What’s Going On In $VIX? (Preview)

By Lawrence G. McMillan

Over the past few days, volatility has exploded, but the decline in the Standard & Poors 500 Index ($SPX) has been muted.  This is unusual, but not completely unprecedented.  We’ll take a look at what this might mean for movement in the broad market, as well as why this is happening.  As you might expect, there is more than one theory about what’s causing this aberration.

Weekly Stock Market Commentary 6/16/16

By Lawrence G. McMillan

The market was marching along towards new highs (albeit slowly) when some modest selling was accompanying by a big increase in volatility. The combination now has the market on its heels.

$SPX ran into resistance in the "usual" area between 2100 and the all-time highs of 2135. It has broken support at 2090 and 2080, and now support at 2040 looms large.

Equity-only put-call ratios have continued to remain on buy signals, despite the recent pullback in the broad market.

Option Basics: Credit Spreads

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 4, No. 7 on April 13, 1995.

Credit spreads using options are a popular strategy. In this article, we'll define them, see how they work, and attempt to assess their true profitability. They have been growing in popularity recently, partially for the wrong reasons, as we will see later in the article.

A Rare Move for $VIX

By Lawrence G. McMillan

...Volatility indices exploded to the upside for a second straight day yesterday. $VXST has gone from just below 11 to nearly 23 in three days (it rose 10 points in the last two days). $VIX itself went from 14.08 to 20.97 in three days.  First and foremost, that puts $VIX in a “spiking” mode.  Once in a spiking mode, we continue to track the intraday high price of $VIX.  Currently, that is 21.01 – yesterday’s high.  But it appears that $VIX will open higher this morning, as it is indicated another full point higher, even though $SPX futures are only down 7 points.  $VIX will generate a broad market buy signal when it closes at least three points below that highest intraday price.

Options Basics: Covered Straddle Writing

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 4, No. 13 on July 13, 1995.

Most option traders quickly realize that time is a very heavy factor weighing on the price of an option. This lesson often is driven home after buying an option and losing money.

"The Current State of Option Indicators" Recording Available

The recording for Larry McMillan's recent "The Current State of The Market-Predicting Option Indicators" webinar with Cyber Trading University is now available. In the video, Mr. McMillan discusses the chart of the S&P 500, the equity only put-call ratios, market breadth and the volatility indices and what they are saying about the stock market. Watch the video below.

Weekly Stock Market Commentary 6/10/16

By Lawrence G. McMillan

The Standard & Poors 500 Index ($SPX) is nearing its all-time highs. But the progress has been rather slow, especially in light of the fact that all of our other indicators are on buy signals. As you can tell from Figure 1, there is heavy resistance all the way up to the all-time highs at 2135 (upper thick red line). The first support level is 2090, and then 2040 below that.

Equity-only put-call ratios remain on buy signals. In addition, the Total put-call ratio is on a buy signal as well.

Market breadth has been strong ever since $SPX broke out of the triangle on its chart (Figure 1). As a result, both breadth oscillators are on buy signals.

Is this market setting a trap?

By Lawrence G. McMillan

Stock prices maintained a positive stance throughout yesterday’s session, once again producing new closing and intraday highs for this move.  Moreover, these are the highest prices since last July 2015.  Still, one has the feeling that the rally should be stronger, instead of essentially inching higher day by day.  Overnight, S&P futures are down  8 points, so today might be a down day.  There is support at 2090 and then 2040 below that.  

Option Basics: Buying Options As a Stock Substitute (04:01)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 4, No. 1 on January 12, 1995.

Buying options is often regarded as one of the most speculative activities. However, as we have shown time and time again, there are often differing ways in which one can establish a strategy. These different ways may change the speculative to the conservative, or at least moderate things somewhat. Buying options is no exception.

Option Basics: Bull Spreads (03:23)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 3, No. 23 on December 8, 1994.  

 Traders sometimes use bull spreads instead of actually buying calls when they want to hedge their bets somewhat. In this article, we'll take a look at how the bull spread works, and perhaps shed some light on the somewhat unusual characteristics of its profit potential as time passes.

Trading or investing whether on margin or otherwise carries a high level of risk, and may not be suitable for all persons. Leverage can work against you as well as for you. Before deciding to trade or invest you should carefully consider your investment objectives, level of experience, and ability to tolerate risk. The possibility exists that you could sustain a loss of some or all of your initial investment or even more than your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and investing, and seek advice from an independent financial advisor if you have any doubts. Past performance is not necessarily indicative of future results.
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