By: Tom Gentile
on February 28th, 2022
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
Toms Option Tools scan the markets for bullish and bearish trade opportunities using our proprietary scans and strategy algorithms. TTR Darknet finds bullish entries based on triple stack channel collisions. Money Calendar identifies seasonal patterns with at least 90% accuracy looking back 10 years. Weekly Cash Clock finds short term opportunities that last a week on average. Microcurrency Trader applies Darknet technology and moving averages to cryptocurrencies. Velocity Trader utilizes volume spike and Velocity indicators on custom stock lists. Quantum Scripts scans the markets for momentum acceleration signals and employs Quantum noise filters. Optimal Trader finds directional pre-earnings opportunities that are optimized for entry date, stock movement, and volatility surge. My Trades tracks the profit/loss of your trades, displays stock charts and risk graphs, creates new trades, and edits existing trades. Morning Report provides top 10 option rankings in 6 categories each day.
Stock and options trading has large potential rewards, but also large potential risk.
You must be aware of the risks and be willing to accept them in order to invest in the stock and options market. Do not trade with money you cannot afford to lose.
This is neither an offer to buy/sell/ or recommend a particular stock or option.
Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been actually executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with hindsight.
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