In September 2014, we introduced OMI (Option Mobility Index), an analytical tool measuring trending potential of the S&P500 index, which supplemented the ODI (Option Deviation Index) concept published in 2005. It didn’t take long to prove its usefulness, as the market ended its over 5-year bullish run and turned into a sideways moving phase, which for this index is very common.
Traditional trading using futures contracts for low-trending market conditions is a challenging task, as even though the market may stay within a certain range, its turning points usually flip through various levels within the channel. But for any market condition there is always an options strategy which may be applied.
As trading conditions get tougher...
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Articles
As I’m writing this, it is the afternoon of January 6, 2016. The stock market has been in full-blown meltdown mode for the last five trading days. The S&P 500 index has dropped by about 4% in that time. The Chinese stock market is down much more after dropping 5% yesterday alone. Crude oil has dropped over 6% in that time. This is high volatility in anybody’s book.
And yet, there was one type of volatility that was curiously muted: implied volatility in the options market.
Implied volatility is the name we give to the fear reflected in options prices. The more fear there is, the more people are willing to pay for the insurance offered by options. This fear factor for the stock market as a whole is measured by the VIX, or Volatility...
There are literally hundreds of options strategies, many more if you include the vast array of complex strategy combinations. Why so many? Simple, it s because most options speculators can't figure out price direction. Instead, they rely on complex option strategies and a variety of standard pricing models that don t work and simply add illusion to a constant simple reality of all markets: supply (resistance) and demand (support).
When you filter out illusion and replace it with pure supply and demand analysis in options trading, you not only simplify the useless complexity of options, you discover endless low risk-high reward opportunity based on a set of objective rules. This opportunity is one in which the reality-based options...