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Daily Option Trading Commentary

The Market Could Stay In A Tight Range For 2 Weeks - It Is Searching For A Catalyst

February 9
Last week, the market was able to break out to a new relative high on better-than-expected economic releases. It rests just below major resistance at SPY 135 and traders are waiting for the next catalyst. European credit concerns have waned and earnings season is winding down. That means the focus is clearly on economic growth. ISM manufacturing, ISM services and Q4 GDP all exceeded expectations. Initial jobless claims have been drifting lower (-15,000 today) and last week's Unemployment Report showed that 243,000 jobs were added in January. Not all of the gains came from hiring (Census adjustments were made) and…

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Option Trading Article of the Week

Option Trading - Why I Trade Relative Strength and Relative Weakness!

Posted by Pete Stolcers on January 12

In today’s option trading blog I will discuss relative strength and weakness. This concept is critical to my trading system. Every day I search for stocks that are strong or weak relative to the market If I’m successful at identifying this trait I can build a basket of long and short positions and reduce my market risk. This is my “edge”. I can actually get the market wrong and still make money. When I turn on my screen in the morning I hope for a big market move in either direction. I’ll bet most of you have never had that…

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Stock Options Question of the Week

Surrogate Market Positions - How and Why?

Posted by Pete Stolcers on March 11

Question Over a year ago, I featured this question in my option trading blog. The market conditions have changed, but the concept has not. Lee T. asks, “Can you recommend a stock that I can use as a proxy for the S&P? I would like to make directional bets on the market for seasonal trends such as a year-end rally, and swing trades spanning a few days or weeks. But options on SPY don't seem to work well since the SPY has a historical volatility of six. I've seen some people use GOOG as a market proxy but I am also not wild about options on a $400/share stock that trades on the NAS. Are there any NYSE stocks that might work better?

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