Options Action –
The show started out being pre-empted by a statement from the President regarding the fiscal cliff situation. This led to a basic free form discussion among the show participants for a half hour. A couple of interesting comments about the overall stock market came out while the guys were waiting for comments from the President. First, with the stock market up 13% this year the feeling is there are many market participants that have a vested interest in the market not dropping too much from current levels. Also, it was stated that if the market rallies into yearend that more potential downside for January is created. The discussion turned to Apple (AAPL – 519.33) and it was stated that the stock does not look too good even though it has been holding current levels. AAPL appears to be testing support that may be broken in the 500 range.
There was a discussion of the S&P 500 going into 2013 and the feeling was not very positive. The technical analyst noted that the S&P 500, although up in 2012, is the worst performing of all developed market indexes. There is a feeling that there is very little upside from current levels. On a fundamental basis, it was also noted that first quarter earnings may be less than stellar with cautious outlooks as well.
Due to the network sort of being on hold waiting for the press conference, the show never got to the typical trading ideas, although the suggestion of lower levels for AAPL opens things up to a plethora of strategies.
Steven Sears’ column highlighted the benefits of selling options in the form of covered calls and cash secured puts. Featured prominently were three indexes the CBOE publishes based on a consistent strategy that involves selling options on the S&P 500 (SPX). The strong performance of the CBOE S&P 500 BuyWrite Index (BXM), CBOE S&P 500 2% OTM BuyWrite Index (BXY) and CBOE S&P 500 PutWrite Index (PUT) were all discussed. All three indexes have had long term absolute and risk adjusted performance that is superior to buy and hold for the S&P 500.
More info on each can be found at –