Posted in Technical Analysis
By: Tom Gentile on February 28th, 2022 • 2 mins read
Bullish Day in the Stock Market Today
The markets started off flat to slightly down on the open. It rallied in its first couple of hours before it rolled over to form pretty much a double bottom on the day with an hour and a half to go in the day’s session.
That last hour and a half saw a bullish run for the day bringing it well off its lows of the day. The markets still finished in the red today, but it could have been a lot worse.
Technical Chart on SPY (Elevated IV)
On the chart below you see the candlestick chart view on the SPY. I have the 7-30-day Implied Volatility (for the options) overlayed on the chart.
The ATM IV reflects whether options are expensive or cheap.
The right hand axis is a numerical value and you can see the low part of the range for SPY is 10. It is currently elevated, up at 26 currently.
Decide Which Option Strategy to Use
When deciding which option strategy to use, between buying strategies like Long Calls or Debit Spreads or selling strategies like Credit Spreads, I favor selling strategies when IV is high.
If you execute a buying strategy you risk the volatility draining out of the premium of the option regardless of what the security does and that could depreciate the option.
On the other hand, using a selling strategy like selling to open a Call or Put Credit Spread (depending on your anticipated direction for the security) you can try and anticipate selling at one price to open and then when volatility drains from the option premium one can try and buy to close that position at a lower price than what it was sol for and pocket the difference.
App: Toms Option Tools
Market Insight articles may show images of lists of stocks meeting a variety of options parameters like Unusual Call and or Put activity or Expensive IV found on my app Toms Option Tools.
Other times I will have other charts may work to amplify my educational points.
Those options data lists, however, can be found on my app Tom’s Option Tools. Use your device to search up and download this app and get free access to the Morning Reports section of the app.
Other parts of the app are available at a premium subscription rate, but the Morning Reports Lists are yours free.