A few of terms you might hear used on the webcasts.
Bearish: Believing that a particular security, a sector, or the overall market is about to fall.
Bollinger Band: Is a measure of volatility in which the price of the stock is banded by an upper and lower band along with a simple moving average.
Breakeven: In general, the price point at which gains equal losses. Example: You bought ABC Corp. at 45 and it rises to 46. Since you are ahead on the trade you decide to use a "stop" at the breakeven point 45, your entry price.
Bullish: Believing that a particular security, a sector, or the overall market is about to rise.
Call Option: An agreement that gives the owner the right, but not the obligation to buy a stock at a specified price within a specific time period. You profit on a call when the underlying stock increases in price.
CBOE Put/Call Ratio: Volume of put option contracts / Volume of call option contracts
This indicator attempts to gauge the prevailing level of bullishness or bearishness in the market.
This indicator is used as a contrarian indicator
Low Reading: 0.70 indicates greed in the market, (one might turn bearish)
Normal reading: .80
High Reading: 1.10 indicates fear in the market (one might turn bullish)
These readings can get to extremes in market crashes or in big market rallies.
Covered Call Writing: The selling of a call option while simultaneously holding an equivalent position in the underlying security. This is an attempt to take advantage of a neutral or declining stock. If the option expires unexercised, the writer keeps the premium. If the holder exercises the option, the stock must be delivered, but, because the writer already owns the stock, risk is limited.
ETF's: An exchange-traded fund (or ETF) is an investment vehicle traded on stock exchanges, much like stocks or bonds. An ETF holds assets such as stocks or bonds and trades at approximately the same price as the net asset value of its underlying assets over the course of the trading day. Most ETFs track an index.
Fibonacci Retracement: A term used in technical analysis that refers to the likelihood that a financial asset's price will retrace a large portion of an original move and find support or resistance at the key Fibonacci levels before it continues in the original direction. These levels are created by drawing a trendline between two extreme points and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.
Gap: They are represented graphically by a non-linear jump or drop from one point on the chart to another point.
Higher high: When a stock trades above the previous day's high price.
Higher low: When a stock does not trade at a lower price than the previous day's low price. Often times can be associated with a bottoming out formation or consolidation period.
Lower High: When a stock does not trade above it's previous day's high price. Often times can be associated with a topping out formation or a consolidation period.
Lower Low: When a stock trades below the previous day's low price
MACD: A trend-following momentum indicator that shows the relationship between two moving averages of prices.
Market Volatility Index (VIX): This is a measure of implied volatility in trading of S&P 500 futures on The Chicago Board Options Exchange. The index is calculated using a formula that considers a large number of option strike prices, supposedly in a way based on current financial research and practice. Values for VIX tend to be between 5 and 100. Many view the VIX as a contrarian indicator. High VIX values such as 40 (reached when the stock market is way down) can represent irrational fear and can indicate that the market may be getting ready to turn back up. Low VIX values such as 14 (reached when the market is way up) can represent complacency or 'irrational exuberance' and can indicate the the market is at risk of topping out and due for a fair amount of profit taking. There's no guarantee on any of this and VIX is not necessarily by itself a leading indicator of market action, but is certainly an interesting indicator to help you get a sense of where the market is.
Matched/Paired Trading: This is a strategy of matching a long position with a short position. Brian uses many pairing strategies involving STOCKS & SECTOR ETF's. This will be discussed and explained more in depth during our live trading sessions.
Moving Averages: An indicator frequently used in technical analysis showing the average value of a security's price over a set period. Moving averages are generally used to measure momentum and define areas of possible support and resistance. Moving averages can consist of any period.
Options: A financial derivative that represents a contract sold by one party (option writer) to another party (option holder). The contract offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security or other financial asset at an agreed-upon price (the strike price) during a certain period of time or on a specific date (exercise date).
Play for Top/Bottom of Bollinger Band: Often times you will look for a stock to hit the top or bottom of the Bollinger Band before taking action in a stock.
Position trade: The buying of stocks or options in which you hold the position for several days to several weeks. Often referred to as a Swing Trade.
Pull Down/Pull Back: This is when a stock drops in value, giving you the opportunity to buy it at a lower price.
Put Option: An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time. You profit on a "put" when the underlying stock depreciates relative to the strike price.
Risk Highs of the Day: Used when you are already in a short position (sold short) and you are going to use a "stop" at the stocks highest recorded price of the day prior to entering position.
Risk Lows of the Day: Used when you are already in a long position (bought long) and you are going to use a "stop" at the stocks lowest recorded price of the day prior to entering position.
RSI or Relative Strength Index: This compares the magnitude of a stock's recent gains to the magnitude of its recent losses and turns that information into a number that ranges from 0 to 100. Generally, if the RSI rises above 30 it is considered bullish for the underlying stock. Conversely, if the RSI falls below 70, it is a bearish signal.
Scale into a Trade: When you buy or short a small % of what a normal size position would be. Example: You buy ABC Corp. at 50, 49 and 48. You short ABC Corp at 50, 51 and 52. Scaling in 1/3 at each price point to give you a better average price. Often times this is done when trying to pick a top or bottom in a stock.
Scalp: When you play for less than .50 on a trade, trying to catch a quick move in a very short period of time.
Sideways Chop/Trade Sideways: Describes the horizontal price movement that occurs in a relatively narrow price range. This occurs when the forces of supply and demand are nearly equal. Often regarded as a period of consolidation.
Stochastic Oscillator: This is displayed as two lines. The main line is called "%K." The second line, called "%D," is a moving average of %K. This is used to interpret whether a security is a buy or a sell.
Stochastics: A technical momentum indicator that compares a security's closing price to its price range over a given time period.
On-Balance Volume (OBV): A method used in technical analysis to detect momentum, the calculation of which relates volume to price change. OBV provides a running total of volume and shows whether this volume is flowing in or out of a given security. This indicator was developed by Joe Granville. OBV attempts to detect when a stock is being accumulated by a large number of buyers or sold by many sellers.
Stock is Stretched: Means that a stock has moved a great distance to the upside/higher and can be clearly seen when looking at the daily chart.
Stocks: A type of security that signifies ownership in a corporation and represents a claim of part of the corporation's assets and earnings
Strike Price: The price at which a specific derivative contract (stock) can be exercised.
Unchanged level: A situation in which the price of the security does not change between two periods. This can be over any time frame including a trading day, week, or even as much as a year