Options in a Quiet Summer Market
 

Options in a Quiet Summer Market

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Options in a Quiet Summer Market

http://www.options-trading-education.com/24049/options-in-a-quiet-summer-market/

Sell in May and go away is a well-known investment adage. The point is that there is often a decline in stocks over the North American summer. In general stock trading volume falls in the summer months and investment in stocks goes up in the fall and winter. Our question has to do with trading options in a quiet summer market. Is this a time for profits, for hedging risk or going away?

Volume and Volatility

Volume and volatility commonly go together in the stock market and in stock options trading. A strong cue that options traders and stock traders use is projected options trading volatility. This is implied volatility which is based upon market price projections and various pricing models. Historic options price volatility calculations provide precise numbers. Implied oil options volatility provides a theoretical value. Professional options traders often speak of implied options volatility instead of options price. The current price of an option is tied to its underlying equity, such as shares of an oil company stock. The implied volatility of this option is tied to the projected price of the stock. The point of all this is that profits lie in volatile markets. And options in a quiet summer market are often not volatile and thus not profitable. But is this always true?

Exceptions to the Rule

This year may be an exception to the rule. The SPDR S&P 500 started May at $188 a share and ended at $192 a share. Now as July starts it is trading at $198 a share. Manufacturing figures from both the USA and China look good, which bodes well for the global economic recovery. It looks like options in a quiet summer market may be profitable after all. One can either trade options on a bellwether of the economy like the S&P 500 or trade options on individual stocks like GM. GM options used to have to do with the recovery of the company as it came out of bankruptcy but now the issue is more one of market survival as the ignition switch recalls are mounting. No matter how quiet the market is in general there is always activity in the options market when fundamental and technical factors predict price specific changes.

Options in a Quiet Summer Market

The options market, like all markets, is driven by supply and demand. Options in a quiet summer market may not be selling but then prices might fall as well. The ideal option contract is a cheap out of the money option that will on a later date become valuable. If an options trader is attentive he or she may well pick up deals on cheap options contracts and profit when trading becomes more active in late fall and winter.

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Options in a Quiet Summer Market Options in a Quiet Summer Market Presentation Transcript

  • Options in a Quiet Summer Market Is It Best Not to Trade Options in the Summer?
  • Sell in May and go away is a well- known investment adage. The point is that there is often a decline in stocks over the North American summer.
  • In general stock trading volume falls in the summer months and investment in stocks goes up in the fall and winter.
  • Before We Continue… Click the links below to get your FREE training materials. Free Weekly Investing Webinars Don’t miss these free training events! http://www.profitableinvestingtips.com/free-webinar Forex Conspiracy Report Read every word of this report! http://www.forexconspiracyreport.com
  • Our question has to do with trading options in a quiet summer market.
  • Is this a time for profits, for hedging risk or going away?
  • Volume and Volatility
  • Volume and volatility commonly go together in the stock market and in stock options trading.
  • A strong cue that options traders and stock traders use is projected options trading volatility.
  • This is implied volatility which is based upon market price projections and various pricing models.
  • Historic options price volatility calculations provide precise numbers. Implied oil options volatility provides a theoretical value.
  • Professional options traders often speak of implied options volatility instead of options price.
  • The current price of an option is tied to its underlying equity, such as shares of an oil company stock.
  • The implied volatility of this option is tied to the projected price of the stock. The point of all this is that profits lie in volatile markets.
  • And options in a quiet summer market are often not volatile and thus not profitable. But is this always true?
  • Exceptions to the Rule
  • This year may be an exception to the rule. The SPDR S&P 500 started May at $188 a share and ended at $192 a share.
  • Now as July starts it is trading at $198 a share.
  • Manufacturing figures from both the USA and China look good, which bodes well for the global economic recovery.
  • It looks like options in a quiet summer market may be profitable after all.
  • One can either trade options on a bellwether of the economy like the S&P 500 or trade options on individual stocks like GM.
  • GM options used to have to do with the recovery of the company as it came out of bankruptcy but now the issue is more one of market survival as the ignition switch recalls are mounting.
  • No matter how quiet the market is in general there is always activity in the options market when fundamental and technical factors predict price specific changes.
  • Options in a Quiet Summer Market
  • The options market, like all markets, is driven by supply and demand.
  • Options in a quiet summer market may not be selling but then prices might fall as well.
  • The ideal option contract is a cheap out of the money option that will on a later date become valuable.
  • . If an options trader is attentive he or she may well pick up deals on cheap options contracts and profit when trading becomes more active in late fall and winter.
  • . As always profits are more likely to occur when preceded by careful analysis of fundamentals and attention to market sentiment as conditions change.
  • If there are no great deals in the summer options market one can just as well follow the stock traders and take some time off remembering that you do not lose money when you do not trade.