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About SENTIMENT

Welcome to the fourth issue of SENTIMENT, smart options for today's investor, a quarterly magazine devoted to options trading. We're excited to offer you another issue of insightful, timely articles that should help make your trading more profitable and more enjoyable. Issue No. 4 includes features on the option trading opportunities you will find during expiration week, and the much talked about CBOE Market Volatility Index, or VIX, along with the final part of our series on Expectational Analysis ®, our three-tiered methodology for analyzing the market. The quarterly Sentiment Report offers up some thoughts on where the market is headed in 2010, including our target for the S&P 500 Index. See below for more details on the stories in this issue. Along with SENTIMENT magazine, Schaeffer’s Investment Research Inc. offers a full array of print and multi-media educational offerings to the options trading community, including the Option Advisor newsletter and our award-winning Web site, SchaeffersResearch.com. We've been delighted by the reader response to our magazine; please enjoy it. And if you like what you see in our latest issue, don’t forget to check out our archived issues below.

If you think trading during expiration week is dangerous, think again. Not only do opportunities abound, but they can come with very little risk. During expiration week, you can purchase in-the-money options on volatile stocks for little or no time premium—options that can achieve high, double-digit or even triple-digit gains in a week or less. Time decay is the enemy of the option buyer, but in expiration week, option buyers can minimize the dollars they have exposed to this threat. That means, potentially, higher win rates and bigger profits on a given stock move.

Often when there is a big down day in the U.S. stock market or, more specifically, in the S&P 500 Index, the financial press cites the level of the CBOE Market Volatility Index, or VIX, as an indication of the level of fear in the marketplace. Now, although the VIX typically has an inverse relationship to the direction of the S&P 500, it is more than an index of fear. And it is definitely more than just something for the talking heads on TV to get excited about every once in a while.

In previous editions of SENTIMENT, we introduced you to Expectational Analysis®, our three-tiered methodology for analyzing stocks, and we reviewed some basic concepts of fundamental and technical analysis (two of those three tiers). Fundamental analysis and technical analysis can provide a wealth of information about a company’s financial health and its past performance on the charts. But they both overlook one critical factor: investor psychology. This final element is our “X Factor”—it not only helps to fill the gaps left by technical and fundamental analysis, but it can also provide you with an entirely new insight into the market.

Regular features in every issue of SENTIMENT include The Sentiment Report, a quarterly market roundup; the Idea Lab, an examination of technical analysis tools; Ask Bernie, with Bernie Schaeffer answering some of the most commonly posed questions by traders; and .COM, featuring the "best of" recent commentaries and blog posts on SchaeffersResearch.com.