This article was originally published in The Option Strategist Newsletter Volume 13, No. 5 on March 11, 2004.
In the last issue, we spelled out the details of the CBOE’s new volatility contracts, which are due to be listed on March 26, 2004. In this issue, we’ll spell out some strategies that every stock portfolio owner should consider – whether or not you currently trade options and/or futures. These new contracts (futures symbol: VX) are dynamic in that they will provide a hedge for you during a declining market, no matter when that decline occurs, and no matter where the market is when the decline begins. This is a vast improvement over, say, buying puts for insurance purposes. We’ll spell out the mechanics of operating such a hedging strategy, and we’ll look at some of the problems that may occur – at least as we can envision them from this vantage point in light of the fact that actual trading has not yet commenced.
The market remains overbought in many areas, and confirmed sell signals are beginning to appear. However, the most important indicator (the chart of $SPX) remains in a positive uptrend. There is support near 3725, more important support at 3630-3650, and then 3550.
This article was originally published in The Option Strategist Newsletter Volume 7, No. 2 on January 22, 1998.
From questions that subscribers have asked, and from conversations with other option professionals, it seems that there is a rather large contingent of stock owners who own stocks that are now at losses, and they want to know if options can help them out at this point. So, this article will discuss a simple strategy that can be used for these purposes – the stock “repair” strategy of placing a call spread on top of a long stock position.
On Monday, January 4th, the new year got off to a rocky start as selling built and exploded into a 90+ point selloff in $SPX. However, the decline bottomed at 3662, and the market has been rallying ever since. That brief selloff seems to have rejuvenated the market, and not only are new all-time highs being made, but they have been accompanied once again by rapidly expanding breadth.
This article was originally published in The Option Strategist Newsletter Volume 7, No. 11 on June 11, 1998.
An option strategist is often faced with a difficult choice when it comes to selling (overpriced) options in a neutral manner -- i.e., “selling volatility”. Many traders don’t like to sell naked options – especially naked equity options – yet many forms of spreads designed to limit risk seem to force the strategist into a directional (bullish or bearish) strategy that he doesn’t really want.
It looks like things are going to be very interesting in the new year. The market is strong, as evidenced by new all-time highs in all of the major indices this past week $SPX, $NDX, $DJX, and $RUT (although $RUT has faltered a bit in the last couple of days). Since price action is the most important indicator, the overall trend remains bullish as long as $SPX holds above support.