Home Study Course by Bernie Schaeffer

Home Study Course by Bernie Schaeffer

Bernie Schaeffer, president of the Investment Research Institute, is best known as the chief editor of The Option Advisor, the largest-circulating options newsletter in the United States. He is also the senior editor of the Fund Profit Alert and the newsletters of Schaeffer Research Research. Schaeffer was inducted into the Dick Davis Hall of Fame for being bearish prior to the stock market correction in 1987, and since then has been firmly and correctly optimistic, largely because of his use of sentiment-based indicators, which they recently helped him obtain the Best of the Best award from the Association of Market Technicians in sentiment and psychological analysis; Plus, he has a book pending publication even when you read this by John Wiley & Sons titled The Option Advisor: Wealth Building Techniques Using Index and Equity Options. So how do you see the market these days? To find out, STOCKS & COMMODITIES editor Thom Hartle interviewed Schaeffer by phone on August 19, 1997.

How did you start in business?

I have always been fascinated by the stock market, ever since my years in New York City. I remember my dad taking me to the New York Stock Exchange Visitors Gallery and watching the ticker tape go by. Those were the days when you could look at a teletype tape and pass the paper between your fingers. I remember one scene in particular on the NYSE floor. There was a problem in Central America that affected United Fruit Co. It was a pandemonium at the United Fruit trading post, and that scene always stuck with me because it was exciting to see the kind of feverish activity that can occur in the stock market. .

Did you start your career at a brokerage company?

No, my business career started as a victim actuary in the insurance field. I completed all the exams to become a member of the Actuarial Society. However, not long after reaching my full professional position as an actuary, I left a large insurer to start the Investment Research Institute. That was in 1981.

How did the idea come about?

As I mentioned earlier, I had this long-standing fascination with the stock market, which led me to become interested in the options market. I’d take The New York Times on Sunday and track over-the-counter options. Of course, the advent of the options listed in the early 1970s really sparked my interest.

With your solid math background, I imagine the options market seems intriguing to you.

Exactly. And he was always working on strategies and doing some recreational trading, which got a little more serious over the years. I had an associate at the insurance company and we were always brainstorming about the stock market and the options market. We both decided that we had had enough of the corporate world, and were looking for another business to enter. Just out of curiosity, we went to a seminar on how to start a newsletter.

An investment newsletter?

No, it wasn’t really an investment-related seminar, but the newsletter business made sense to us because we were both good communicators and the seed money wasn’t really that big.

So your plan was to write about the options market?

I subscribed to a series of investment newsletters and never noticed anything of real value regarding the options. That did not surprise me. At the time, the listed options had been in existence for less than a decade, and the trading options had not really captured the public interest. So I felt there was a good niche to be covered by an options-based newsletter, and that’s why we started one. The first issue of The Option Advisor was published in December 1981.

And so the Option Advisor newsletter was your main focus?

Yes. In the first years of the newsletter’s existence, we were a one-product company. We gradually evolve in two additional directions.

What were they?

The former was more short-term oriented for the options trader; We provide option recommendations by fax. The second was a body of research that I developed at the same time. There was a lot of valuable information from the analysis of the volume of options, open interest and prices that I was using as tools for my recommendations, and I began to realize that the information was valuable as indicators based on feelings.

Can you explain how you interpret some of these key indicators?

Insurance. The first thing that caught my attention was the importance of focusing more on analyzing open interest options than on the volume of options. Options volume is the most obvious statistic for people, but I started to see that it really was open interest, which represents the number of actual positions held overnight, which is a more informative statistic compared to volume.

How is that?

Volume is a very crude indicator, which means it is not as accurate. First, a large amount of volume, particularly on options that are about to expire, represents the daily trading activity in which traders are in positions in the morning and afternoon. If you’re looking to forecast five, 10, 15, and 20-day movements in an underlying stock, based on an option-based indicator, the activity of daily traders is quite irrelevant to that whole process.

Mixing apples and oranges, for example?

Right. In traditional technical analysis, if you have a 10-day time frame, you would see things like 10-day moving averages. Your past data period for analysis is consistent with your future trading horizon. I discovered that volume, due to its distortions due to a large number of daily transactions, is not good for a position trader who is waiting, for example, 10, 15 or 20 days. And there is another aspect of the volume that can be very misleading.

And that is?

You can look at the heavy volume and say, “If it’s a high call volume and I’m an opponent, I have to worry because operators are obviously very optimistic about the call options.” The problem with that is if we are looking at the options for a company that is actively trading in the first month. options, for example IBM or Intel, that large volume could be the result of liquidating the position, rather than creating new interest in those options. The same to analyze the activity in options on futures contracts. Again, it does not know if the volume is being generated by those who liquidate their positions or if they add new positions.

Forex Trading – Foreign Exchange Course

You want to learn about Forex?

Foreign exchange, or forex, is the conversion of one country’s currency into another.
In a free economy, a country’s currency is valued according to the laws of supply and demand.
In other words, a currency’s value can be pegged to another country’s currency, such as the U.S. dollar, or even to a basket of currencies.
A country’s currency value may also be set by the country’s government.
However, most countries float their currencies freely against those of other countries, which keeps them in constant fluctuation.

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