{"id":106444,"date":"2017-05-25T10:19:45","date_gmt":"2017-05-25T14:19:45","guid":{"rendered":"http:\/\/countingpips.com\/?p=106444"},"modified":"2017-05-25T07:20:25","modified_gmt":"2017-05-25T11:20:25","slug":"stock-market-lull-calls-for-extreme-measures","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/05\/stock-market-lull-calls-for-extreme-measures\/","title":{"rendered":"Stock Market Lull Calls for Extreme Measures"},"content":{"rendered":"<div id=\"inves-432752127\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">May 25, 2017<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><p>By <a href=\"http:\/\/WallStreetDaily.com\/\"><u>WallStreetDaily.com<\/u><\/a> <img loading=\"lazy\" decoding=\"async\" class=\"attachment-home-th size-home-th wp-post-image\" style=\"display: block; margin-bottom: 5px; clear: both;\" src=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/05\/0517_marketlull_feature.jpg\" sizes=\"auto, (max-width: 580px) 100vw, 580px\" srcset=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/05\/0517_marketlull_feature.jpg 580w, https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/05\/0517_marketlull_feature-300x155.jpg 300w\" alt=\"Stock Market Lull Calls for Extreme Measures\" width=\"580\" height=\"300\" \/><\/p>\n<ul>\n<li>Market has cooled off following initial Trump-fueled burst.<\/li>\n<li>Investors on the sidelines will miss massive profit opportunities.<\/li>\n<li>A simple strategy adjustment could change everything\u2026<\/li>\n<li><strong><a href=\"https:\/\/pro.agorafinancial.com\/m\/683269\" target=\"_blank\" rel=\"noopener noreferrer\">Also recommended: Why are big companies secretly re-listing their shares?<\/a><\/strong><\/li>\n<\/ul>\n<hr \/>\n<p><img decoding=\"async\" style=\"float: left; max-width: 85px;\" src=\"https:\/\/duip7hn7nchpo.cloudfront.net\/editor-circle-louis-basenese.jpg\" alt=\"Louis Basenese\" \/>Investors and traders are two very different animals in the market.<\/p>\n<p>So it should come as no surprise that they each have different ways to approach market volatility.<\/p>\n<p>Buy-and-hold investors fear that volatile markets will slash the value of their stocks.<\/p>\n<p>While traders ride gyrating stock prices to quick gains \u2014 often playing moves to the upside and the downside.<\/p>\n<p>On the other hand, investors love periods of low volatility in stocks\u2026 While traders cringe at stagnant share prices.<\/p><div id=\"inves-1394380055\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<p>Now, the current market situation might have some investors out of the game. But a simple adjustment to your strategy could change everything.<\/p>\n<p>As senior analyst Jonathan Rodriguez details below, there\u2019s a low-risk way for investors to play the current market like a short-term trader\u2026<\/p>\n<p>Ahead of the tape,<\/p>\n<p>Louis Basenese<br \/>\nChief Investment Strategist, <em>Wall Street Daily<\/em><\/p>\n<hr \/>\n<h2 class=\"headline\">Forget Stocks\u2026 Here\u2019s a Better Option<\/h2>\n<p><img decoding=\"async\" style=\"float: left; max-width: 85px;\" src=\"https:\/\/duip7hn7nchpo.cloudfront.net\/editor-circle-jonathan-rodriguez.jpg\" alt=\"Jonathan Rodriguez\" \/>This month, the VIX \u2014 commonly known as the stock market\u2019s \u201cfear gauge\u201d \u2014 dropped to its lowest closing level since 1993.<\/p>\n<p>To be sure, the market has cooled off considerably since Donald Trump\u2019s presidential election win. And investors are playing a mellow game of wait-and-see as the president\u2019s legislative agenda unfolds.<\/p>\n<p>Don\u2019t follow their lead!<\/p>\n<p>Now is not the time to sit on the sidelines. But it\u2019s also not time to load up on pricey shares of your favorite companies.<\/p>\n<p>Instead, now\u2019s the time to \u201creplace\u201d these expensive stocks using options.<\/p>\n<p>As you may know, options derive much of their value from the price of their underlying stock.<\/p>\n<p>But another major component in their pricing is volatility.<\/p>\n<p>When volatility is high, option prices become more expensive as traders buy them up \u2014 hoping to make quick profits. Conversely, when the market is calm, options become cheap.<\/p>\n<p>So in other words, when the market becomes complacent, a savvy trader can substitute their stock for cheap options.<\/p>\n<p>Stock replacement is particularly useful during times of market uncertainty, coupled with high valuations. And the future profits can be several times greater than the stock gains, with even less risk.<\/p>\n<p>There are two main ways to implement a stock replacement strategy: using an out-of-the-money (OTM) call option or an in-the-money (ITM) call.<\/p>\n<p>Here\u2019s a quick rundown on the difference between the two\u2026<\/p>\n<h2 class=\"subhead\">Less Risk and More Reward<\/h2>\n<p>An OTM call is an option with a strike price that\u2019s higher than the current price of the underlying shares.<\/p>\n<p>This type of call is cheaper than an in-the-money call because it doesn\u2019t actually hold any \u201cintrinsic\u201d value.<\/p>\n<p>For instance, say XYZ Co. is trading for $10 a share. An OTM option with a $15 strike price is less valuable than an ITM call with a $5 strike.<\/p>\n<p>In this example, the ITM option has $5 of intrinsic value built in. That is because the owner of the option can buy XYZ shares at $5 and sell them at the $10 market price for a profit ($10 share price \u2013 $5 strike = $5).<\/p>\n<p>Pretty simple, right?<\/p>\n<p>Now, both types of options come with advantages.<\/p>\n<p>An OTM call option boasts an advantage. Not only is it cheaper to purchase when you enter the trade, but it also allows you greater leverage to increase your profit potential.<\/p>\n<p>The downside is that until the option trades ITM \u2014 when the stock price moves higher than the option\u2019s strike price \u2014 you\u2019ll capture less of a profit on the underlying stock\u2019s rise.<\/p>\n<p>This correlation between the option\u2019s price and the underlying stock\u2019s price is called \u201cdelta.\u201d<\/p>\n<p>So what\u2019s the advantage of an ITM option?<\/p>\n<p>An ITM option is more intrinsically valuable \u2014 and as a result, it\u2019s more expensive. However, ITM options have higher deltas \u2014 meaning these options follow the underlying stock more closely.<\/p>\n<p>Plus, despite their premium price to OTM calls, they can still reduce an investor\u2019s cost basis to owning shares by at least half.<\/p>\n<p>Want to learn more?<\/p>\n<p>Next week, I\u2019ll dive into examples of both replacement strategies at work.<\/p>\n<p>Stay tuned.<\/p>\n<p>On the hunt,<\/p>\n<p>Jonathan Rodriguez<br \/>\nSenior Analyst, Wall Street Daily<\/p>\n<p>The post <a href=\"https:\/\/www.wallstreetdaily.com\/2017\/05\/25\/stock-market-lull-calls-extreme-measures\/\" rel=\"nofollow\">Stock Market Lull Calls for Extreme Measures<\/a> appeared first on <a href=\"https:\/\/www.wallstreetdaily.com\" rel=\"nofollow\">Wall Street Daily<\/a>.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By WallStreetDaily.com Market has cooled off following initial Trump-fueled burst. Investors on the sidelines will miss massive profit opportunities. A simple strategy adjustment could change everything\u2026 Also recommended: Why are big companies secretly re-listing their shares? Investors and traders are two very different animals in the market. So it should come as no surprise that [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-106444","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/106444","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=106444"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/106444\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=106444"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=106444"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=106444"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}