Covered call writers can avoid exercise by closing the call and replacing it with a later-expiring one. But some pitfalls may also occur along the way. The forward roll works because a later-expiring contract is always worth more, due to higher time value. You can always change out the short position profitably. You can roll… [READ MORE]

Most swing traders use long stock for expected upswings; and either short stock for downswings or just stay out because shorting is high-risk and expensive. Two things are problematical with this idea. First, the risk is real, and second you miss half of the swing opportunities by avoiding going short. There is a solution, and… [READ MORE]

Options traders like the ratio write. This is a strategy like the covered call, but when more calls are written than can be covered with stock. For example, if you own 300 shares of stock and you sell four calls, you have a 4:3 ratio write. Three calls are covered and one is not (or,… [READ MORE]

One of the most difficult chart-reading skills is determining whether a directional change is a reversal or a retracement. During a dynamic trend, the distinction is a key one to recognizing when to exit, or when to hold on. As a general rule, retracement – a pause in the prevailing trend during which price moves… [READ MORE]