...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. $VIX will generate a broad market buy signal when it closes at least three points below that highest intraday price.
This article was originally published in The Option Strategist Newsletter Volume 4, No. 13 on July 13, 1995.
Most option traders quickly realize that time is a very heavy factor weighing on the price of an option. This lesson often is driven home after buying an option and losing money.
The recording for Larry McMillan's recent "The Current State of The Market-Predicting Option Indicators" webinar with Cyber Trading University is now available. In the video, Mr. McMillan discusses the chart of the S&P 500, the equity only put-call ratios, market breadth and the volatility indices and what they are saying about the stock market. Watch the video below.
The Standard & Poors 500 Index ($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.
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.
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.
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.
This article was originally published in The Option Strategist Newsletter Volume 4, No. 8 on April 27, 1995.
Since we are currently recommending a "backspread" strategy in OEX options (and have been for a while), we though it might be beneficial to define and review the strategy for subscribers who are not familiar with the term.
After a strong upside breakout last week from the triangle formation (blue lines in Figure 1), the market has spent this week in a tight range. There has been an improvement in the indicators in general, but the most important indicator -- the price chart of $SPX -- has not really responded.
A clear breakdown and close below 2090 would be a short- term negative, likely calling for a retest of support at 2060. A breakout over 2115 and then 2135 would be very bullish.
This article was originally featured in the 5/27/16 edition of The Option Strategist Newsletter.
As you can see from the right, $VXST (the CBOE’s short-term volatility index) is approaching 10. That seems incredibly low, and one would naturally think that it is a warning sign. But the $VXST chart of past two years (below) shows that it’s been at this level a lot – just not since August of 2015.