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Harnessing Market Direction with the Butterfly Option Strategy | Webinar Recording

By Lawrence G. McMillan

In a market environment where volatility is the norm, traders need flexible strategies that adapt to changing conditions. One such strategy is the butterfly spread, a time-tested approach that can be tailored to suit neutral, bullish, or bearish market biases.

To Roll Or Not To Roll – That Is The Question!

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter on 7/30/2021.

One of the tougher choices an option trader faces is what to do with a profitable position. That’s a good choice to have, but it might not be any easy one. Our philosophy is always to let profits run. Therefore we use trailing stops, not targets. Targets only take you out of your best positions way before they have run their course. But even within the framework of using trailing stops, there are some choices to be made besides just raising the trailing stop as a long call position gains profits. Specifically, when should a profitable long call be rolled up or a profitable long put be rolled down – if at all?

Tracking 90% Days: A Warning Sign for Market Stability

By Lawrence G. McMillan

Last week, the market experienced both a 90% down day and a 90% up day—an uncommon and potentially concerning combination. These “90% days,” defined by extreme imbalances in advancing vs. declining stocks or volume, often appear during periods of market stress or transition.

Covered Calls vs. Selling Puts: The Same Strategy, Different Name

By Lawrence G. McMillan

With the recent market sell-off, some traders have been shifting from selling puts to writing covered calls. The argument is that selling puts in a declining market is riskier, while covered calls provide a safer way to generate income. However, this belief misunderstands the fundamental equivalence of the two strategies.

Understanding the Difference Between the Standard and Weighted Put-Call Ratio

By Lawrence G. McMillan

The put-call ratio is a widely used sentiment indicator in options trading, helping investors gauge market positioning by comparing the volume of put options traded to call options. However, there are two primary ways to calculate this ratio: the standard put-call ratio and the dollar-weighted put-call ratio. Understanding their differences can provide deeper insight into market behavior.

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