Ted Olshansky began his investment career in 1968 as a registered broker with Dean Witter & Co., Inc. Mr. Olshansky was a market maker and member of the Chicago Board Options Exchange (CBOE) from 1975 to...
The Dow started November with a few down days and a successful test of the psychological 12,000 mark. From that level, the Dow marched to several record closes, closing Wednesday, November 22nd at 12,326 for a 2½% rise for the month and 15½% gain for the year.
Several factors are propelling this rise. Among these are lower oil and natural gas prices. This coupled with a slowdown in housing leads investors to believe that the Federal Reserve will not raise interest rates. Furthermore, with the ten year Treasury Note at 4.6%, bonds cannot compete for investors' dollars.
There are still a lot of non-believers on the sidelines with plenty of cash. Fear of being left behind and worried about year end performance should keep support firm on any correction. We remain bullish and note that the third year of a presidency has almost always been a good one for investors.
This is issue #1 of our first newsletter. Each month we will measure our bullishness or bearishness with a number and a comment. The number will be between 1 and 10, with 1 being the least bullish and 10 being the most bullish.
This week's number is 7.8. After a long run up, a little money could be taken off the table. To reach a higher number, we would need the transportation index to make a new high. It still has a way to go.
Do you have a question concerning options? Each month, Ted will address questions from the readers to provide insight and education concerning options. Being that this is the first newsletter, this month we will address the most frequently asked questions concerning the options marketplace. If you would like to “Ask Ted” submit your email to ted@myautomatedadvisor.com.
Q. Could you please explain the function of a put option?
A. A put is an option to sell stock. It is the opposite of a call. If you buy 100 shares of a $35 stock and buy a two month $35 strike put for $1.60 ($160), your loss is limited to $160. You profit dollar for dollar on every point the stock rises over $36.60. In essence, you have bought an insurance policy.
Q. Can you explain how options can provide more income to me?
A. One way is to sell a call on stock you own. Investors will pay you for the right to buy your stock at a fixed price (strike price) through a fixed date (the expiration date of the option). You get to keep the premium. You should have a financial advisor who understands options implement this trade or any other trade involving this strategy.
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The opinions and commentary provided by the advisors in the My Automated Advisor Newsletter are the opinion of those advisors and not of My Automated Advisor.
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