We all know that trading options is exciting, highly competitive, and can be very profitable. The key to long term and consistent profits in option trading is options education.
There will be a very slight alteration of our publishing schedule in March. The first issue in March will be published on the normal day, the 2nd Thursday, which is March 13th. But the second issue in March will be published one day early, on Wednesday, March 26th. This is because of the AAPTA Conference in Austin (see page 5), to which I will be traveling on Thursday, March 27th (the usual publishing day).
The broad market, as measured by the Standard & Poors 500 Index ($SPX) has finally managed to close at a new all-time high. A second day closing above 1850 would solidify the breakout and give it more credence.
Equity-only put-call ratios (Figure 2 and 3) have finally rolled over to buy signals.
Market breadth has been strong all month. As a result, the breadth indicators remain on buy signals, but they are in deeply overbought territory.
In our last issue, we discussed the newest volatility product – the futures that have recently begun trading on the Short-Term Volatility Index ($VXST). One of the things that arose from that discussion was that $VXST “overshoots” $VIX on both the upside and the downside. That is, in periods of high volatility (spike peaks, for example) $VXST rises to higher prices than $VIX does. Conversely, in periods of low volatility, $VXST falls farther than $VIX does.
In this MoneyShow.com interview, Lawrence G. McMillan discusses "how he trades volatility in today's markets and what strategies he has found to be the best." Larry talks about volatility ETFs and ETNs, the relationship between the VIX index and VIX futures, hedging, directional trading, and VIX spike peak buy signals. Watch the video at Moneyshow by clicking the image below.
For information on Fat Tail Distributions and The Empirical PDF refer to Enhancing Option Portfolio Returns Using Probability and Statistics - Part 4.
The stock market rally that began on February 3rd continues to persist, almost daily. The Standard & Poors 500 Index ($SPX) has only had two down days in that time. Even so, there is some question as to whether it has the strength to overcome what is stubborn resistance at 1850.
In this MoneyShow.com interview, Lawrence G. McMillan "discusses why selling naked puts does not have to be as dangerous as many option traders may think." Larry explains why he prefers put-selling to covered writing, how he locates put-selling opportunities and what situations to avoid. Watch the video at Moneyshow by clicking the image below.
The CBOE has launched what may prove to be a very useful product – short-term $VIX futures ($VXST). The feature article discusses their terms and their potential usage. Also, there are comparative charts with $VIX and $VXST. If volume is decent, this should be an excellent product.
A lot has happened in the past three weeks, but $SPX is literally unchanged from where it was at that time. A nearly 100-point round trip has taken place -- down, then up.
A move above 1850, to new highs, would be very bullish for $SPX. Although if it happens right away, it will be without support from many of our indicators. Meanwhile, there is minor support at 1800, and major support at 1740 (the February lows).
Equity-only put-call ratios continue to remain on sell signals.