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Article Archive For Jay Kaeppel

  • Introducing The Open Collar

    ARTICLE SYNOPSIS ...When the price of a stock you are holding keeps moving higher and higher to the point where you are sure a pullback will occur, do you continue holding your position, do you close it, or are there other alternatives? Here's one technique you can apply when faced with such a scenario....

  • New Tricks With Old Indicators

    ARTICLE SYNOPSIS ...Traders are always looking for ways to refine their tools. Here, we'll reshape and redesign two familiar, classic indicators. The result is something new that could improve your ability to identify oversold buying opportunities....

  • The JK HiLo Index

    ARTICLE SYNOPSIS ...No single indicator will accurately forecast or coincide with every market top or bottom. Here, two indicators have been combined to form one indicator that can increase your chances of identifying buy or sell points....

  • Investment VS Trading In Covered Call Writing by Jay Kaeppel

    ARTICLE SYNOPSIS ...With the investment approach, shares of stock are viewed as rental property and calls are written to generate additional income from what is expected to be a longer-term stock investment. The trading approach involves executing buy/writes based on the possibility of generating a high annualized rate of return on a given stock/option combination. Which is better? It can be argued that covered call writing is the second-most commonly used option trading strategy, trailing only straight call and put buying. This is not surprising, since many investors assert that covered c...

The Out Of The Money Butterfly Spread by Jay Kaeppel

  • Introducing The Modidor Spread by Jay Kaeppel

    ARTICLE SYNOPSIS ...Introducing The Modidor Spread by Jay Kaeppel Here's a strategy that involves modifications to the standard iron condor spread. The world of option trading is an ever-evolving one. While the basic strategies have been around for a long time, the search for useful adjustments and enhancements to these fundamental strategies is an ongoing process. The more closely traders look at traditional strategies, the more opportunities they are likely to find. This article details a strategy that involves modifications to the standard iron condor spread, dubbed the modidor spread. THE GENESIS OF THE M...

The Double Calendar Spread by Jay Kaeppel

Short-Term Gap Trading by Jay Kaeppel

  • Stocks & Commodities V. 26:3 (24-32) Buying Straddles by Jay Kaeppel

    ARTICLE SYNOPSIS ...Buying Straddles by Jay Kaeppel In this, the third article of the series, the strategy of buying a straddle is discussed, which gives option traders an opportunity not available to others. AS discussed in the first article in this series, there are several key factors to consider in determining the best option trading strategy to use at any given point for a given security. Likewise, these criteria can be used to zero in on the specific best option or options to trade in executing a particular strategy. Selecting the proper strategy involves knowing what to look for in terms of the following...

  • Stocks & Commodities V. 26:1 (52-57) A Structured Approach To Option Trading by Jay Kaeppel

    ARTICLE SYNOPSIS ...A Structured Approach To Option Trading by Jay Kaeppel This is the first in a series of articles about option trading with the PROVEST option trading method. The PROVEST method is not a trading system. Rather, it utilizes a series of criteria that can aid option traders in choosing the proper trading strategy for a given situation. Likewise, traders are free to choose different parameters to apply to each of the key criteria. This month's article lays the groundwork for the strategy pieces to follow in the months ahead. Option trading volume has proliferated in recent years. Part of this is ...

  • Buying Puts And Calls With PROVEST by Jay Kaeppel

    ARTICLE SYNOPSIS ...Buying Puts And Calls With PROVEST by Jay Kappel The second article in this series discusses the details of the PROVEST strategy and how you can apply it to trade calls and/ or puts. As discussed in the first part of this series, several key factors should be considered in determining the best option trading strategy to use at any given point in time for any given security. Likewise, these criteria can also be used to zero in on the best option or options to trade in executing a particular strategy. Selecting the proper strategy involves knowing what to look for in terms of the following var...

  • Stocks & Commodities V. 26:4 (32-38) Bull Put Spreads by Jay Kaeppel

    ARTICLE SYNOPSIS ...Bull Put Spreads by Jay Kaeppel In part 4 of this series, you'll find out more about the bull put spread strategy. AS discussed in the first article in this series, several key factors should be considered in determining the best option trading strategy to use at any given time for a given security. In this installment we will look at a specific trading strategy -- the bull put spread -- and how to use the PROVEST criteria to identify trading opportunities. STRATEGY: BULL PUT SPREADS As I have stated in the past, one of the most attractive features about trading options is the ability to cre...

  • Playing The Yield Curve by Jay Kaeppel

    ARTICLE SYNOPSIS ...Stocks & Commodities V. 24:6 (32-36): Playing The Yield Curve by Jay Kaeppel So what is the yield curve, and how can you use it in your trading? Find out here. Most investors are at least vaguely aware of something known in financial circles as the "yield curve." In its most basic definition, the yield curve represents the difference between interest rates offered by US Treasury securities of various lengths of time until maturity. A more complex version of the yield curve compares intermediate-term interest rates to short-term rates and long-term rates to both intermediate- and short-term r...

