Thursday, November 08, 2007

Option Volume Burst and More Ideas for a Volatile Market

* Equity Options on the Rise - We see above (click chart for greater detail) the S&P 500 Index (SPY; blue line) from 2004 to the present alongside 20 day average total equity put and call volume (red line). Equity option volume has expanded about 50% over this time period; note how total option volume has tended of late to spike during market declines. According to my stats, Thursday's total equity option volume was a record. We've also had two consecutive days in which total equity put volume has exceeded call volume. Here's a worthwhile post on put/call spikes among the equity options.

* Links Worth Reading - Charles Kirk has an extensive link selection, including a view on how long the housing slump could last and a look at where the dollar's fair value may lie. See also Trader Mike's updates, including outlooks on the economy and housing, and more enlightening views from Abnormal Returns, including the bear market in financial issues and picking a bottom. The Big Picture also weighs in with a sobering look at how financial companies may be even worse off than they seem.

* Trading With the Rat Brain - The Trading Success blog looks at how we need to get our multiple brains in sync to trade well.

* Options as an Option - Daily Options Report: "Options should always be viewed as an alternative to stock. And if *actual* volatility is higher than the implied volatility you paid for the options, you are better off owning an option."

* Abandoning the Dollar? - Here's a list of countries considering diversifying reserves and what it might mean from the Currency Trading blog.