There had been a good rally in August, but that had been completely reversed by mid-October. Then a late October rally brought $SPX back almost exactly to where it had been on July 31st – meaning that the three-month period was essentially a “wash.”

The Cumulative Advance-Decline Volume Line Buy Signal (Preview)

By Lawrence G. McMillan

This is a subject that we wrote about in the July 31st, 2020, issue. Cumulative Advance-Decline Volume Breadth (CVB) is determined by 1) calculating the daily difference between volume on advancing issues minus volume on declining issues, and then 2) keeping a running sum of that daily total. We pointed out that there have been a few times in the past where this CVB made a new all-time high while $SPX had yet to do so. Every time, $SPX followed along to a new high of its own.

$SPX in Presidential Election Years - 2020 Update (Preview)

By Lawrence G. McMillan

$SPX In Election Years

We have $SPX data going back to 1950, so it wasn’t too difficult to construct the following Table, which shows the performance of the market (as measured by $SPX) each election year, from the last trading day in July through the day prior to Election Day. It should be noted that the stock market was closed on Election Day until 1984 – a rare bit of trivia probably not known by most younger traders.

Aftershocks of a Bear Market on the Volatility Space (Preview)

By Lawrence G. McMillan

There are currently a number of factors affecting the CBOE’s Volatility Index ($VIX), most notably the upcoming Presidential Election and the fears of market volatility that a contested election might foist upon the stock market. But there is another element that is affecting $VIX, and it is not getting much press. Specifically, it is the after-effect of an initial bear market “shock” on $VIX.

The (Election Year) Seasonality of $VIX (Preview)

By Lawrence G. McMillan

This year has been a wild and crazy year in many respects – probably nowhere more than in volatility.  That has manifested itself in the trading of $VIX.  Over the years, we have sometimes described the seasonality of $VIX.  As it turns out, it often follows a very similar pattern (although not completely this year).  Moreover, in election years, the pattern is altered in a way that is, perhaps, developing this year as well.

An Update on Cumulative Breadth and Volume (Preview)

By Lawrence G. McMillan

Every so often, we take a look at cumulative breadth and volume, when they appear to have something to “say.” This could be one of those times, as cumulative volume has already made a new all-time high (in “stocks only” terms) as has cumulative breadth.

First, some definitions and nomenclature:

Cumulative breadth (CB): the running daily total of advances minus declines.

Things Could Really Get Insanely Bullish (Preview)

By Lawrence G. McMillan

In the November 1929 - April 1930 rally, stocks rose 48% and volatility (all that we have to go on from that time period, of course, is realized/historic volatility) dropped from 112% to 8%!! Then we all know what happened after that: the wheels came off, and the market made new lows by October 1930, and the rout was on.

Some Perspectives on Volatility and Its History (Preview)

By Lawrence G. McMillan

We are currently, in March 2020, in one of the three most volatile markets in history.  In terms of absolute price change, it has no peers.  In terms of percentage price change, 1929, 1931-1933, and 1987 are all in the mix (but not 2008, which has been surpassed).  If we looked back even farther, there would be other markets which were volatile, too (1907, for example), but in this paper we are not looking back past 1928.  

Dusting Off An Old Indicator (Preview)

By Lawrence G. McMillan

We first wrote about this indicator in the August 10, 2012, issue (tos2115.pdf, if you’re looking for the file name in the back issues). Excerpting from that article:

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