  • Buy Strong Groups Or Weak? by Jay Kaeppel

    ARTICLE SYNOPSIS ...V. 22:9 (34-37): Buy Strong Groups Or Weak? by Jay Kaeppel Is it better to buy weak industry groups or strong ones? The best approach might be to utilize both strategies. Is it better to buy weak stocks or strong ones? The theory behind buying weak stocks is that you have the opportunity to buy low and (some time later) sell high. The theory behind buying strong stocks is one of momentum; the idea is that a stock in motion is most likely to continue in that least for a while. Most research suggests that direction, at least for a while. Most research suggests that when you buy individual stoc...

  • The 40-Week Cycle In The Stock Market by Jay Kaeppel

    ARTICLE SYNOPSIS ...The 40-Week Cycle In The Stock Market by Jay Kaeppel Is the market truly random? Some phenomena related to the stock market would not be expected to exist if the market truly were random. There has been much debate in the investment community regarding the existence of cycles in the markets. Some claim that cosmic forces (a full moon, for instance, or other celestial events) can cause the overall mood of investors to swing from high to low, often on a predictable and repetitive basis. On the other end of the spectrum are those who dismiss such notions as hogwash. Most investor opinions fall ...

  • The Stock Market, The Calendar, And You by Jay Kaeppel

    ARTICLE SYNOPSIS ...The Stock Market, The Calendar, And You by Jay Kaeppel What's more important -- what you buy or when you buy it? Seasonality in the market has long been a welldocumented phenomenon. A detailed look at the stock market will lead you to conclude that there are certain times when it is more advantageous to be in the stock market than other times. Seasonality offers a viable approach to investing and trading, and in this article I want to focus on this aspect. I will illustrate how combining four basic seasonal tendencies can maximize returns. One advantage of employing a seasonal system is that...

  • Trade Sector Funds With Pure Momentum by Jay Kaeppel

    ARTICLE SYNOPSIS ...Trade Sector Funds With Pure Momentum by Jay Kaeppel In the July 1999 Technical Analysis of STOCKS & COMMODITIES, I wrote about one of the systems I use to trade Fidelity Select sector funds. That system was referred to as the relative strength system (or RS System for short). In this article, I will discuss another system that I use for trading sector funds. This one is referred to as the pure momentum system (or PM System). Like the RS System, the PM System holds a portfolio of up to five sector funds at any time. Because the PM System is similar to the RS System, the results tend to be hig...

  • Sizing A Futures Trading Account by Jay Kaeppel

    ARTICLE SYNOPSIS ...Sizing A Futures Trading Account by Jay Kaeppel While most traders start out working on a trading system, they forget that the amount of starting capital is equally important. Here are some guidelines to consider. Novice traders focus their attention on developing a system for entering and exiting the markets. In fact, an entire industry has been spawned to facilitate trading system development. The age-old quest for the Holy Grail fuels the simplistic attitude among new traders that if their timing is good enough, everything will work out. Only after a trader has become seasoned and taken s...

  • A System For Trading Fidelity Select Funds by Jay Kaeppel

    ARTICLE SYNOPSIS ...A System For Trading Fidelity Select Funds by Jay Kaeppel The key techniques for trading stocks, options, and futures can also be applied successfully to mutual funds. Here's a systematic approach to mutual fund trading. Several keys to investment and trading success are universal; these keys apply to stock, futures, and options trading, and they also apply to trading mutual funds. The first key is to identify opportunities with above-average profit potential. The second is to determine how best to take advantage of those opportunities without taking on too much risk. Achieving the proper b...

  • Bond Market Timing Revisited by Jay Kaeppel

    ARTICLE SYNOPSIS ...Bond Market Timing Revisited by Jay Kaeppel Here's an update of this author's article from August 1994 on trading bond funds using Barron's Gold Mining Index as an indicator. In addition, take a look at a new version of that model, as well as information on other ways to take advantage of the timing signals it generates. An article I wrote that appeared in the August 1994 STOCKS & COMMODITIES focused on bond fund investing and detailed a simple bond market timing model that signaled when to switch between long-term bond funds and short-term bond funds. This article will update the results o...

  • Selling Vertical Credit Spreads by Jay Kaeppel

    ARTICLE SYNOPSIS ...The options trader has available many different strategies, virtually to suit every need and intent. Here's how to use the credit spread strategy. by Jay Kaeppel Most of the money made in options trading is made by those who write options rather than by those who buy them. This is because an option is a wasting asset, the price of which is composed of intrinsic value (equal to the amount by which the option is in the moneyŻ) and time premium. (Out-of-the-moneyŻ options have no intrinsic value and their prices are composed entirely of time premium.) Options lose all of their time premium by e...

