Explore Your Options
Got a question about options? Tom Gentile is the chief options strategist at Optionetics (www.optionetics.com), an education and publishing firm dedicated to teaching investors how to minimize their risk while maximizing profits using options. To submit a question, post it on the Stocks & Commodities website Message-Boards. Answers will be posted there, and selected questions will appear in future issues of S&C.
With December now upon us, what’s a trader to do? As everyone starts planning their holiday parties, their vacations, and of course, their gift-buying, the market, too, is in planning mode. There are gifts from Father Wall Street for those who bear (no pun intended) to look for them. They come in the form of seasonality. Let’s take a look at a well-known seasonal pattern with an approach that’s an alternative to sticking your neck out with stocks or futures.
Want to trade options just one day a month? One of my students wanted to and was asking me about it at a recent West Coast seminar. It seems this option trader wants to trade options short-term, based on a well known — and pretty good — system that signals a bullish day in the stock market each month. That’s right, he wants to enter the market at the close of business on one day and exit the position the following trading day at the open, and wanted to know which option strategy would best fit his bullish prognosis.
Here’s a question I get asked from time to time when I’m circling the globe to speak at events: Can options be daytraded for profit? In the past, I would have answered not unless you want to give your money away over time. In the last year, however, I have changed my tune, researching and even trading options inside of a day. I now answer with a yes, but answering this question thoroughly takes more than a one-word response.
As I travel the world speaking at various conferences, at some point the discussion usually turns to the world markets. When I broach the currency markets, the top two questions usually are: How can a trader profit from changes in currency values, and second, are there options in the currency markets? The answer to the first question can be best answered by the various articles on forex that may be found elsewhere in this issue or in other issues of this magazine, so I’ll concentrate on the types of options that are traded in the currency markets. The good news is there are indeed options that trade on currencies, but there are differences between these and options in other markets, so it’s good to understand them all before determining what is right for you. Here, I’ll discuss a few of them.
Gold sure has gotten a lot of press so far in 2013. The metal started out the year on a high note — the first week of January saw gold at its highest levels for the year so far. Since then, gold has been on the decline, and in April it dropped off a cliff, taking a 10% plunge in just two days. As the bitcoin seems to be the “new thing” in decentralized currencies, gold had lost its short-term luster to investors. This digital phenomenon is the reason why gold may only be on a temporary drop, potentially to bounce back as everyone’s favorite by year’s end.