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Weekly Stock Market Commentary 1/17/2020

By Lawrence G. McMillan

The stock market continues its remarkable run, and it continues to look more and more like January 2018 every day. That's bullish news for the short term, but extremely negative news for the intermediate-term.

Time Decay of Options (06:06)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 6, No. 6 on March 27, 1997. 

I was tempted not to label this article as a "basics" article, because the concept we're going to discuss is one that is probably not all that familiar to most option traders. It concerns the rate of decay of in- or at-the-money options versus that of out-of-themoney options. It's a concept that I realized I understood subconsciously, but not one that I had thought about specifically until I recently read Len Yates' article in The Option Vue Informer. Len is the owner and founder of Option Vue, creator of the software package of the same name and is one of the best option "thinkers" in the business (we are going to have a review of Option Vue when their new version is released).

Dividend Arbitrage (13:16)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 13, No. 2 on January 22, 2004. 

Question: You have repeatedly mentioned dividend arbitrage. Could you briefly tell me what it is? – J.Z., 1/17/2004

Answer: Dividend arbitrage has been around since listed call options first traded. It has become quite popular lately, though, as heavy call volume is noticeable in nearly every stock with decent open interest in its options that is paying a quarterly dividend of 20 cents or more.

Larry McMillan Stock Market Update Video 1/13/2020

By Lawrence G. McMillan

Join McMillan Analysis Corp. president, Lawrence G. McMillan, as he discusses the current state of the stock market. Watch below

Weekly Stock Market Commentary 1/10/2020

By Lawrence G. McMillan

The stock market continues to put on a tremendous display of bullishness. There was some brief but heavy selling in relation to the military action in Iraq, but most of the selling came in the overnight sessions and was largely reversed by the time the NYSE opened the next day.

With most of the major averages making new all-time highs, their charts remain bullish. There is support at 3190-3210. There is further support at 3150 and 3070.

Was the overnight selloff on Tuesday a glimpse into the future? (Preview)

By Lawrence G. McMillan

There was wild overnight action during the night session on Tuesday January 7th. S&P futures dropped 54 points immediately after news that Iran had fired missiles at U.S. installations in Iraq. Obviously, prices have recovered since then, but perhaps we can get a glimpse into what might happen should a “real” decline of that magnitude take place.

The Distribution of Stock Prices (09:08)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 9, No. 8 on April 27, 2000. 

In the past year or two, there have been many references in this newsletter to the fact that stock prices don’t conform to the lognormal distribution, which is the distribution used in many mathematical models that are intended to describe the behavior of stock and option prices. This isn’t new information to mathematicians – papers dating back to the mid-1960's have pointed out that the lognormal distribution is flawed. However, it isn’t a really terrible description of the way that stock prices behave, so many applications have continued to use the lognormal distribution.

Years Ending In... (Preview)

By Lawrence G. McMillan

Since we are at the inception of a new year and a new decade (if you adhere to the notion that the decade begins with 2020 and not 2021), it is sometimes useful to see how the patterns of previous years have played out. The top chart on the right is a composite of all years ending in ‘9.” The orange line shows how the “average” of all stock market years has performed. The Blue line depicts the performance only of years ending in ‘9,’ and you can see that it is strong. Typically there is a decline early in the year (January-February) and then it’s off to the races for the remainder of the year – with minor corrections in May-June and September-October. The year that just concluded (2019) didn’t fit that pattern exactly, but it was certainly a very bullish year (Compare the chart in Figure 1 on Page 1).

Larry McMillan Stock Market Update Video 1/6/2020

By Lawrence G. McMillan

Option Strategist, Larry McMillan, discusses the current state of our option-oriented indicators. Watch below:

Weekly Stock Market Commentary 1/3/2020

By Lawrence G. McMillan

Stocks backed off today, but the bull market is still intact so far. There is support on the $SPX chart at the various horizontal red lines in Figure 1. There isn't MAJOR support, though, until you get down to 3070.

Equity-only put-call ratios are at extremely low levels, due to heavy call buying during most of the recent three-month stock market rally. But they are not on confirmed sell signals yet.

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