180Taxation:capital gains, 137seasonal trends/indicators and,214T-bills, 245–246T-bonds, 245–246Technical analysis:average directional index indicator(ADX), 386–387average true range (ATR), 384–385Bollinger bands, 382–384characteristics of, 42, 221, 228–233,254moving average convergencedivergence (MACD) indicator,377–379moving averages, 375–377on-balance volume, 374–375overview of, 373–374rate of change (ROC) indicator,385–386relative strength index (RSI),381–382
8:45 AM
Page 422
INDEX
stochastics, 379–381tools, 369Technical Analysis of Futures Markets(Murphy), 182–183Technical Analysis of Stocks andCommodities, 249Technical analysts, functions of,39Technical indicators:A/D line, 189–190Arm’s Index, 191–193crash signals, 194–195market anomalies, 195–198market breadth, 189–190market internals, 189–195Maximum Pain Theory (MPT),216–218new high–new low index,193–194seasonal trends and indicators,211–215seasonality, 215–216sentiment indicators, 198–211significance of, 181, 354–355volume, 182–189Technical trading, managementexample, 320–323Technology indexes, 16Technology sector, 9, 21, 32, 226,276Technology stocks, 7, 13, 29, 89, 100,222Ten-Year Note Index ($TNX), 17–18, 28,143, 246Terrorist attacks, market response to,155Theoretical value, 270TheStreet.com Internet Index ($DOT),138, 224–225, 329, 331Theta:characteristics of, 115–116, 290,298decay, 338risk, 292–293Thirty-Year Bond Index ($TYX), 1730-year Treasury bonds, 26Thomson Financial, 228
ccc_fontanills_403-425_ind.qxd
6/27/06
Index
Three-box reversal system, 168Three-Point Reversal Method of Pointand Figure (Burke), 168“Three Steps and Stumble” rule,149Tick, 153–155Tick Index, 153–154Ticker symbols, 3, 37Time decay/time decay risk, 76, 84, 92,94–95, 97, 102, 110, 115, 117, 127,131, 290, 292–293, 298Time horizon, 92, 142Time spread, 84–86Time value, in options, 54, 58, 87,99Timing the markets, 315–316Titanic Syndrome, 194–195T-notes, 245–246Tobacco industry, 17Tops, see Double topsTracking strategies, 17Trade Options Online (Fontanills),xviii, 50Traders, success factors, 181Trader’s Index ($TRIN), 189, 191–192.See also Arm’s IndexTrading account, establishment of,344–345Trading day, 66Trading for a Living (Elder),208Trading psychology, 320Trading rules, xii–xiiiTrading the market:bull vs. bear markets, 30–31charts, 37–39, 46going long, 34–37moving averages, 42–45quotes, 37–39selling short, 34–37trending markets, 29–34, 46trendlines, 40–42volume, 45–46Trading volume, 21, 26–27, 30–31, 38,46, 49Transportation sector, 221, 223,247–249
8:45 AM
Page 423
423Treasuries rally, 246Trending markets, 29–34, 46, 247Trendlines, 40–42Trend reversal, 42, 46TrimTabs Investment Research,210True range (TR), 163–164, 264Trustee, HOLDRs, 2320-day moving average, 42200-day moving average, 42–44“Two tumbles and a jump” rule, 149Unbundling, 23Uncorrelated investments, 314Uncovered straddles, 91Underlying asset, significance of,51–52, 55, 57–59, 65, 68, 74–75, 77,79, 81, 83–89, 97, 100–101, 103,105, 107–113, 116–117, 121–123,129, 216Underlying index, 65, 71, 84, 87, 94,107, 109–110, 112, 125, 259, 270,273Underlying securities, 50, 52–54, 95,115, 131Underlying stock, 23, 88, 93, 102,125Underperforming stocks, 254Unemployment report, 144U.S. dollar, gold prices and,239U.S. Labor Department, 144U.S. Oil ETF LP (USO), 236U.S. stock exchanges, 7U.S. Treasuries, 245–246Upticks, 152Uptrends, 40–42Up volume, 183–184Utilities sector, 21, 222, 226, 233–238,243–244, 271–272, 283,334–335Utility HOLDRs (UTH), 85, 87, 244Valuation/valuation ratios, 140–141Value Line enigma, 197–198Value Line Investment Survey,197–198
ccc_fontanills_403-425_ind.qxd
6/27/06
8:45 AM
