Comments on: Using Technical Indicators to Assist with Strike Selection https://www.thebluecollarinvestor.com/using-technical-indicators-to-assist-with-strike-selection/ Learn how to invest by selling stock options. Wed, 07 Jun 2017 20:55:41 +0000 hourly 1 By: Jay https://www.thebluecollarinvestor.com/using-technical-indicators-to-assist-with-strike-selection/#comment-109684 Wed, 07 Jun 2017 20:55:41 +0000 http://www.thebluecollarinvestor.com/?p=15466#comment-109684 In reply to Roni.

Thanks Roni,

That is very helpful. I saw the drop in EWZ last month and figured it was something like what you described.

See you in the next blogs :)! – Jay

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By: Roni https://www.thebluecollarinvestor.com/using-technical-indicators-to-assist-with-strike-selection/#comment-109683 Wed, 07 Jun 2017 20:19:53 +0000 http://www.thebluecollarinvestor.com/?p=15466#comment-109683 In reply to Roni.

Yes Jay, it sounds right.

The Brazilian economy was showing a timid recovery last month, but a new corruption scandal erupted as JBS president “volunteered” a colossal plea bargain against Brazil’s president and many other politicians, and investors are very concerned about the immediate future.

JBS is probably the largest meat company in the world. They also have many companies in the US, (pilgrim’s was the latest aquisition) all aquired with public funds supplied by Brazilian state owned banks and funds, through corruption deals with former and present presidents and high rank politicians.

I beleive Chile’s economy is doing very well, except for the copper mines which are suffering from low price of the comodity.
But living closer to Chile does not mean we know more than you do about the country.

I hope this helps.

Roni

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By: Alan Ellman https://www.thebluecollarinvestor.com/using-technical-indicators-to-assist-with-strike-selection/#comment-109649 Wed, 07 Jun 2017 11:36:45 +0000 http://www.thebluecollarinvestor.com/?p=15466#comment-109649 In reply to Alan Ellman.

Adrian,

1- If a stock is trading under its 20-d EMA, I will defer to a different security. Our obligation is 1-month and the shorter-term price pattern is more relevant. If investing in a long-term buy-and-hold portfolio, I would change trend parameters and perhaps use 50-day and 200-d simple moving averages

2- Rolling decisions imply that the price is above the strike. So generally speaking, the price chart will not be bearish. If trading under the 20-d EMA and rolling is “on the table” I will usually allow assignment and move on to a different security in the following contract month.

3- If rolling is being considered, we are limited to making a decision by 4 PM ET on expiration Friday. If trading below the 20-d EMA, I will usually allow assignment. Again, finding ourselves in a “rolling position” with price trading under the 20-d EMA is unusual. This implies that the original option sold was deep, deep ITM.

Alan

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By: Jay https://www.thebluecollarinvestor.com/using-technical-indicators-to-assist-with-strike-selection/#comment-109581 Tue, 06 Jun 2017 20:51:15 +0000 http://www.thebluecollarinvestor.com/?p=15466#comment-109581 In reply to Roni.

Roni, I value our “chats” also!

Speaking of Brazil I have a small position in EWZ . I have not been over writing it like I should. My other South American holding is Chile (ECH). It has been clobbering SPY this year! I consider them investments so I do not get too fussed over short term price movements. Same with INDA, EWG and EWY.

It seems EWZ and ECH correlate better with gold than with global stocks. Does that sound right to you? – Jay

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By: Roni https://www.thebluecollarinvestor.com/using-technical-indicators-to-assist-with-strike-selection/#comment-109578 Tue, 06 Jun 2017 19:45:09 +0000 http://www.thebluecollarinvestor.com/?p=15466#comment-109578 In reply to Jay.

Yes Jay, you are right,

but as you know, I have no other investing friends here in Brazil, so “talking” to you is very important to me.

Cheers – Roni

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By: Jay https://www.thebluecollarinvestor.com/using-technical-indicators-to-assist-with-strike-selection/#comment-109576 Tue, 06 Jun 2017 19:16:33 +0000 http://www.thebluecollarinvestor.com/?p=15466#comment-109576 In reply to Alan Ellman.

Scott,

Thanks for taking the time to write out the scenarios. My only add to this discussion is please remember selling options is a remarkably flexible strategy.

Today, for example, I am wary of both current events and traditional calendar seasonality so I have many things covered for June. I did not feel that way earlier in the year and hardly wrote calls at all. If you like a stock consider selling a cash secured put to acquire it and once you do maybe only cover half the shares or ladder the strikes. Maybe even keep a little stable of “race horses” you never cover at all and only overwrite your “plow horses”?

My suggestion is these strategies are as flexible as you want to make them to fit your view of any market, sector or stock at any time. – Jay

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By: Alan Ellman https://www.thebluecollarinvestor.com/using-technical-indicators-to-assist-with-strike-selection/#comment-109540 Tue, 06 Jun 2017 11:07:31 +0000 http://www.thebluecollarinvestor.com/?p=15466#comment-109540 In reply to Don.

Don,

Although there are exceptions, open interest will be higher than Vol (ume) because the former is cumulative and Vol is reset to zero each day as shown in the pre-market screenshot of SBUX below.

Figure 77 from the “Complete Encyclopedia…” represents a hypothetical where both start at zero and was designed to show the mathematics of how each is calculated.

CLICK ON IMAGE TO ENLARGE & USE THE BACK ARROW TO RETURN TO BLOG

Alan

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