Price Weighting of DJIA gives False Sense of Security

As we analyze the Dow Jones Industrial Average Components, we can see that the majority of the move comes from only one stock today: Boeing.

Boeing beat on earnings but missed on revenue with their earnings report this morning.  This move is lifting the average up about $51 dollars.

There are 3 other stocks:, DIS, VZ, and MRK that are contributing roughly $16 to the DJIA.

We wanted to highlight this because we feel that the market continues to hit news highs but there are hidden days like this where there is still plenty of opportunity on both sides of the market for option trading.

Don’t be pulled off a good downside play just because BA is pulling the DJIA up.  Keep in mind the bigger picture that we are sitting at all time highs with historically low Implied Volatility.  The CBOE’s VIX traded below $9 yesterday and is still hovering around $9.2.  While we don’t consider this a signal to trade off  of for option trading…  we do take this into consideration when deciding to buy/sell options when initiating or adjusting our positions.

 

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