  • A DJIA Long-Term Momentum Indicator by Jay Kaeppel

    ARTICLE SYNOPSIS ...A DJIA Long-Term Momentum Indicator by Jay Kaeppel Picking the tops and bottoms of the market has always been the dream of traders. Is it necessary, though? Here are the results of using a long-term momentum indicator based on the Dow Jones Industrial Average (DJIA). With powerful personal computers and abundant price data now commonly available, many stock market professionals - and even nonprofessionals - are focusing more and more on capturing profits from short-term trading. With many new traders in particular, the goal seems to be anticipating and pinpointing market tops or bottoms. Fo...

  • Should You Trade Futures? by Jay Kaeppel

    ARTICLE SYNOPSIS ...V.13:08 (337-341): Should You Trade Futures? by Jay Kaeppel Here's some helpful advice to novices who are considering trading commodity futures. This should give you some idea of what's involved. And whether you should. Each year, many individuals take a deep breath, open futures trading accounts and begin trading on their own. Their reasons for doing so are numerous and diverse, but they generally fall into one of several categories. For the most part, these individuals have: ? Had a lot of success in stocks, mutual funds or bonds and want to parlay their winnings by branching out into f...

  • Maximizing Bond Fund Profits by Jay Kaeppel

    ARTICLE SYNOPSIS ...Maximizing Bond Fund Profits by Jay Kaeppel A new indicator based on Barron's Gold Mining Index is introduced for timing bond mutual funds. The proliferation in bond mutual funds in recent years has created both good news and bad news for investors. The good news: Income investors can now select from funds investing in specific types of bonds with specific maturities. This flexibility allows an investor to tailor a portfolio to meet his or her own specific requirements. The bad news: More flexibility introduces more choices, and with it the increased possibility of making poor decisions at ...

  • Prospecting With Gold Mutual Funds by Jay Kaeppel

    ARTICLE SYNOPSIS ...Prospecting With Gold Mutual Funds by Jay Kaeppel Gold. In the past, it inspired rushes and revolutions, passion and poetry, but in recent times gold mutual funds have been distinctly lackluster. The emotion that the precious metal inspired may have dwindled, but gold mutual fund investors can still make money. Gold mutual funds can provide huge profits to investors when things are going well -- but unfortunately, these funds can also expose investors to the risk of devastating losses when a precious metals bear market is in force. As a result, many investors simply shy away from gold funds a...

  • The Stock/Bond Yield Gap by Jay Kaeppel

    ARTICLE SYNOPSIS ...The Stock/Bond Yield Gap by Jay Kaeppel STOCKS & COMMODITIES contributor Jay Kaeppel presents an indicator using the yield for high-grade corporate bonds and the yield for the DJIA to predict the stock market. Investors have often wondered if some significant information could be gleaned from comparing yields on stocks to yields on bonds. In theory, at least, it would seem to make sense that if bond yields were much higher than stock yields, then investment dollars would be drawn to bonds and away from stocks, thus having a negative effect on stock prices. Likewise, if the difference betwe...

  • The January Barometer: Myth And Reality by Jay Kaeppel

    ARTICLE SYNOPSIS ...The January Barometer: Myth And Reality by Jay Kaeppel Some claim the January Barometer is a great forecasting tool, while others say it is totally without value. As usual, the truth lies somewhere in between. First, let's define exactly what the January Barometer is. Originally, the theory behind the January Barometer was that ""as January goes, so goes the year."" If the market closed January with a gain, the market should close that year with a gain. Conversely, if January was down, then the year as a whole should be down. For our purpose of attempting to use the January Barometer as an a...

  • Stock timing to the discount rates by Jay Kaeppel

    ARTICLE SYNOPSIS ...Stock timing to the discount rates by Jay Kaeppel The course and direction of interest rates have long had a direct and often profound effect on the course of stock prices. When interest rates are rising, investors tend to turn away from the stock market and lean more towards interest-bearing investments, such as Certificates of Deposits and Treasury bills. However, when interest rates begin to decline, investors look to the stock market as an avenue to increase their returns, as the returns on their interest-bearing investments decline. One of the most useful interest rate measures is the Fe...

  • Stock market timing with interest rates by Jay Kaeppel

    ARTICLE SYNOPSIS ...Stock market timing with interest rates by Jay Kaeppel The level and trend of interest rates has a tremendous influence over what types of investments investors choose to put their money into. Generally, when interest rates are low and/or falling, investors will move into the stock market, pushing prices higher. Conversely, when interest rates are high and/or rising, investors will move out of stocks, thus pushing prices lower. By tracking interest rates, investors can often identify periods when the probability of higher stock prices is great. The key is knowing which interest rates to watc...






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