Options – When to use the Collars as a Portfolio Management Strategy

by Michael Thomsett

The problem for anyone in the market is the threat of loss. Owning stock means you risk a decline in the price, and this is where some specific options-based protective strategies are exceptionally valuable. One such strategy is the collar. The collar has three parts: 100 shares of long stock, a short call, and a… [READ MORE]

Bollinger M top, strong reversal signal

by Michael Thomsett

Bollinger Bands can strongly signal the end of a trend. This adds to the obvious benefit and predictability of Bollinger Bands as a “probability matrix” in which the likely range of dynamic price movement is easily tracked. Even with an array of technical signals worthy of tracking, Bollinger may set up a price pattern called… [READ MORE]

Bollinger W bottom, strong reversal signal

by Michael Thomsett

Bollinger Bands offer a rich variety of signals in many ways. The bands track resistance as prices trend higher, and track support as prices move lower. The Bollinger squeeze anticipates coming reversal or breakout from consolidation. The combination of the bands and the t-line add great value in identifying channels and when they are likely… [READ MORE]

7 Risk Arguments Of Swing Trading With Short Options

by Michael Thomsett

Selling short options as part of a swing trading strategy in many respects is a higher-risk strategy than the opposite focus on long options only, although the degree of risk might not be as severe as you think at first glance. This is true for seven reasons: You can cover a short call with ownership… [READ MORE]

Swing trade in extreme situations

by Michael Thomsett

At times, the chart pattern is so exceptional, and price moves so much, that you have to expect a retracement. No matter how significant the news, surprises inevitably cause an over-reaction in price, followed by an adjustment. Case in point: moved on Friday, October 27 by 128 points to the upside. An abundance of… [READ MORE]

Covered Calls: The Three “Positioning” Keys  

by Michael Thomsett

Positioning of strike and expiration and proximity are crucial to the success of a covered call strategy. Selection of the elements requires awareness of (1) level of volatility, (2) degree of time value and (3) proximity between current value of the underlying and strike of the short call. The three elements that define the well-selected… [READ MORE]

Follow-up: Three bear spread choices

by Michael Thomsett

A previous article set up three variations of a bear spread on Priceline (PCLN). The signals looked bearish so this seemed reasonable at the time. However, in one week the price moved up about 90 points, leading to a different set of challenges. As of Friday, October 6, a set of recovery strategies was required… [READ MORE]

The Strap

by Michael Thomsett

At times, the chart indicators are so strong in one direction or the other that a particular strategy simply makes sense. For example, if the pattern looks bullish, why just buy a call (or two)? Alternative strategies may allow for both bullish and bearish moves, while favoring the bullish side. For example, the strap is… [READ MORE]

Rules of consolidation

by Michael Thomsett

The popular charting “school of thought” is that reversal signals have to be either bullish or bearish. Here’s a new way to think about these signals: When stock is trading in consolidation, a reversal (or continuation) signal may forecast successful breakout. In other words, the signal applies to the trend and not just to the… [READ MORE]

Three bear spread choices

by Michael Thomsett

Based on the price pattern found on the chart, at times it is easier to decide whether the situation is bullish or bearish, than to pick which strategy to use. This presents a problem for traders who may not be able to quantify the risk level without knowing how much movement to expect. For example,… [READ MORE]

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