This article was originally published in The Option Strategist Newsletter Volume 19, No. 15 on August 13, 2010.
When one hedges risk in his portfolio – whether via broad-based index option strategies or via individual stock options – that doesn’t necessarily end the discussion. Later, especially if the underlying declines sharply in price, one has decisions to make. In this article, we’ll discuss those decisions as they apply to the somewhat popular strategy of “collaring” stock.
This article was originally published in The Option Strategist Newsletter Volume 20, No. 14 on July 29, 2011.
There has been something of a “buzz” in volatility forums and in some media articles about a backspread strategy that is designed to take the loss out of using $VIX options for protection or speculation. As you know, we are running a “perpetual call buy” strategy for long $VIX calls (Position S610). Also, this week we recommended the purchase of $VIX calls as protection for stock portfolios, for those who were worried about what might happen in the event of a downgrade of U.S. debt or a failure to raise the debt ceiling. However, this backspread strategy purports to be better because it allows you to exit before much, if any, loss occurs. As all thinking traders know, however, there is no free lunch. If there’s really no risk, then something else has to give. You’ll see what we mean.
The broad stock market continues to plow ahead, as $SPX has made new closing or intraday all-time highs on 10 of the last 14 days, including the last two. Thus, momentum is strong and the $SPX chart remains bullish.
There is a modest support level at 3065 (the early November lows) and a more valid support at 3025-3030 (the previous all-time highs). It would be disappointing for the bulls to see 3025 taken out.
In what will become a semi-regular occurance, McMillan Analysis Corp. President Larry McMillan recorded a video in which he discusses his current stock market outlook. Larry discusses the current state of our option-oriented indicators which are all currently bullish. Watch below or click here.
The broad market is putting on a rather spectacular bullish performance. $SPX has repeatedly gapped to new all-time highs on at least four separate days since October 28th.
There is general support in the area of the old highs, at 3025- 3030. The next lower support at 2950 is crucial to maintaining the bull market. A close below there would be a game-changer, but it doesn't seem to be a problem at this time.
This article was originally published in The Option Strategist Newsletter Volume 22, No. 22 on November 29, 2013.
There are a number of trading systems involving the days before and after Thanksgiving. Some are quite profitable, and some not so much. For some reason, there even seems to be a certain amount of misinformation about one of these systems, although that arises from financial television, which is incorrect, not surprisingly. In this article, we’re going to take a look at three such systems: one encompassing the three trading days prior to Thanksgiving, one looking only at the day after Thanksgiving, and a longer-term one involving a period several weeks after Thanksgiving. This latter one has a few interpretations, so we’ll expand our analysis of that one.
Stocks broke out to new all-time highs this week, finally getting confirmation of a "bullish" status from the $SPX chart. That goes well with the other indicators, which have all been bullish for some time already.
There should now be support near the previous all-time highs, in the 3025-3030 area. Below, there is important support at 2950. A close below there would be negative.
This article was originally published in The Option Strategist Newsletter Volume 14, No. 10 on May 26, 2005.
Statistically-based trading is normally applied to hedged positions. It could be pairs trades for stock traders, or option spreads for option traders, or intramarket spreads for futures traders. But generally, the position is one that is based on a relationship between the entities involved – whether that relationship be a price-based relationship or a volatilitybased relationship. The position can be evaluated using assumptions about price relationships or about volatility, and those assumptions are based in historic fact, upon which mathematical calculations can be made (expected return, for example, and then the Kelly Criterion).