The Option Strategist Newsletter Volume 24, No. 10 Preview

By Lawrence G. McMillan

Note that there are three weeks between newsletters, since there are five Thursdays in October.  The next issue will be published on Thursday, November 12th, and of course there will be Hotline updates for the intervening weeks.

Sellling Naked Straddles Pre-Earnings

By Lawrence G. McMillan

Everyone knows that stocks can gap by huge amounts on earnings reports. Who in their right mind would want to sell such straddles? We touched on this subject in the last issue, but have since had time to complete a more rigorous study. It turns out that, at times, these straddles can be sold.

Weekly Stock Market Commentary 10/23/15

By Lawrence G. McMillan

Earlier this week, it appeared that the rally that began at the end of October was lagging. But then Thursday, the market blew through resistance at 2040 and reaffirmed the bullish case with authority. A violation of the 1990 would remove the "bullish" label from the $SPX chart.

Equity-only put-call ratios remain on buy signals, as they continue to decline (Figures 2 and 3).

Weekly Stock Market Commentary 10/16/15

By Lawrence G. McMillan

The stock market has taken on a much more bullish tone since the late- September lows.  We had several buy signals on September 30th, and they were well-timed.  The bullish case is still strong, even after $SPX has advanced 150 points this month.

McMillan Interviewed on Trend Following Podcast

Lawrence G. McMillan was recently interviewed by bestselling author Michael Covel's Trend Following podcast where he discusses his various facets of options trading. Larry dishes on his early days at Bell Labs and the original options markets before discussing more relevant topics like volatility, black swan protection, and various option trading stategies. Download the podcast for free over at iTunes. 


Weekly Stock Market Commentary 10/9/15

By Lawrence G. McMillan

A week ago, we noted that there were three short-term, oversold buy signals. Now, more buy signals are occurring, and these are of the intermediate-term variety. The last hurdle was cleared today, when the $SPX closed above 2000.

Equity-only put-call ratios remain on buy signals, as they continue to decline from recent highs.

More Thoughts On Pre-Earnings Straddle Buy

By Lawrence G. McMillan

We have been having a good amount of success with our event-driven straddles this year – especially with the pre-earnings straddle buys.  We have refined that technique through several modifications since we first began by buying the Qualcomm (QCOM) straddle back in late January.  I feel that we have a very workable strategy now, but there is one “hole” in it, which we will address in this article.

Weekly Stock Market Commentary 10/2/15

By Lawrence G. McMillan

Despite a couple of rough days this week, buy signals have emerged from our short-term oversold indicators, and so we have a more bullish outlook for the short term but not necessarily for the intermediate- term.

$SPX has retested the August lows and formed a "W" bottom, so that is support at 1870. A violation of that area would force a retest of the October lows at 1820. A move above 2000 would be bulllish.

Weekly Stock Market Commentary 9/25/15

By Lawrence G. McMillan

The $SPX chart remains bearish. During the oversold rally that failed at the 2000 level, an upward trend line had developed on the $SPX chart, connecting the daily lows since the 1870 bottom. That trend line was broken decisively this week, as $SPX fell back below its 20-day moving average. For now, the $SPX chart is bearish as long as it remains below the broken trend line (see Figure 1).

The Post-September Expiration Seasonal Trade

By Lawrence G. McMillan

There are several seasonal trades that we use in the fall of the year – primarily the “October seasonal,” the “Post-Thanksgiving Trade.” and the “Heating Oil – Unleaded Gas Seasonal.” There are some others, too, that we don’t usually trade, such as the “January Effect” (which actually occurs in December), the “Santa Claus Rally,” and other trades surrounding Thanksgiving. As noted, we don’t usually trade the latter three specifically, but we have incorporated them into first set of systems that we do trade.

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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