424Value Line Timeliness Select Portfolio(PIV), 198Value stocks, 315, 318Vanguard 500 fund (VFINX),135–136Vanguard S&P 500 Index Fund, 12, 333,339Vega/vega risk, 115–116, 262, 294Verizon (VZ), 4, 161Vertical spreads:bull call, 85characteristics of, 84–85, 389debit strategy, 88Volatility:actual, 262–263, 266, 270, 272, 281,284average true range (ATR), 263–264,266–267, 284bar charts, 258Bollinger bands, 264–266, 284CBOE Volatility Index ($VIX),259–261, 263, 276, 282, 284–285,296, 298–299crush, 268–269, 294defined, 257–295energy prices and, 150expected, 259, 276hedging with index puts,282–284historical, 262–263, 266, 268–270,284impact of, 48, 82, 127, 152, 180, 284,355implied, 148, 260–262, 268–270,272–276, 284, 285, 294, 300,338–339, 355index components, 331–332indexes, overview of, 275–278inter-index spread and,338–339mutual funds and, 210ratio backspreads and, 123reverse, 273–274seasonal trends, 278–280by sector, 271–272as sentiment indicator, 280–282skews, 272–274
Page 424
INDEX
speed of movement, 267statistical (SV), 266–268, 270, 281,284Volatility Course, The(Fontanills/Gentile), xviii–xix, 50,55, 73, 260, 274Volex system:average true range (ATR),162–165defined, 162entry strategies, 165–166exit strategies, 172–175key components of, 169–170point and figure (PnF) exit,167–169system results, 170–171Volume:exchange-traded funds (ETFs),185–187market trends and, 248–249options, 49put, 205–207put-to-call ratios, 201sector analysis and, 227–228significance of, 45–46, 182–189simple/basic system, 187–188up vs. down, 183–184Wal-Mart (WMT), 328Wall Street Journal, as informationresource, 2, 12, 154, 190, 193,238Washout, 30Wash rule, 214Wealth protection, xiiWeb sites:brokerage firms, 349information resources, 6, 15n, 21, 24,37, 50, 198, 200, 209, 261, 332,343–344, 353, 356Weekly options, 65Weighting, 4, 44, 327, 329Whaley, Robert, 335Wholesale trade inventories,145Wilder, J. Welles, 162, 164, 263–264WorldCom, 329
ccc_fontanills_403-425_ind.qxd
6/27/06
8:45 AM
Page 425
425
Index
Worst-case scenario:covered calls, 83–84long calls, 76Worthless options, 74, 76–77, 81, 84, 87,89–90, 95, 97, 100, 102–105, 108,112, 120–121, 125, 127,129–131Wright, Charlie, 162Writer:call option trades, 77defined, 50, 56
options, generally, 104put option trades, 93Xinhua Financial Network, 24Yield:curve, inverted, 241, 244dividend, generally, 142, 160–161Zacks Investment Research, 143, 228Zero coupon bonds, 244–246
ccc_fontanills_coupon.qxd
6/27/06
8:47 AM
Page 426
FREE Trading Package(A $100 VALUE)FROM GEORGE A. FONTANILLS AND TOM GENTILERequest your FREE Trading Package and learn more about high-profit, lowrisk, low-stress trading strategies that really work!The Trading Package is full of practical tips and useful information to guide youdown the path toward successful trading. The trading fundamentals presentedare based on the same proven techniques taught by Optionetics (www.optionetics.com), which was founded by George Fontanills in 1993 to show individual investors how to profit in all market conditions. Since that time, Optionetics hasbecome a leading provider of investment education services, portfolio management techniques, market analysis, and online trading tools to more than 250,000people from more than 50 countries worldwide.To receive your FREE Trading Package, simply complete and mail (or fax) theform below to:OptioneticsP.O. Box 2409Santa Rosa, CA 95404Fax: 650-802-0900You may also call 888-366-8264 (or 650-802-0700 outside of the United States),or e-mail customerservice@optionetics.com.
FREE Trading Package❑ Yes! I would like to learn more about high-profit, low-risk,low-stress trading strategies. Please send me my FREE TradingPackage today.Name: _____________________________________________________Address: _____________________________________________________________________________________________________________City, State: __________________________
Zip Code:___________
Telephone:_________________________________________________Fax: ________________________
E-mail: _____________________
I purchased this book from: ________________________________
<|end|>