What’s Free (or Almost Free) from the Exchanges?
One lesson from 2008 is clear: you are a lot better off if you know how to use options than if you don’t. One of the best ways to start leaning about options is to check out the various services offered by the option exchanges. Even experienced option investors should review the ever expanding list of training and information services offered by these organizations.
The Options Industry Council
The Options Industry Council (OIC) is a non-profit association of the exchanges and the Options Clearing Corporation (OCC). The goal of the OIC is to educate investors and brokers about listed options. To this end, they never cease to improve and expand the training and services they offer. If you have not visited their site in the past several years, we urge you to do so now.
Among the more recent offerings at this site are a full array of webcasts and podcasts, delivered by OIC training professionals. The podcasts run the gamut from the most basic to such advanced issues as selling calls against LEAPS and the dynamic use of options as a portfolio hedge.
Registering at OIC Select (all it takes in your email and answering a few basic questions), gives you access to the OIC’s Virtual Trading. At this site, you can create paper trades and track them in 20-minute delayed time. (Virtual Trading uses the platform created by one of the better know online brokerage companies. In Figure 2 below, we show an example from Virtual Trading. Here we have selected the March $55 strike covered call on Transocean (RIG) with the stock at $49.95 and the call at $3.10. You can also practice your trades on individual calls and puts and on spreads and straddles.
Another new feature at the OIC site if you register is the series of interactive option quizzes. These quizzes are fun to take. Advanced topics include option pricing and order placing.
The Chicago Board of Options Exchange (CBOE) is the world’s largest options Exchange. The CBOE provides a wealth of content at its well-formatted website. Here is a brief description of some of its more interesting offerings.
Starting at the homepage, click on Learning Center, then on Options Institute and finally on Online Tutorials. Here you will find an excellent web-based introduction to options. To go beyond basics, click on Advanced Strategies for such topics as selling puts, vertical spreads and how and when to use ratio spreads. There are multiple choice quizzes at the end of each session to test what you have learned.
If you click on Trading Tools, you will find a number of useful items. One is CBOE-TV. Here you get a five-minute, twice-daily, update from the CBOE trading floor, hosted by former market marker and well-known options expert, Jon (Dr. J.) Najarian.
individual options (just enter the option ticker) or the full option chain (all options) on any U.S. stock with listed options (just enter the stock ticker). After displaying the option chain, you can click on an individual option and view option details, including the “greeks” and bid/ask average implied volatility.
If you are considering upgrading to real time data, you want to take a look at the Streaming Real Time Quotes under the Quotes tab at the CBOE home page. You can get a 14-day no-risk trial of these quotes. After that, the charge is around $20 per month plus Exchange fees.
Eight years ago, the International Securities Exchange (ISE) was the new kid on the block, introducing electronic only trading on the 600 most active stocks. Today, the ISE lists options on more than 2,000 stocks and leads all the other Exchanges in equity options volume (although, because of index trading, the CBOE leads in total options volume).
The ISE offers its own online educational “Webinars” and posts an archive of past sessions, which can be played back using Windows Media Player (or viewed in Microsoft PowerPoint.) Additionally, as part of its educational services, the ISE offers seminars to qualified user groups by its options instructors. You can email them at firstname.lastname@example.org for information on this service.
Another offering at the ISE site is its market data, including the ISE Sentiment Index (ISEE.). This index shows the ratio of new customer (as opposed to market maker) call option volume to put option volume. While the index may jump around a lot on a day-today basis, its moving averages can show some very telling patterns. Looking at the 10- day moving average of all equities (in Figure 4 below), one can see that the ratio of call volume to put volume had been falling back in the four weeks up to January 23rd, indicating an increasing bearish sentiment in the market. Often this increase in bearish sentiment is a “buy” signal, since it indicates the approach of a market bottom.
Before you go out and spend big bucks on option training, you should check out the excellent free services offered by the exchanges. In next week’s report, we will show some of the free (or nearly free) services offered at some commercial websites.