fbpx Blogs | Option Strategist

Blogs

Interpreting Put-Call Ratio Charts (21:15)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 21, No. 15 on August 10, 2012. 

In a continuation of the irregular series, explaining our analytical techniques, we are going to discuss how we interpret put-call ratio charts. This series began two issues ago with an article on naked put selling. Future articles in this series will encompass other aspects of position selection: calendar spreads, volatility skew-based trades, ratio spreads, and so forth.

Weekly Stock Market Commentary 6/14/2019

By Lawrence G. McMillan

The strong oversold rally that abruptly began on June 1st is still in play. It is slowing down, but the bears have not been able to retake any of the rally's gains. There is resistance at 2940-2950, with support at 2720-2730.

Equity-only put-call ratios remain solidly on their recent buy signals. The TOTAL put-call ratio is on a buy signal, too.

A Tax Tip For Covered Writers (10:22)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 10, No. 22 on November 21, 2001. 

This is not really a year-end tax strategy, but it is something that covered writers who are writing calls against low-cost-basis stock should consider.

Protecting Stocks: Covered Call Writing vs. Put Buying (12:10)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 12, No. 10 on May 22, 2003. 

Most people think of covered call writing as at least partial protection against a downside move by their stocks. Of course, buying a put as protection for a stock position affords a lot more protection – in fact, complete protection below the striking price. But call writing is generally more popular because it involves taking in option premium rather than paying it out. Still, there are times when one strategy is clearly superior to the other. This is one of those times. So, in this article, we’ll compare how stock owners should view the two in any environment and then specifically address the current environment.

Lower Your Risk by Buying Options (02:24)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 2, No. 24 on December 22, 1993. 

We have often stated that one can reduce the risk of stock ownership by buying call options instead. This, of course, is contrary to what many consider to be "conventional wisdom", in which option purchases are viewed as extremely risky things. As with most investments — and a lot of other things in life — it's a matter of application; every strategy can't be painted with a broad brush. We'll go over the way to make call option buying a lower-risk alternative to buying common stock, and then we'll apply it to a currently popular strategy involving the purchase of the highest-yielding Dow-Jones stocks at year-end.

Call Stupid (21:12)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 21, No. 12 on June 29, 2012. 

A"call stupid" is a rather arcane and little-known term, which is used to describe a position in which a trader is long two calls at two different strikes (probably with the same expiration date). It is often offset by a short position in the underlying security.

Weekly Stock Market Commentary 6/7/2019

By Lawrence G. McMillan

On Monday of this week $SPX was near its lows at 3pm. But from there, there has been massive buying all week. However, the $SPX chart is still bearish, because there are lower highs and lower lows on its chart. Oversold rallies typically carry from their lows up to and slightly above the declining 20-day moving average. That's exactly what this rally has done so far (the 20-day MA is just below 2830).

Portfolio Protection, Revisited (20:21)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 20, No. 21 on November 17, 2011. 

We have written about the subject of protecting a portfolio of stocks with derivatives several times over the years, although it’s been a while (Volume 19, Numbers 6 and 12 had articles on the subject). Recently, some subscribers have inquired about how to calculate the amount of protection they need.

Big SPX Moves

By Lawrence G. McMillan

Last fall, we published several studies in The Option Strategist Newsletter and summarized them here, as well as enacted several trades based on “big moves.” At the time, 20 of the 21 largest $SPX daily rallies had been reversed in a fairly short period of time afterwards (3 to 23 trading days). The only one that had not been reversed was the one coming out of the March 2009 bottom of the financial crisis. Then there were two – on December 26th, 2018, and January 4th, 2019 – that weren’t reversed either. The reason that these are usually reversed is that occur during volatile, bearish markets where rallies are fierce but short-lived. However, at the actual bottom (March 2009, December 2018) the rallies were real – not just oversold bounces.

How Implied Volatility Affects A Popular Strategy (09:03)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 9, No. 3 on February 10, 2000. 

We have often spoken about how to calculate or interpret implied volatility, and how to relate it to historic volatility. Some of these discussions have bordered on the theoretical, while others have been quite practical. However, we haven’t really addressed how implied volatility affects a specific option strategy.

Pages

Option Strategist
Blog Search

Recent Blog Posts

Trading or investing whether on margin or otherwise carries a high level of risk, and may not be suitable for all persons. Leverage can work against you as well as for you. Before deciding to trade or invest you should carefully consider your investment objectives, level of experience, and ability to tolerate risk. The possibility exists that you could sustain a loss of some or all of your initial investment or even more than your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and investing, and seek advice from an independent financial advisor if you have any doubts. Past performance is not necessarily indicative of future results.
Visit the Disclosure & Policies page for full website disclosures.

-->