Stocks have continued to rally from the June lows, with the rally picking up steam over the last three or four weeks. But now it has run into the heavy resistance area of 4070-4170, which was initially established back in the early part of June. A clear breakout over 4170 would be bullish and would likely then call for a challenge of the bear market downtrend line at 4300+.
Stocks are continuing to rally, and for the first time in a while there is a pattern of higher highs and higher lows, at least in the short term. The major intermediate-term trend of $SPX is still negative (outside blue lines on the chart in Figure 1), but the short term has accomplished some objectives. For example, the gap on the chart at 4017 has been closed.
This article was originally published in The Option Strategist Newsletter Volume 11, No. 16 on August 22, 2002.
The sale of naked options is a strategy that is probably over-used, in general. However, at the current time, with options remaining expensive, but with the skews lessening, volatility traders’ thoughts should turn more towards selling options these days. This is one of the riskiest option strategies, since losses could be large – even theoretically unlimited. However, the probabilities of such losses occurring might be lessened and the overall profitability turned in favor of the option seller. In this article, we’ll look at the specifics behind writing naked options successfully.
This article was originally published in The Option Strategist Newsletter Volume 9, No. 18 on September 28, 2000.
While the title may look like a typo, it’s what we want to talk about. In order to discuss the implied volatility of a particular entity – stock, index, or futures contract – we generally refer to the implied volatility of individual options or perhaps the composite implied volatility of the entire option series.
The downtrend lines are still in place on the $SPX chart, but the short-term outlook has improved greatly. the rally that began on July 15th seems stronger than most of the oversold rallies that we have seen so far.
But there is stronger overhead resistance above current levels. First, there is the gap, which extends up to 4017. Closing that gap would be a strong positive move. Then above there, the trading range from early June, at 4070 4170 is strong resistance.
This article was originally published in The Option Strategist Newsletter Volume 8, No. 22 on November 24, 1999.
At a recent seminar or conference (don’t ask which one – there have been too many to distinguish one from another!), the subject was raised regarding the effect of time decay on an option. As the discussion progressed, it dawned on me that many (perhaps novice) option traders seem to think of time as the main antagonist to an option buyer. However, when one really thinks about it, he should realize that the portion of an option that is not intrinsic value is really much more related to stock price movement and/or volatility than anything else – at least in the short term.