Ready to get started trading options? If you're brand new to option-trading and don't yet know the difference between a put and a call, then be sure to read through the first part of this two-part lesson before proceeding. The second part you're reading now looks at a couple of the nuances and oddities in how options are priced in the real world. Superficially/mathematically option prices don't make sense until you understand there are two components an option price reflects. Those two components are an option's intrinsic value, and its time value. The intrinsic value is exactly what it sounds like it would be - the mathematical value of the difference between the strike price of an option and the underlying stock's present price. Let's work through an example. As of right now, Procter & Gamble (PG) shares are trading at a price of $87.50. Let's assume we think PG… more
By Alex Rosenberg, CNBC As the Dow has marched to 20,000, investors appear to have become more and more excited about the mega-cap index. Some $4 billion have flowed into the SPDR ETF tracking the Dow Jones industrial average (DIA) since November. On a percentage basis, that dwarfs what has been added to the much larger SPDR ETF tracking the... more
The VIX has a negative correlation to stock market returns By Sue Chang, MarketWatch The CBOE Market Volatility Index, a measure of fear in the market, is trading at an extremely subdued level that is more symptomatic of a carefree market. But the mood on Wall Street is anything but, suggesting that the volatility index’s foray below 20 may be... more
Acampora thinks Wall Street is a believer in Trump pro-business promises By Mark DeCambre, MarketWatch Prominent market technician Ralph Acampora thinks the stock market has more room to run over the near term, despite a trend that has seen the Dow steadily walk back from the psychologically significant level of 20,000. Acampora told MarketWatch on Monday that the Dow Jones... more
Sales drop 1.9% from November, far more than forecast Accelerating inflation may damp consumer spending this year By Jill Ward, Bloomberg U.K. Chancellor of the Exchequer Philip Hammond told a Davos gathering on Friday that an inflation pickup will put a damper on consumers this year. The first signs may already be appearing. Less than an hour before Hammond spoke,... more
After an initial post-earnings bounce, IBM is headed for a gap-lower open. By Gary Morrow, TheStreet.com IBM (IBM) initially surged following its better-than-expected earnings report before losing momentum early in the overnight session. Heading into Friday's opening bell, the stock is headed for a very damaging gap-lower open and is leaving behind a ominous top near $170. If the stock... more
T. Rowe Price’s Shawn Driscoll says an oversupply combined with greater efficiency means crude prices are headed lower By Howard Gold, MarketWatch The dark days of February 2016, when oil and stock prices were in a race to the bottom, are a distant memory. The lows were hit on Feb. 11, when the S&P 500 Index closed a bit above... more
Trend Watch, TRENDSCORE, webinars, technical analysis e-book, and more!