Later, I read about and investigated futures, options, etc. Several years ago I attended some seminars, studied and started trading stocks and then stock options. I purchased stocks and sold calls on the stocks I purchased. I was successful for awhile and then found myself holding nothing but bad stocks. I had been called out of all of the good stocks (because they had risen in price) and I was left holding the dogs (because their prices had fallen.) I also tried trading equity (stock) options, puts and calls.
Then I discovered the S&P 100 index options (OEX). The OEX is a combination of 100 stocks traded on the various exchanges and the OEX moves with the market. The OEX is not tied to good or bad news of one company - if I can read the market, I can make money. This is what I have done for several years.
This has been an expensive learning process but I am now making money.   - often small amounts of money - and, in the process, Learning what probably works and what probably doesn't work.
My goal is to consistently make $500/day.
OEX is the symbol for options on the S&P 100 Index. This is a capitalization-weighted index, covering a broad-range of industries.
Each index option contract represents 100 times the current value of the index. For example, when the index is 400, the dollar value of the index will equal $40,000....100 (the multiplier) times 400.
OEX option premiums are quoted in a manner identical to equity options, stated in points and fractions, the prices are multiplied by $100 to determine total cost. If the option price in the newspaper is 5, the premium is $500. Exercise, or strike prices, are set at five point intervals to bracket the current value of the S&P 100 Index.
OEX options are American Style. This means they can be exercised on any business day prior to expiration date. OEX options, available in each of the four nearby months, expire on a monthly basis. The expiration date is the Saturday following the third Friday of the expiration month.
Settlement value is tied to the S&P 100 at expiration or to the value of the index when the option exercised. This value is calculated by Standard and Poor's. OEX options are cash-settled. This means that cash is delivered at settlement, not securities.
The index consists of 100 blue-chip stocks from diverse industry groups, and because of this it provides a measure of the overall market performance.
Therefore, you can participate directly in the blue-chip market by using OEX options.
For additional information refer to the OEX FAQ
You can view the stocks that make up the S&P 100 (OEX) at the CBOE site:
S&P 100 LIST
The Market Volatility Index (VIX) is calculated by the Chicago Board Options Exchange and it is a measure of stock-market volatility widely followed by investors. It is a "market sentiment" indicator and it indicates shifting moods of the market which may indicate where prices will head. The difficulty is anticipating when the index will change direction. More attention should be paid to the direction of the movement of the VIX rather than its absolute number.
VIX is best when it spikes; you are generally close to the maximum of the current run and things should start going the other way. Volatility by definition can not stay at the extremes, it will tend to move toward the average.
The VIX is based on premiums paid for the CBOE's options on the Standard & Poor's 100 index (OEX). At a reading of 22.75, the VIX essentially is predicting the market will rise or fall by 22.75 percent over the next 12 months.
Thomas Ascher, the CBOE's vice chairman, has cautioned
that... "the VIX's value comes in measuring
volatility, not future stock prices."
From the Chicago Board Options Exchange web site http://www.cboe.com/
"CBOE Market Volatility Index
In 1993, the Chicago Board Options Exchange introduced the CBOE Market Volatility Index. The CBOE Market Volatility Index, known by its ticker symbol VIX, measures the volatility of the U.S. equity market. It provides investors with up-to-the-minute market estimates of expected volatility by using real-time OEX index option bid/ask quotes.
The VIX is calculated by averaging S&P 100
Stock Index at-the-money put and call implied
volatilities. The availability of the index enables investors
to make more informed investment decisions. "
"Arm's Index (TRIN) ARMS INDEX (also known as the TRIN) named after originator Richard Arms.
This is a volume based indicator which looks at
market strength and breadth and simply states
whether the stocks gaining in price or those dropping
in price are getting the greater share of market activity (volume).
This indicator, although simple in its formulation, requires much study in its application. There are many variations applied to the TRIN. Many analysts use a 10-day moving average of TRIN as an indicator. A reading of less than 1.0 usually indicates a bullish demand while a reading greater than 1 can signify a bearish market condition. It must be kept in mind that the indicator behavior and its reading and interpretation depends on whether the market is in a bullish or bearish phase. The actual time duration of this market phase must also be considered. Do not attempt to make and buy or sell decisions based on movements of this indicator by itself.
This index is based on the concept that greater
market volume associated with rising prices
indicates market strength while market weakness is generally
associated with greater down volume and a greater number of
declining issues. "
So put away the match and let us help you save a few thousand dollars on your
day trader education. In the following text we will try to impart some of the knowledge
we have acquired while day trading for a living:"
For the Trading Strategies, click here "Trading Strategies"
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