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Some Random Thoughts On Options Trading (02:22)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 2, No. 22 on November 26, 1993. 

When I was in Europe recently, one of the attendees at the Colloquium asked me what guidelines I generally followed in my option trading. This is actually a rather thought-provoking question, especially when it regards something you do almost every day. In our many feature articles, many useful general strategies have been given, but not assembled all in one place. After giving the matter some thought, it seemed like it might be beneficial to list some of the "rules" that we follow, either consciously or sub-consciously after all these years.

Credit Spreads or Debit Spreads (12:07)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 12, No. 7 on April 10, 2003. 

A subscriber recently asked the question, “If the market is breaking down and options are expensive, would a call credit spread be the best low risk spreading strategy to use?” It’s a good question, and the answer gets into a dichotomy of sorts – in that a credit spread might not be the best strategy even when options are expensive.

It is sort of a “knee-jerk” assumption that a credit spread will do better than a debit spread if volatility collapses. In reality, that’s not true. If they both employ the same strikes, they will perform the same (otherwise, risk-free arbitrage would be available).

Condors and Credit Spreads: “Trouble?” or “Worth The Trouble?” (16:07)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 16, No. 7 on April 12, 2007. 

This article reflects some new research (or, more appropriately, backtesting) that we have done regarding credit spread strategies. These strategies are very popular at the current time with a large number of web sites and advisory services. However, it seems that most people don’t really understand the risk that they’re taking in this strategy. Many stories are now surfacing about condor spread accounts with losses of 50%, 60% and more. Most of these were caused by being heavily invested in a month when the underlying made a maximum move.

For completeness, let’s start at the beginning. A credit spread involves buying one option and (simultaneously) selling another option – where the two options expire in the same month, but have different strikes. If the option that is sold is trading at a higher price than the option that is bought, a credit is taken in when the spread is established. Hence it is a credit spread.

Weekly Stock Market Commentary 10/25/2019

By Lawrence G. McMillan

The rally that began two weeks ago, with an upside gap move on October 11th, continues but almost in slow motion.

We should have some resolution fairly soon as to whether this market is ready for a breakout to new highs or a return to the old trading range.

Equity-only put-call ratios remain on the buy signals that were generated a little over a week ago. Neither buy signal arose from a particularly high point on the put-call ratio chart, so they weren't the strongest of signals.

Earnings-Based Strategies (20:08)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 20, No. 8 on April 29, 2011. 

Once again, as we enter another earnings reporting season, we are seeing some large moves by individual stocks and perhaps even larger anticipation of moves by the option markets in advance of the earnings announcement. This was a topic of much discussion at the just-concluded 3 Gurus Webinar over the past two days. Because of that interest, we thought the subject is apropos as the feature article this week. In this article, we’re going to review the strategies that are often recommended in this newsletter.

The Strategy of Selling Naked Options (07:03)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 7, No. 3 on February 12, 1998. 

The attraction of selling something that may waste away to nothing leads many option traders to the strategy of naked option writing. However, the strategy is definitely not for everyone. Even for a suitable account, the strategy can “blow up” if not handled properly. Since volatility is so high these days – especially in index options – as compared to the levels of 1995 and earlier, it seems that the strategy is becoming more popular. Therefore, this article will outline some of the ways that naked writing – if undertaken at all – should be approached.

Put-Call Ratios on Stocks (07:22)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 7, No. 22 on November 25, 1998. 

Using options as a contrary indicator to aid in predicting the forthcoming path of the underlying instrument is one of our favorite technical tools. When option speculators agree en masse about something, they are generally wrong. So, as astute traders we should do the opposite (the exception, of course, is in stock options where someone might be acting on inside information, in which case we would want to go along with them).

Weekly Stock Market Commentary 10/18/2019

By Lawrence G. McMillan

Stocks have generally reacted favorably ever since the oversold "washout" on October 3rd (or maybe you prefer the other one, on October 8th). Those created oversold conditions that have spurred buying, along with somewhat positive news on the China trade front. However, there are a couple of things that keep this chart from being all-out bullish.

Larry McMillan on Money Life Podcast

By Lawrence G. McMillan

McMillan Analysis Corp. president Larry McMillan was recently intereviewd on Chuck Jaffe's Money Life podcast where he explored the current state of our option-oriented indicators and discussed the current market environment.

Listen below or click here:

Weekly Stock Market Commentary 10/11/2019

By Lawrence G. McMillan

Violent market movements have followed nearly every piece There are both bearish and bullish signals in place, although the bears are being put to the test today.

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