Stocks have continued their sharp pullback after failing to break through the bear market downtrend line. That challenge came in mid-August at the 4300 level, and the decline since then has been steady and swift. Oversold conditions are beginning to appear, and soon we will see some confirmed buy signals, but the $SPX chart is still bearish and so a "core" bearish position is recommended. Other signals can be traded around that.
This article was originally published in The Option Strategist Newsletter Volume 1, No. 2 on January 9, 1992.
All strategy recommendations made by "The Option Strategist" have a graph accompanying them that displays the delta of the entire position. Moreover, this graph also displays how the delta of the position is expected to change as the stock moves up or down in price. This article describes the position delta and how to best use it, especially for follow-up action.
This article was originally published in The Option Strategist Newsletter Volume 17, No. 4 on February 28, 2008.
Most option traders are acutely aware of their costs – especially commissions, but also bid-asked spreads, slippage, and so forth. But there is one area that can prove very costly to an option trader if he’s not aware of how to navigate it – and that is selling an option that should be worth parity, but is bid below that level. Most of the time – but not always – these “parity” situations arise at or near the option’s expiration date.
This article was originally published in The Option Strategist Newsletter Volume 8, No. 5 on March 11, 1999.
From questions asked at seminars and personal appearances, it seems that most people have some difficulty in determining which option to buy once the decision to buy something has been made. This topic is perhaps more elementary than some of the rather high-powered volatility discussions of the past few issues, but it is a very important one. The option speculator must be able to make the “correct” decisions about which option to own, lest the research that was done in order to predict the forthcoming direction of the underlying instrument be wasted by the purchase of the “wrong” call (or put).