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Overview The most widely used option pricing model is the Black-Scholes option valuation model which was developed by Fisher Black and Myron Scholes in 1973. The Black-Scholes model helps determine the fair market value of an option based on the security’s price and volatility, time until expiration, and the current […]
Overview Developed by Martin Zweig, the Puts/Calls Ratio (“P/C Ratio”) is a market sentiment indicator that shows the relationship between the number of Puts to Calls traded on the Chicago Board Options Exchange (CBOE). Traditionally, options are traded by unsophisticated, impatient investors who are lured by the potential for huge […]
Overview Comparative Relative Strength compares two securities to show how the securities are performing relative to each other. Be careful not to confuse Comparative Relative Strength with the Relative Strength Index. Interpretation Comparative Relative Strength compares a security’s price change with that of a “base” security. When the Comparative Relative […]
Overview The Relative Strength Index (“RSI”) is a popular oscillator. It was first introduced by Welles Wilder in an article in Commodities (now known as Futures) Magazine in June, 1978. Step-by-step instructions on calculating and interpreting the RSI are also provided in Mr. Wilder’s book, New Concepts in Technical Trading […]
Overview A basic principle of technical analysis is that security prices move in trends. We also know that trends do not last forever. They eventually change direction and when they do, they rarely do so on a dime. Instead, prices typically decelerate, pause, and then reverse. These phases occur as […]