So we have a sort of standoff developing. It would have a bullish resolution if $SPX could rally to 3184 and close the gap on the island reversal. However, a further break below that support at 2965 would be to the bears' advantage. So, in the short- term we are waiting for a breakout to occur.
The equity-only put-call ratios remain overbought. The standard ratio continues to trade at or near 16-year lows, as both ratios remain on buy signals in overbought territory.
This article was originally published in The Option Strategist Newsletter Volume 8, No. 16 on August 26, 1999.
Q: I would like to ask you about delta neutral trading which I have heard and read about. Could you give me a brief description, it's merits and drawbacks, and in what situations it is best used. K.T. 6/17/99
A week ago, stocks were on their heels after one of the worst down days on record on June 11th. Prices rallied within a couple of days, but the negativity of that day still hangs over this market. If $SPX were to fall below 2920, that would be bearish. But as it stands, the $SPX chart remains bullish as long as the Index holds above 2920.
Equity-only put-call ratios continue to fall, thus remaining on buy signals. That will continue to be the case until they visibly roll over and begin to rise.
Stocks continue their wild ride. Yesterday, $SPX gapped open strongly higher, then gave back all the gains in a very short period of time when Fed Chairman Powell said that the Fed might not be buying everything, forever. But that selloff was quickly reversed in a matter of minutes. In the end, $SPX closed nearly 60 points higher, It closed right at the lower edge of the gap from last Thursday. If that gap is filled (at 3182), it would be another bullish sign. Short-term support exists at 2965 (Monday’s low, which was left in the dust by the 188-point rally that followed in about 1 trading day, as Monday’s lows were made in the morning and Tuesday’s highs were also registered in the morning; the move in futures was even larger). Below that, support in the 2920-2940 range is important. It is the top of the trading range from April-May; if $SPX were to fall back into that trading range, it would negate a lot of work that’s been done since then.
This article was originally published in The Option Strategist Newsletter Volume 12, No. 23 on December 11, 2003.
Probably too many traders treat options as pure speculation rather than the theoretically more profitable treatment as a hedging vehicle or as a way to take advantage of pricing discrepancies. Many of our articles deal with hedging or volatility trading (which is the generic term describing theoretical value trading), but in this article we’re going to change gears a little and talk about speculation – plain old vanilla option buying. Specifically, we’re going to talk about how option activity might denote a potential trade in a stock or its options, and then we’ll discuss how to follow up on the position – setting stops, and letting profits run if they develop.
This article was originally published in The Option Strategist Newsletter Volume 15, No. 6 on March 30, 2006.
As our regular subscribers know, the CBOE recently listed cash-based options on its Volatility Index ($VIX). We have published several recent articles describing the details of these options, so we’ll review those only briefly in this article.