We head into the final two hours of the session with a mixed picture...
As the intraday chart of the S&P 500 (SPX) shows, there was a bit of a late-morning rally attempt but that fizzled as the SPX has dropped back to breakeven.
The sector action remains mixed with strength in retail and banks still countering weakness in brokers and commodities. In other words, not much has changed since the open....
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Due to the diversity available to options traders, investors have many paths toward achieving a profit. For a bearish trader, the simplest path is to buy (to open) a put contract. By doing so, the trader is placing a bet that the underlying stock will trade significantly below the option's strike price by that contract's expiration date. This strategy is pretty straightforward, but it fails to take into account the potential complexities involved in positioning your portfolio to profit from stocks that are not in a clearly defined downtrend. What's more, due to the size of the drop needed in the underlying security, an outright put purchase often rules out stocks that have additional downside potential, but which could stall near technical support levels. read more...
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Research In Motion Limited (RIMM: sentiment, chart, options) has attracted an unusual amount of attention from option traders today – especially on the put side of the tape. In early afternoon activity, the BlackBerry maker has seen roughly 17,000 puts change hands, already surpassing the stock's expected single-session volume of about 15,000 puts. read more...
Earnings season is upon us, and investors all across Wall Street are hoping to take advantage of these potentially volatile few weeks. Large bull (and bear) gaps, upgrades and downgrades, and short squeezes all become increasingly more likely during this period, as companies meet, beat, or miss quarterly expectations. As such, it is imperative that traders be well equipped to deal with all of the eventualities. read more...
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Bullish call spreads are known by a variety of different names among options traders. But whether the position is a bull call spread, bullish debit spread, or a long vertical call spread, it is still constructed by purchasing an at-the-money or in-the-money call while simultaneously selling an out-of-the-money call. The reasoning behind pairing up these seemingly contradictory options is really quite simple: limited risk. read more...
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