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.
You may not be aware, but Stan Freifeld of the McMillan Mentoring Program also directs our consulting services. It allows those who have questions regarding their options trading to have a professional trader provide insight, analysis and solutions to many trading situations.
Are you having fun yet? Volatility has returned, and the market is a daily dose of pain and pleasure, to either the bulls or the bears. There are plenty of cross-currents now, and in reality, volatility hasn't even increased all that much (statistically).
We are excited to announce the release of Option Workbench 3.0 on February 15th, 2014. I will be giving live demonstrations at the New York Trader's Expo in the McMillan Analysis booth (#5409) in the exhibit hall located on the 5th floor from February 16th through February 18th.
Yesterday saw steady rally for nearly the entire day. That had some ramifications beyond merely an oversold bounce. However, it’s what has happened overnight that has been extremely volatile and interesting. First, just after yesterday’s close, Turkey announced that they were intervening on their currency, and S&P futures rallied 13 points from yesterday’s close.
The incessant march upward has run into a bit of a roadblock. The 1850 level on the Standard & Poors 500 Index ($SPX) has proven to be stiff resistance. The failure of the market to clearly break through to new all-time highs has put the bears (temporarily?) in charge. There is most likely going to be a challenge of support at the 1810 level (see Figure 1) soon.
Equity-only put-call ratios have both rolled over to sell signals.
Larry McMillan was recently interviewed by Bob Lang of Explosive Options where he discussed the finer points of options, volatility and measuring sentiment. Watch the video by visiting ExplosiveOptions.net.
If there is a theme to this market, it's this: it's overbought, but continuing to rise. There is strong support for $SPX at 1810. Moreover, there is now resistance near 1850.
Now for the litany of bullish, but overbought indicators: Equity- only put-call ratios are typical of this group. Both ratios are declining, and that is bullish. In addition, both ratios are at the lowest levels on their chart and that means they're overbought.
Forecasting this market with the Fed doing what they’re doing is really a very inexact chore. However, there are some historic parallels that can be drawn.
