The prospect of lower rates in both Europe and the U.S. has driven the market into a bullish stampede, as it seems to be on a massive "high."
There should now be support on the $SPX chart at 2890-2900, the area which was most recently overcome as resistance. Below there, it's a sharp drop down to the major support at 2720-2730 (the March and June lows). There is no formal resistance, since we are trading at new all-time highs.
The stock market ($SPX) is opening at new all-time highs this morning, fueled by a very euphoric response to perceived rate cuts coming in both Europe and the U.S. That doesn’t seem like a recipe for long-term market success, but we are concerned with how the indicators look, rather than trying to predict what a small group of central bankers might do.
This article was originally published in The Option Strategist Newsletter Volume 10, No. 9 on May 10, 2001.
Most option traders understand that it is advantageous to buy “cheap” options. Unfortunately, most don’t cite any specific reasons why, other than the general “retail” concept that it’s better to buy something cheap than something expensive. Ironically, in the option markets, that’s not always true. There are times when buying expensive options is actually a “good” thing to do. But one must recognize that those occurrences are infrequent, and he must have a specific knowledge of what he can expect to happen to his position if he has stumbled into one of those more frequent times that expensive options are harmful to his profits.
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.
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.
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.
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.
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.
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).