Chapter 15

Profiting from Non-Vibrational Flatline Price Action

Vibratraders can usually extract oscillational profits from ranging or sideways markets. They may experience some difficulty should the interval size be larger than the current price oscillations in the market. This can be somewhat mitigated by introducing short options into the construct, thereby generating returns from the premiums instead.

The Basis for Non-Directionality

With the collection of premiums within the construct, the vibrational trader can look forward to a more consistent income stream. Price need not even oscillate to derive a profit from within the construct.

One disadvantage of equity options is that they are priced in a lot of one hundred shares. Therefore, the trader must realize that the minimum downbuy sharesize will be one hundred shares, which limits the minimum capital required to build a vibrational construct. Another limitation is the inability of the vibrational trader to match up strike prices with various upsells and downbuys as strike prices are only available at specific price levels.

Riskless Short Options Trades

Once they are introduced into the vibrational construct, all short options become essentially riskless. This is due to two factors:

1. The short calls are covered by shares purchased at previous lower downbuys. If price rises above the option's strike price, the vibrational trader will still derive a profit, keeping the short call premium while earning the difference between ...

Get The Profitable Art and Science of Vibratrading: Non-Directional Vibrational Trading Methodologies for Consistent Profits now with the O’Reilly learning platform.

O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.