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Covered Writing vs. Put Selling (02:09)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 2, No. 9 on May 13, 1993. 

Covered call writing is not one of our normally recommended strategies, because we prefer ratio writing or the equivalent, since it is a more neutral strategy. However, covered writing is a strategy practiced by many option investors and therefore is a topic worthy of discussion. In this article, we will approach this subject from a slightly different, more sophisticated viewpoint: we will compare the covered call write with the sale of a naked put. In addition, we'll see how this comparison leads us to conclusions regarding neutral strategies such as ratio call writing or straddle and combination selling.

Preparing for Volatility Trading (13:04)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 13, No. 4 on February 26, 2004. 

As we’ve mentioned before, the CBOE is about to offer us the ability to trade volatility. We expect this to be a very successful product – perhaps the most successful new listed derivative product since the introduction of index options over 20 years ago. We want you, our readers, to be prepared for this event. Hence, we will run a series of short articles prior to their introduction, to ensure that everyone knows the facts and understands the basic strategies.

Leverage (Part 1 of 2) (14:16)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 14, No. 16 on August 25, 2005. 

Most traders realize that leverage is available through margin accounts, futures, and options, but give it little thought in terms of constructing strategies or even in terms of developing broader trading plans – i.e., business plans.

More On: Protecting A Stock Portfolio With $VIX Options (15:07)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 15, No. 7 on April 14, 2006. 

Areader question regarding last issue’s feature article indicates that some expansion on the topic might be useful.

How Often do Futures Options Expire Worthless? (15:07)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 15, No. 7 on April 14, 2006. 

Over the years, we have published several articles dealing with the frequency of stock and index options expiring worthless. Generally, they don’t expire worthless nearly as often as (incorrect) conventional wisdom thinks. At a recent seminar, an attendee asked for the same data concerning futures options, and we didn’t have it! So, we’ve begun some research, and it looks like it could be quite interesting. In this article, we’ll look at a few of the futures markets, with the idea of adding more of them, as time for research permits.

The “Protection Trade” (21:16)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 21, No. 16 on August 24, 2012. 

For quite some time now (perhaps since last November), we have been pointing out how the voracious appetite for volatility protection has had the effect of distorting the term structure of the $VIX futures. Recently, though, this activity has branched out in a way that is only rarely seen in the markets: in short, large institutional traders are both buying stocks and buying volatility ETNs (thus, by inference, they are buying $VIX futures). Hedging on a large scale can distort technical indicators and other things – such as the term structure. That is, we can’t really interpret this activity in a contrary manner. Are these traders bullish (because they’re buying stocks) or bearish (because they’re heavily buying protection)? In truth, it’s probably the former, but their need to buy protection also means they’re not overly bullish. This reminds me very much of what was happening in QQQ options at the end of the tech stock craze in 2000.

THE BASICS: Review and Explanation of Concepts: Just Why Is Volatility So Important? (04:04)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 4, No. 4 on February 23, 1995. 

If it seems that we preoccupied with volatility, it's because we are. It is the only variable factor in determining the fair value of an option; the others are known with certainty at any point in time — strike price, time remaining until expiration, stock price, dividends, and short-term interest rates. However, it has practical and real application as well. If you buy options when volatility is low, then you stand to gain doubly if volatility increases. Or, even if you're wrong on the direction of the underlying market, your loss will be reduced if volatility increases. Some examples may help to clarify these points.

Some Nuances Of Volatility Trading (17:17)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 17, No. 17 on September 12, 2008. 

We often get questions regarding the operation of volatility trading strategies. While we endeavor to explain why we are establishing certain trades, or why we are taking follow-up action, we really haven’t put it together in a sort of “how to” article. That’s the purpose of this week’s feature.

Modern Portfolio Protection (16:13)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 16, No. 13 on July 13, 2007. 

In this newsletter, over the years we have presented many methods for protecting a portfolio of stocks. Some are “ancient,” such as buying S&P 500 Index ($SPX) puts and some are “new,” such as buying $VIX calls. With the continuation of the bull market well into its fourth year (making it the fifth longest bull market in history – but not the fifth largest), many portfolio managers and individual investors are becoming concerned that a sharp correction may be more than just a remote possibility. As such, the topic of protecting a portfolio with derivatives has once again risen to the forefront. With that in mind, I wrote The Striking Price column in Barron’s this week, on this topic.

The VIX/$SPX Trade (17:20)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 17, No. 20 on October 24, 2008. 

In recent weeks, one of the more profitable strategies has been the $VIX/$SPX hedged trade. We have recommended it several times in this publication, as well as in other newsletters that we write. Many of our readers have asked for more information on the strategy, as it is either new to them, or they haven’t tried to use if before. So this article will describe the strategy in detail – discussing its basic concepts, determining how many options to trade on each side of the hedge, and finally how to handle follow-up strategies.

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