Trading Options In The New Millennium: What’s In It For You?
As week two of the new year unfolds, market watchers and options
players (myself included) are carefully pondering what shape and direction trading, and
the economy, will take this year. Perhaps now, more than in Januaries past, we have
some extreme fundamental questions in front of us. Is the big “R” really
looming? Will the “January effect” take place this year? Will the Fed institute
enough rate cuts to balance last year’s draconian measures? How much lower can the
techs tumble? Is Nasdaq going to become second fiddle again? Are the Indexes where we
should focus our trading attention, as was the case in the early ‘90s?
And
perhaps most importantly for our purposes, how can we options practitioners possibly hope
to chart out a profitable trading strategy during such uncertain times? As I hope to make
clear through my daily column and periodic “lessons,” far from ignoring the
options market during these turbulent times, it is precisely now that a knowledgeable and
well-prepared trader can use options to his advantage and turn a profit.
As my faithful readers have hopefully begun to understand by know, the options player
can make money whether the market goes up or down. He can trade with or without a
directional bias, and/or can attempt to harness “volatility” to his advantage. (
stay tuned for an upcoming lesson on volatility and volatility spreading techniques). For
any of you new readers out there in ’01, if you follow this column and do your
homework, you will begin to appreciate the beauty of options trading through the medium of
“spreading,” my personal preference.
Now let’s look at today’s data, where tech call buyers are coming out on a
relatively average Monday morning…
Pre-open order volume was moderate today. In the overall market, call sellers and
buyers are even at 1:1, and put buyers are on a par with sellers at 1:1. No big
surprises in the top five order volume leaders today:
(
CSCO |
Quote |
Chart |
News |
PowerRating),
(
INTC |
Quote |
Chart |
News |
PowerRating),
(
JNPR |
Quote |
Chart |
News |
PowerRating),
(
EMC |
Quote |
Chart |
News |
PowerRating) and
(
QCOM |
Quote |
Chart |
News |
PowerRating). JNPR
call sellers outnumber buyers 3:2. In EMC, pre-bell call buyers were out, trumping sellers
3:2. QCOM call buyers made their presence felt as well, leading sellers 3:2.
(
MSFT |
Quote |
Chart |
News |
PowerRating) call
sellers hammered buyers 6:1.
First hour order volume remained
moderate. Overall, call sellers and buyers were even at 1:1, as were put buyers and
sellers. The top five order volume leaders were as follows: CSCO, JNPR, INTC,
(
SUNW |
Quote |
Chart |
News |
PowerRating) and
(
BEAS |
Quote |
Chart |
News |
PowerRating). CSCO call buyers outnumber sellers 2:1, while put sellers outpaced buyers 3:2. JNPR
call buyers outnumber sellers 2:1. In INTC, pre-bell call buyers were out, trumping
sellers 3:2, while put sellers crushed buyers 4:1. SUNW call buyers made their presence
felt as well, leading sellers 3:2. BEAS order flow picked up dramatically, and call buyers
trumped sellers 3:1.
(
AMGN |
Quote |
Chart |
News |
PowerRating) call buyers whacked sellers 6:1.
Another learning tool I have implemented in my column is the “question and
answer” format. I have set up a mailbox tonys@tradingmarkets.com where I’ll field questions from my
readers. I have pledged to answer each question as best I can, and in a timely fashion,
and so far I feel I have been able to do so.
I must say, the questions have been generally excellent. The best first step to learn
options is one-on-one discussion: Options strategies can be personalized to the nth
degree, thus there needs to be a personal comfort level in the understanding and
execution. To this end I plan on offering periodic seminars to my readers, the syllabus to
which will be available here on the site Jan. 19. In the mean time, we’ll try to
bring everyone along at his or her various paces. A big notion is: What is good and what
is bad about trading spreads. Your comments will be brought together in a survey
we’re doing and hopefully we’ll be able to address and correct the negatives (it
could be perception on the part of the user that is messing things up). How many of you
“leg” into spreads?