By Stan Freifeld, formerly, a floor trader of the American Stock Exchange and a market maker for options*
Posted: Jan 2, 2009

It's times like these when knowing your risks (Greeks) could save the day. Well, prepared options traders should be able to weather the storms quite well and, in fact, look at the increased volatility as an opportunity. Stock traders just using options for increased leverage may experience a different fate.

Remember: There are stock traders, options traders and stock traders who think they are options traders. Each group has a clearly defined yet different mindset. Anyway, let’s get back on track.

(RTTNews) - AutoZone (AZO) dropped away from a four-month high in Monday trading. The stock fell in the opening half-hour and has dipped below its lows of the day in the mid-afternoon. Shares are at $138.11, down $2.46.

(RTTNews) - Baidu.com (BIDU) has climbed sharply amid a pickup in volume during the last 15 minutes of trading. The stock is posting its fourth gain in a row and is at its highest level since mid-December, up $4.14 at $139.55.

By Alan Farley, Founder and publisher of Hard Right Edge

Gaps are shock events that jolt price up or down and leave an "open window" to the last bar. Market folklore (such as the infamous "gaps get filled") seems to offer guidance, but, in reality, it has little value. After all, many gaps never get filled. So, how can we use these one-bar wonders to make good trades and increase profits?
The first thing to do is figure out what kind of gap you're dealing with. It should fall into one of these three categories:

One of the major issues people usually have with Elliott Wave theory is the fact that the wave counts can change. This is a BIG problem for those people who exclusively use the Elliott Wave count, and depend completely on their ability to find the correct count at all times. The way we do things with Advanced GET is to always have complimentary indicators verify the count seen on the screen. The Oscillator we use helps us not only to confirm the count we see, but also to let us know when we should NOT believe the count seen on the screen.

In today's Euro on a 3-minute chart, there was a classic example of a Wave 5 recounting to a Wave 3. We can predict when this happens by watching the strength in the oscillator. Typically, Wave 5's oscillator strength should be LESS than what was seen during Wave 3. The oscillator, being an indication of momentum, should show less momentum in Wave 5 than in 3. If it does NOT, then we have a good chance of seeing the 5 recount to an extension of the original 3.

Lawrence McMillan is considered by many to be one of the top options educators and experts in the world. His first book on options, Options as a Strategic Investment, is in its fourth edition and is a perennial bestseller among options texts.

Many refer to it as the “Bible of Options Trading”. The 100,000+ readers of this classic who are not familiar with his later work reviewed here (McMillan on Options) might wonder if it is merely a re-write of his first book. The answer is definitely no. McMillan’s first book is academically oriented and is formatted like a textbook that categorically and systematically covers virtually all aspects of options trading.