Covered Call Writing: Why Cash-Based Put Selling is Superior

By Lawrence G. McMillan

In past issues of The Option Strategist Newsletter, we have stated that we mainly utilize naked put sales rather than covered call writes in its traditional form – even for cash accounts.  Several readers have asked not only how this works, but why we do this.  So let us explain.

Covered Call / Naked Put Sale

Some Random Thoughts On Option Trading: Option Trading Guidelines

By Lawrence G. McMillan

I was recently asked what guidelines I generally follow in my option trading. This is actually a rather thought-provoking question, especially when it regards something one does almost every day. In our feature articles, many useful general strategies have been given, but not assembled all in one place. After giving the matter some thought, it seemed like it might be beneficial to list some of the "rules" that we follow, either consciously or sub-consciously after all these years.

Indications are very bullish - $SPX $VIX

By Lawrence G. McMillan

MORRISTOWN, N.J. (MarketWatch) — While there are still some mixed signals for stocks, some very powerful signals have lined up so that the bulls once again have a chance to take control of this market.

Weekly Commentary 11/23/12

By Lawrence G. McMillan

The market, as measured by the Standard & Poors 500 Index (SPX) has been in a steady decline since mid-October.  There is resistance in the 1395-1410 area, and that must be overcome for the picture to become bullish.

Both equity-only put-call signals have now rolled over to buy signals!

The stock market got quite oversold near the recent lows.  Now, Monday's strong oversold rally gave birth to actual buy signals from the breadth oscillators.

Bears remain in control below $SPX 1400-1410 level

By Lawrence G. McMillan

Today's early market action was a continued grind higher as further shorts were forced out of their positions.  $SPX made the intraday high just below 1390, the upper end of resistance from 1380-1390.  Around 1:00pm EST the Fed Chairman finished up a speech that apparently the market didn't enjoy.  This triggered a wave of selling that brought the market down.  Despite the sharp midday selloff, we still believe this rally may have some more room to the upside, likely a test of firm resistance in the area of 1400 and slightly above.

Weekly Commentary 11/16/12

By Lawrence G. McMillan

The stock market has continued to decline rather sharply this week.  As a result, the support at 1370 was broken -- yet another major support level giving way.  The next major support level is likely to be 1330, which is the lows of last July (see Figure 1).

The equity-only put-call ratios are moving to the higher levels of their charts now (Figures 2 and 3), and in a sense, that is oversold.  However, they are clearly still on sell signals since they are trending higher.

In focus: Bears finally in control

By Lawrence G. McMillan

The bears have finally managed to take control of the stock market, mostly due to some worries about upcoming economic and regulatory issues. However, the market has quickly gotten oversold, so a bounce may be forthcoming in the near future.

About Put Call Ratios

By Lawrence G. McMillan

Put-call ratios are useful, sentiment-based, indicators.  The put-call ratio is simply the volume of all puts that traded on a given day divided by the volume of calls that traded on that day.  The ratio can be calculated for an individual stock, index, or futures underlying contract, or can be aggregated – for example, we often refer to the equity-only put-call ratio, which is the sum of all equity put options divided by all equity call options on any given day.

Potential Sell Signal - Pure "90% Days"

By Lawrence G. McMillan

We keep track of “90% days” with a great deal of accuracy.  A “90% up day” is, in its purest form, a day when advancing issues outnumber declining issues by at least a 9-to-1 ratio and advancing  volume outnumbers declining volume by at least a 9-to-1 ratio.

Weekly Commentary 11/9/12

By Lawrence G. McMillan

The stock market, as measured by the Standard and Poors 500 Index ($SPX) continues to break down through important support levels. It is the close below 1395 that matters.  This should activate targets as low as 1330, although it probably won't be in a straight line, for $SPX worked back and forth between 1330 and 1370 in July, and that range should provide some support.

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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