Divergent bars

by Michael Thomsett

The “divergent bar” is any directional session moving opposite the current trend. As a reversal day, it signals a likely change from bullish to bearish, or from bearish to bullish. As a general rule, expect to see the day’s session open at a gap from the previous day, but to close within the range of… [READ MORE]

The “OOPS signal” trade

by Michael Thomsett

The “OOPS signal” was developed by trader and author Larry Williams. It was named for the all too common experience among traders, upon discovering that “Oops, we lost.” The system is programmed to create more profits than losses. So when the market opens lower than the previous day’s close, a trader places a buy-stop order… [READ MORE]

Options: Contrarian Ideas and Timing Of Trades

by Michael Thomsett

No matter how expertly you are able to time entry and exit in option positions, you face one specific risk not often raised or discussed: the risk of doing too much, too soon, and for the wrong reasons. This action arises any time an underlying price moves too quickly in one direction. Even though the… [READ MORE]

5 Ways To Compare Naked Puts And Covered Calls

by Michael Thomsett

Everyone has heard that writing naked or uncovered options is extremely high risk. This is not necessarily true. The covered call is risky because a stock’s value can fall below the net basis (cost of stock less premium received for the call). But when it comes to the naked put, it’s a different story. The… [READ MORE]

Options timing based on narrow channels

by Michael Thomsett

Options traders face an unending dilemma: During a long-term dynamic trend, how do you know when to open a new position, keep the current position open, or close and take profits?< Many traders get out of trades at the wrong time. It may be wise to take profits when they are available, especially if based… [READ MORE]

Bollinger Band Snaps (BBS)

by Michael Thomsett

Timing of options trades is elusive, especially during dynamic price trends. There is one technique, however, that reliably and consistently allows you to time trades. The Bollinger Band Snaps (BBS) signal occurs at very precise moments during a bullish or bearish trend, and vastly improves timing of both entry and exit. The chart of Chipotle… [READ MORE]

Trading one week prior to expiration

by Michael Thomsett

For anyone wanting to maximize timing for short options, trading on Thursday or Friday for the following week’s expirations (7 or 8 days away) is a good timing strategy. According to Jeff Augen in his book, “Trading Options at Expiration” those options expiring in one week will lose (on average) 34% of remaining time value… [READ MORE]

Options: 5 Ways To Exploit Price Changes 

by Michael Thomsett

So many traders start out with a sensible plan, only to abandon it because of the way the markets move. This abandonment of a smart plan invariably leads to potentially large net losses. Here are five thoughts about how underlying price changes can be timed and exploited: Pick long calls or short puts after the… [READ MORE]

Trendlines and Channels – Recognizing And Using These Indicators 

by Michael Thomsett

Reversals show up in many forms – but in the moment, how do you know when a trend is about to lose momentum and turn in the opposite direction? There are no guarantees that an apparent turn in direction is going to be permanent. However, one relatively simple technical indicator helps you to spot the… [READ MORE]

Options: Flaws In The Put Selling Strategy 

by Michael Thomsett

Selling puts is comparable to covered calls in terms of market risk, but with some notable differences. Rolling flexibility. The short put can be rolled to any later-expiring strike without consequence. In comparison, rolling a covered call has to take into account the potential of exercise and resulting capital loss on the underlying. Dividends Stock ownership includes… [READ MORE]

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