By Lawrence G. McMillan
The feature article discusses a protection technique – collar buying – that is favored by many sophisticated stock owners, including institutional traders.
In the article, two types of collars are discussed: micro and macro. Furthermore, there is a technique whereby one uses a partial collar (sometimes called an “open collar”) that preserves some upside profit potential, while still providing downside protection.
Our market opinion is on page 5. The indicators are still bullish, but overbought conditions are really beginning to run to extremes. Expect a sharp, but possibly short-lived correction, although the history of seasonality would generally augur more for a January than a December correction .
One page 6, we discuss the “5th year of the decade” phenomenon. The market hasn’t been down in the 5th year, going all the way back to 1895. That’s pretty impressive, but some traders seem to be trying to get ahead of the curve.
On page 7, there is a recap of the trading systems that we used, which were very successful in October. Also on that page is a recap of the newest CBOE volatility trading vehicle.
Recommendations on page 9 include a svolatility trade in BLK.B and a speculative trade in IBM.■
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