This article was originally published in The Option Strategist Newsletter on 7/30/2021.
One of the tougher choices an option trader faces is what to do with a profitable position. That’s a good choice to have, but it might not be any easy one. Our philosophy is always to let profits run. Therefore we use trailing stops, not targets. Targets only take you out of your best positions way before they have run their course. But even within the framework of using trailing stops, there are some choices to be made besides just raising the trailing stop as a long call position gains profits. Specifically, when should a profitable long call be rolled up or a profitable long put be rolled down – if at all?
Last week, the market experienced both a 90% down day and a 90% up day—an uncommon and potentially concerning combination. These “90% days,” defined by extreme imbalances in advancing vs. declining stocks or volume, often appear during periods of market stress or transition.
Volatility has returned to the market in full force. With major indices swinging sharply and investor sentiment shifting rapidly, it's more important than ever to rely on objective data and time-tested indicators.
That’s why I recently hosted a special webinar to share my current analysis and help investors make sense of these turbulent conditions. If you weren’t able to attend live, I encourage you to watch the full replay here.
What had been a mediocre, oversold rally failed right where such rallies normally do -- at the declining 20-day moving average. It just so happened that the 200-day moving average of $SPX was in the same area. That was just over a week ago. Then, $SPX quickly declined to the lower edge of the trading range (near 5500) and found support once again.
With the recent market sell-off, some traders have been shifting from selling puts to writing covered calls. The argument is that selling puts in a declining market is riskier, while covered calls provide a safer way to generate income. However, this belief misunderstands the fundamental equivalence of the two strategies.
The put-call ratio is a widely used sentiment indicator in options trading, helping investors gauge market positioning by comparing the volume of put options traded to call options. However, there are two primary ways to calculate this ratio: the standard put-call ratio and the dollar-weighted put-call ratio. Understanding their differences can provide deeper insight into market behavior.
Each day, The Daily Put-Writer newsletter provides a list of potential naked put-sale candidates, selected using McMillan’s proprietary put-writing methodology. In addition to the daily list, we highlight specific trading opportunities when conditions are favorable.
Today’s Put-Sale Candidates
Below is a sample of today’s top put-sale candidates:
Join Larry McMillan as he discusses the current state of the stock market on March 17, 2025.
