$SPX had remained in a trading range for nearly two months, but now it has broken support at 2160 and that is significant.
The only negative indicators that we had as of yesterday were the equity-only put-call ratios, but the others will join in today. As you can see from Figures 2 and 3, the put-call ratios have been edging higher since making their lows in mid-August. That puts them on sell signals.
The breadth oscillators remain on buy signals, in modestly overbought territory. However, it would only take one or two days of negative breadth to throw them back onto sell signals. That is happening today, so they will roll over to sell signals.
This article was originally published in The Option Strategist Newsletter Volume 15, No. 20 on October 26, 2006.
We have written a couple of articles recently on naked put writing and put credit spreads as alternative strategies to covered call writing. We are not going to re-hash all of that previous information (although we will summarize it). Rather, this short article is mainly to address the topic of what sorts of returns can one expect from naked put writing – and what do they mean?
Many covered writers prefer to conduct the strategy on a cash basis – buying shares for cash and selling the option premium against those shares. The premium can then be withdrawn and used for whatever the writer wants – as long as he is willing to have the stock called away.
This article was originally published in The Option Strategist Newsletter Volume 15, No. 6 on March 30, 2006.
As our regular subscribers know, the CBOE recently listed cash-based options on its Volatility Index ($VIX). We have published several recent articles describing the details of these options, so we’ll review those only briefly in this article.
Clearly, these options can be used by speculators trying to predict whether $VIX will rise or fall over the lifetime of the options. However, perhaps a more broad-based approach is to use them as a stock portfolio hedge against a declining stock market. That will be the focus of this article.
This article was originally published in The Option Strategist Newsletter Volume 9, No. 16 on August 24, 2000.
It is somewhat common knowledge amongst option traders that the CBOE’s Volatility Index ($VIX) can be used as a predictor of forthcoming market movements. In particular, when volatility is trending to extremely low levels – as it is doing now – it generally means that the market is about to explode. In this article, we’ll put some “hard numbers” to that theory and we’ll also look at alternate measures of volatility (QQQ and the $OEX stocks themselves) to see what they have to say.
With the holiday weekend approaching, and attendance low because of it, the bears took a couple of shots this week at breaking $SPX down below support at 2160. They came close, but they couldn't do it. Thus, the $SPX chart remains positive, with support at 2160.
Equity-only put-call ratios have been edging higher all week, and they remain on sell signals because of it. But they aren't really rising much, so the sell signals aren't strong.
Similar things can be said about the breadth oscillators. Both breadth oscillators are currently on sell signals, but they kind of "eroded" into that state.
This article was originally published in The Option Strategist Newsletter Volume 21, No. 10 on June 1, 2012.
These days, there are more and more volatility indices and futures than ever. One can observe the same sorts of things about them that we do with $VIX futures – in particular, the futures premium and the term structure. We thought it would be an interesting exercise to see how these other markets’ futures constructs compare to that of $VIX. The $VIX construct, for a long time (see chart, page 12) has been that of large futures premiums and a steep upward slope to the term structure. Historically, that sort of construct has been associated with bullish markets, although it has persisted throughout the current market decline as well. How do these other markets line up in comparison to the $VIX futures construct?
Lately, there has been commentary about how the Standard & Poors 500 Index ($SPX) has not made a 1% move (using closing prices) since July 8th. That’s 36 trading days and counting, through Monday, August 29th. Is that a long time? It certainly seems like it is. It's the longest period of time without a 1% move in over two years. However, we don’t like to go by “feel,” but rather by statistics, and the statistics show something a bit different.
This article was originally published in The Option Strategist Newsletter Volume 12, No. 8 on April 24, 2003.
The concept of “delta neutral” is an intriguing one – especially to traders who have had a hard time predicting the market or to those who don’t believe the market can be predicted (random walkers). The concept is even sometimes “sold” to novice investors as a sort of “can’t-lose” trading method, even though that isn’t true at all. While the idea of having a position that can make money without predicting the direction of the underlying stock seems attractive, in practice the strategy is difficult, if not impossible, to apply – at least in terms of keeping a position delta neutral.
This week, $SPX did break down a little bit, violating the 2175 level, which had been the bottom of the tight 2175-2195 trading range that had contained prices for most of this month. But the piercing of minor support at 2175 was not significant. However, a breach of the 2160 support area would be more damaging, in my opinion.
The equity-only put-call ratios have been flirting with sell signals for most of the month of August. Now, the weighted ratio has turned bearish after the modest selloff by $SPX this week, but the standard ratio remains on a buy signal for now.
Sellers got the upper hand yesterday, on fears of what Fed Chair Yellen might say in her speech on Friday morning. Or at least the excuse that is being given. $SPX closed below its 20-day moving average for the first time since June 29th – a period of 39 days. These long periods of “levitation” above the 20-day moving average are not exactly common, but they occur with enough frequency that we can analyze them. In general, the market moves higher after the period of “levitation” ends – especially when it has lasted this long. We have published data on this phenomenon before, and will update it again now that the current streak has ended.