Blogs

Long-term Put-Call Ratio Charts (Preview)

By Lawrence G. McMillan

We have been repeatedly noting that the equity-only put-call ratio charts are at multi-year lows.  The charts on the right show visual evidence of this.  

These are very long-term put-call ratio charts, extending back 25 years in the case of the standard ratio (upper chart) and 20 years in the case of the weighted ratio (lower chart).  

Bitcoin Futures on the CBOE Futures Exchange ($XBT)

By Lawrence G. McMillan

The CBOE will begin trading Bitcoin Futures with Sunday night’s trading (December 10th). These are the basic facts about the contract, as taken from the website (the CME futures begin trading on Dec 18th).

Weekly Stock Market Commentary 12/8/2017

By Lawrence G. McMillan

Despite some selling early in the week (that seemed to be more of a reaction to a short-term overbought condition than to any real change of trend) $SPX still remains well above its rising 20-day moving average. It has closed above that MA every day except one since August 28th! As I've said before, that is impressive. So the trend of the $SPX chart is bullish, and that is the best intermediate-term indicator that we have.

The two equity-only put-call ratios are diverging once again. The standard ratio is still bullish, but the weighted ratio has generated a a new sell signal.

Weekly Stock Market Commentary 12/1/2017

By Lawrence G. McMillan

The post-Thanksgiving seasonal period got off to a rousing start perhaps too rousing. The $SPX chart remains positive as long as it holds above support. The first support level is at 2600, which is the recent highs and also near today's (Friday's) lows.

Call buying has been particularly heavy in the past two weeks, on the latest leg upward in this ongoing bull market. That has forced the equity-only put-call ratios down to multi-year lows. Simply stated, these ratios are in extremely overbought territory, but they are still on buy signals as long as they are declining.

Can the market go up and $VIX rise as well?

By Lawrence G. McMillan

Traders are abuzz with the seemingly absurd fact that $VIX is up strongly today (and up for four days in a row), even though the market has risen strongly over that time – and is blasting explosively higher today.  

Forget why this is happening.  Can this be sustained?  The simple is answer is “yes,” of course.  Anything can happen – and probably will – is an old adage on Wall Street (and in life).  But has this ever happened over a lengthy period of time?  It certainly has.

Weekly Stock Market Commentary 11/27/17

By Lawrence G. McMillan

The stock market has signaled that whatever was holding it back for the past couple of weeks ("correction" would be too strong of a word) is over. $SPX and all the other major indices have broken out to new closing and intraday all-time highs. This includes the previously-lagging Russell 2000 Index ($RUT, IWM).

For the record, there is support on the $SPX chart at 2560 (last week's lows), 2545 (the late October lows), and 2510, the breakout level back in September. Since this latest upward leg in the market started, with that breakout over 2510 in late September, $SPX has closed below its rising 20-day moving average exactly once!

Collapsing Volatility (18:22)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 18, No. 22 on November 26, 2009.

No matter how you measure it, volatility is decreasing. There are several reasons for this – and we’ll discuss them in this article. In addition to traders’ perceptions about forthcoming actual volatility, there are some strategy-related influences, as well as seasonal influences, that are contributing to this most recent decline in volatility.

Let’s begin by noting that the CBOE’s Volatility Index ($VIX) is at or near its yearly lows and hasn’t been significantly lower since September, 2008, prior to the Lehman bankruptcy. The “old” $VIX – trading under the symbol $VXO since 2003 – has already closed at new yearly lows this week. $VIX is just slightly below 21, but $VXO is already approaching 19. While it is true that these volatility measures are based solely on the S&P 500 Index ($SPX) options that trade on the CBOE, they are and always have been a good measure of the overall mood and volatility of stocks in general.

Seasonal Patterns Around Thanksgiving (Preview)

By Lawrence G. McMillan

The Thanksgiving holiday in the U.S. brings about several positive seasonal patterns that are generally worth playing.  A number of years ago, we used to trade these separately, but then it became apparent that one generally “morphs” into the other, and so in today’s world, these three systems are really blended into one.  The three systems, in their original format, were:

Weekly Stock Market Commentary 11/17/2017

By Lawrence G. McMillan

$SPX remains in a bullish trend, despite breaking one support level this week -- a level which it quickly recovered. There is support at 2557 (Wednesday's low, from which prices have rallied over 30 points in a day). Below that, there is support at 2545 (the October lows), and then the major support at 2510 -- the September highs, and the area which launched the current leg of this long market rally.

The equity-only put-call ratios are split in their nature. The weighted ratio dropped to multi-year lows in late October and gave a sell signal shortly thereafter. It remains on that sell signal, but the standard ratio is on a buy signal.

A Supplement To $VIX (09:07)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 9, No. 7 on April 13, 2000.

The CBOE’s Volatility Index ($VIX) has been a stalwart for option traders and technicians since it was introduced in the early 1990's. The $VIX measures the implied volatility of $OEX options. However, in recent months, the trading in $OEX options has slowed dramatically, and many traders have forsaken them for the more active and volatile equity options – especially NASDAQ options. As a result, $VIX is becoming harder to interpret. Therefore, we thought that perhaps another Volatility Index could be constructed as a useful supplement to $VIX. It would be a “supplement” rather than a “replacement” because there may come a day when most speculators return to the $OEX market. If that were to happen, then $VIX would regain its former place as a premier measure of public sentiment.

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