Jeff, please explain how you pick a particular strike price for an option. Also, once an option reaches a strike price, what is the expected price movement in relation to the price movement in the stock?<\/p>\n
–\u00a0Charlie<\/strong><\/strong><\/span><\/p><\/blockquote>\n Thanks for the question, Charlie.<\/p>\n I prefer to trade options where the strike price is near the current price of the stock. If I\u2019m right on the price, and if I get the timing right, then the at-the-money options tend to provide the best risk\/reward setups. Out-of-the-money options usually require too large of a move on the stock to offer a good reward potential. And the higher premium you have to pay for in-the-money options creates too much risk.<\/p>\n The expected option price movement relative to the stock is called the \u201cdelta.\u201d It tells you how much an option will move for a $1 move in the stock. Most brokerage firms make delta figures available on their option trading platforms. But as a general rule of thumb, an at-the-money option will often move about $0.50 for a $1 move in the underlying stock.<\/p>\n I’m finding your analysis incredibly helpful the last few months that I’ve been a member of Delta Report<\/em>, thank you. Staying calm and lightly positioned with gold and short high-yield bonds just might reap some rewards\u00a0yet. I’ve managed to make a bit with DAL, CCJ, and XOM in recent weeks which I consider great going in these tedious market conditions.<\/p>\n Do you use OBV as an analytical tool, and if so, what would you say about using it well? For me, I like looking at OBV because it seems to match the price patterns and I get some confidence knowing there’s money going with the trend rather than against it, which I can’t see from looking at volume itself.<\/p>\n Thanks again.<\/p>\n –\u00a0Mike<\/strong><\/strong><\/span><\/p><\/blockquote>\n I\u2019m glad your subscription to the Delta Report<\/em> is working out well for you, Mike.<\/p>\n On-Balance Volume (OBV) is a technical indicator that measures buying and selling pressure. It\u2019s a cumulative figure that adds the volume number on up days, and subtracts it on down days.<\/p>\n Technical analysts then look for divergences between OBV and price to help determine the strength of a trend or the potential for a reversal.<\/p>\n For me, OBV is a secondary indicator. I\u2019ve found that other indicators like the MACD (moving average convergence divergence) and the RSI (Relative Strength Index) tend to be more accurate. But, when the MACD and the RSI are telling different stories, I will often turn to other indicators like OBV to settle the argument.<\/p>\n I guess Jeff does not see this as a full time job? He enjoys traveling around watching his kids play ball on our dime .He should quit calling his letter the *market minute<\/em>* and call it the when I am* not busy minute *, I doubt I will sign up again for this *market minute<\/em>* news letter that is only around part of the trading day. I need someone that is at WORK everyday. not just when they feel like it .<\/p>\n –\u00a0Robert<\/strong><\/strong><\/span><\/p><\/blockquote>\n What can I say, Bob? My kids are selfish. They expect some attention from their father.<\/p>\n They don\u2019t realize how much of a burden it puts on folks like you who want 20 fresh Market Minute<\/em> essays every month instead of the 18 I wrote in July while I was traveling with my sons. I\u2019ll try to do better in August.<\/p>\n That might be tough, though. You see, my wife is selfish, too. She\u2019s planned a trip for a couple of days in the middle of the month. I tried to tell her how much this upsets you, Bob. But sometimes there\u2019s just no reasoning with her. She insists that I spend some time with her. So, I might only publish 18 essays this month, too.<\/p>\n I know this will upset you. You feel like you\u2019re not getting your money\u2019s worth for this FREE service. So, I won\u2019t blame you one bit if you go ahead and cancel your free subscription to the Market Minute<\/em>. That way you won\u2019t have to deal with my family\u2019s selfishness around the holidays when I\u2019m likely to publish a few more \u201cclassic\u201d essays.<\/p>\n Best regards and good trading,<\/p>\n
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