Trading Options: Using Technical Analysis to Design Winning Trades, + Website

PART III

OPTIONS STRATEGIES

In the first part of the book we learned how to identify the trend in the major market indexes. This is important because the vast majority of stocks move in the direction of that trend. We also learned that it is important to understand what might impact that trend so we can be prepared for a possible change in the trend from an outside influence. In addition, we learned how to focus the process of trade preparation by using relative strength and other measures to determine which market sectors might be the best ones to look at for stocks that are aligned with the trend.

In the second part of the book we drilled down further, exploring many different types of technical analysis to determine which securities were best suited to trade based on their potential to have a big move. We learned where trigger points might be, based on potential reversals or support and resistance. (There will be more on how to apply this in the section on position sizing and stop losses in Chapter 10 in Part IV.) We explored the impact that news, either scheduled (like an earnings release) or a surprise (like the Gulf oil spill), can have on whether you choose a stock to trade, and how short interest can play a role in determining whether to take the trade. Leaving Part II, you were prepared to trade with a watch list and a plan for the securities on that list.

In this part we will go over some options basics so that we can then adapt all the prior analysis to design options ...