Option Trading Idea of the Week
Favorite Suggested Books for the Conservative Options Investor
I am often asked about my favorite books on investing (other than my own Making 36%: Duffer's Guide to Breaking Par in the Markets Every Year, In Good Years and Bad or my more recent The Mighty Mesa:A Tested Options Strategy Designed to Never* Lose Money (and Just Might Make 36%).
Here is my list of favorites:
McMillan on Options, by Lawrence G. McMillan, (New York: John Wiley & Sons, second edition, 2004). This is generally accepted as "The Bible" on options. It is fairly expensive and the text is ponderous for most people, but everything is there.
Options Plain and Simple, by Lenny Jordan. (London: Prentice Hall, 2000). One of many books which describe just about all the option strategies with some good advice as to which ones work under which conditions. Much lighter reading than McMillan on Options.
Winning the Loser's Game, by Charles D. Ellis, (New York, McGraw-Hill, 4th Edition, 2002). While this is not about options per se, it is just about the most sensible book I have ever found that discusses stock market investments in general.
The Little Book That Beats the Market, by Joel Greenblatt, (New York, John Wiley, 2006). Again, this book is not about options, but is perhaps the best book written in the past several years about how to select individual stocks.
The Little Book of Common Sense Investing, by John C. Bogle (New York, John Wiley, 2007), Another book which is not about options, but I challenge anyone to read this book because if they do, I believe there is no way they would ever buy a mutual fund again (except a no-load broad market index fund).
Any questions? I would love to hear from you by email (terry@terrystips.com), or if you would like to talk to our guy Seth, give him a jingle at 800-803-4595 and either ask him your question(s) or give him your thoughts.
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Terry
Andy's Market Report
In the face of short-term "overbought" readings the market was able to rally four out of the five sessions this past week. In a way I almost expected this which I know is easy to say after the fact. There were a few bullish developments on the economic front, but none that warranted the recent trend to continue, especially in the face of such "overbought" readings.
The S&P 500 (SPY), Dow (DIA), Nasdaq 100 (QQQQ) and Russell (IWM) advanced 2.5%, 2.2%, 2.5% and 4.1%, respectively. For the year, the S&P 500 is up 18.3%, the Dow has advanced 11.9% and the Nasdaq is leading the way with a 35.2% gain.
So, on a technical basis, all of the major indexes have pushed into a "very overbought" state with Wilder RSI (2) levels reaching historical proportions. Couple that with the typical post-expiration blues that immediately occur the trading day after expiration and I think we should not be surprised to see a few days of reprieve early next week.
After if/when the short-term pullback occurs it will be interesting to see how the market reacts. With the "summer doldrums" over, will this rally carry into the New Year or will we see an intermediate-term pullback (1-3 months). Better yet and certainly not out of question would be a flat market that is unable to make any progress. Of course, little progress in the market doesn't mean that premium-selling options strategies will not work. In most cases they will thrive.
"It's been kind of an investors' nirvana because all asset classes have been going up essentially," Phil Guarco of J.P Morgan said, noting exceptions like the dollar and the value of cash holdings. "It can't go on forever like that."
As for the economy, as I stated before, there was some good news this past week. On Tuesday, Retail Sales came in above expectations at 2.7% vs. the consensus of 1.9%. The Empire Manufacturing reading was also well-above expectations with a reading of 18.9 vs. the consensus of 15.0. ). That was followed by better-than-expected Industrial Production on Wednesday and Philadelphia Fed business outlook survey on Thursday.
There was also positive commentary this past week. Federal Reserve Chairman Ben Bernanke stated that the recession is "very likely over". On that same day it was rumored that Warren Buffett had returned to the market. Mr. Buffett confirmed the rumor the following day, stating that while the economy "hasn't gotten worse" it also hasn't "gotten much better" over the past three months, and that he doesn't expect a 'double-dip' recession.
Looking ahead, next week will be busy, busy, busy. There will be the typical economic data which include Existing Home Sales on Thursday, Sept. 24 and Durable Goods Orders on Friday, Sept. 25.
Although the most notable will be the Fed on Wednesday, Sept. 23, with investors watching to see if the FOMC has changed its policy directive. This could really drive the market going forward and into the New Year.
Andy
Overbought/Sold Condition Report
Overbought/Oversold as of September 21, 2009
Major Benchmarks
- S&P 500 (SPY) - 86.1 (neutral)
- Dow Jones (DIA) - 88.0 (neutral)
- Russell 2000 (IWM) - 88.4 (neutral)
- NASDAQ 100 (QQQQ) - 91.1 (neutral)
Testimonial of the week
"I've got one unit of each of the shoot portfolio entries. I'm very happy with the way these have performed, and I have set up a couple of my own using that model and those are also doing decently. Have you thought about adding more Shoot stocks? This is a winning strategy you should really be proud of and I would welcome the chance to participate in additional positions." - Eugene