Stocks continue their wild ride. Yesterday, $SPX gapped open strongly higher, then gave back all the gains in a very short period of time when Fed Chairman Powell said that the Fed might not be buying everything, forever. But that selloff was quickly reversed in a matter of minutes. In the end, $SPX closed nearly 60 points higher, It closed right at the lower edge of the gap from last Thursday. If that gap is filled (at 3182), it would be another bullish sign. Short-term support exists at 2965 (Monday’s low, which was left in the dust by the 188-point rally that followed in about 1 trading day, as Monday’s lows were made in the morning and Tuesday’s highs were also registered in the morning; the move in futures was even larger). Below that, support in the 2920-2940 range is important. It is the top of the trading range from April-May; if $SPX were to fall back into that trading range, it would negate a lot of work that’s been done since then.
This article was originally published in The Option Strategist Newsletter Volume 12, No. 23 on December 11, 2003.
Probably too many traders treat options as pure speculation rather than the theoretically more profitable treatment as a hedging vehicle or as a way to take advantage of pricing discrepancies. Many of our articles deal with hedging or volatility trading (which is the generic term describing theoretical value trading), but in this article we’re going to change gears a little and talk about speculation – plain old vanilla option buying. Specifically, we’re going to talk about how option activity might denote a potential trade in a stock or its options, and then we’ll discuss how to follow up on the position – setting stops, and letting profits run if they develop.
This article was originally published in The Option Strategist Newsletter Volume 15, No. 6 on March 30, 2006.
As our regular subscribers know, the CBOE recently listed cash-based options on its Volatility Index ($VIX). We have published several recent articles describing the details of these options, so we’ll review those only briefly in this article.
This article was originally published in The Option Strategist Newsletter Volume 7, No. 6 on March 26, 1998.
In the course of conversations with other traders or customers, there will occasionally be subjects that come up repeatedly. In this article, we’re going to look at three of them – sort of an article of short subjects. The first is probably the most complicated, as it addresses what volatility to use when trying to project the profitability of an option position. Second, we’ll share some practical insights on trading in futures options – particularly in the New York markets. Finally, we’ve had a lot of questions about one particular usage of our oscillator, so we’ll address that topic as well.
In the November 1929 - April 1930 rally, stocks rose 48% and volatility (all that we have to go on from that time period, of course, is realized/historic volatility) dropped from 112% to 8%!! Then we all know what happened after that: the wheels came off, and the market made new lows by October 1930, and the rout was on.
Stocks broke upward out of the trading range this week, and have made new intraday highs for this rally each day since. Thus, the rally that began from the extreme oversold conditions on March 20th remains intact. There should be support in the 2940-2950 area, which was the top of the recent trading range. As for overhead resistance, the 200-day moving average was supposed to offer resistance, but so far it hasn't.