Get More Bang For Your Buck
A long time reader wrote in asking if you get more bang for the buck buying an out of the money option, or a deep in the money option on a stock that makes a big move. Interestingly the answer isn't perfectly cut and dry. Let's look.If you buy an in the money option, that option will indeed track the movement of the underlying stock more closely than an at the money option. The Delta or measure of value is much higher, so when the stock moves, the option tends to move also.If you buy an out of t...
The FOMC And The Cyclical Bull Market
The cyclical bull market, which began in March 2003 (or October 2002 by some estimates), within the structural bear market, that began in March 2000, was fueled by monetary policy. The FOMC began an easing cycle in January 2001 when it lowered the Fed Funds Rate from 6.50% to 6%. The FOMC continued to lower the Fed Funds Rate, until it reached 1% in June 2003, and kept there for a year. In June 2004, a tightening cycle began. The Fed Funds Rate reached 5.25% in June 2006 (to neutral from accommo...
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