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

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

Greg Harmon

ISBN: 978-1-118-67907-4

Mar 2014

240 pages


A thorough guide to technical analysis methods applied for success in the options market

Though still not widely practiced or accepted in the options market, technical analysis is becoming increasingly common. As the practice spreads, traders are discovering how useful technical analysis is for determining clear entry and exit signals. Trading Options: Using Technical Analysis to Design Winning Trades takes the standard technical analysis approach and applies it to the options market. Author Greg Harmon combines technical analysis with a deep understanding of the options market to explain how to design technically created trades that lead to outsized gains with low costs of entry and managed risk. The book covers trend determination, security identification and selection, tools and trade design, and executing, hedging, and adjusting trades.

  • Ideal for individual investors and options traders
  • Identifies and applies mainstream technical analysis methods to the volatile options market
  • Perfect for stock traders that wish to delve in to technical analysis and options
  • Written by the founder of Dragonfly Capital Management, which provides daily technical analysis of securities markets and trade ideas, and CIO of Presidium Capital Management which provides money management for clients

Foreword xi

Introduction 1

Part I Identifying and Understanding the Trend 7

Chapter 1 Identifying the Major Trend 9

Market Influencers and Intermarket Relationships 14

Significant Market Ratios 19

Other Indicators 22

Conclusion 27

Chapter 2 Sector Review Analysis 29

Case Study: Sector Ranking 30

Relative Strength 37

Conclusion 38

Part II Technical Analysis for Identifying Individual Stocks 41

Chapter 3 Classical Technical Analysis 45

Support and Resistance 45

Patterns 49

Conclusion 63

Chapter 4 Japanese Candlestick Patterns 65

Reversal Patterns 66

Continuation Patterns 76

Indecision Candles 80

Conclusion 83

Chapter 5 Derived and Quantitative Analysis 85

Fibonacci Analysis 85

Harmonic Trading 91

Elliott Wave 100

Andrews’ Pitchfork 101

Conclusion 103

Chapter 6 Price Derivatives, Momentum, and Other Indicators 105

Relative Strength Index (RSI) 105

Moving Average Convergence/Divergence (MACD) Indicator 110

Bollinger Bands 112

Moving Averages 114

Conclusion 119

Chapter 7 The Watch List and Initial Plan 121

Create the Mosaic 121

Other Information 123

The Plan 125

Conclusion 130

Part III Options Strategies 133

Chapter 8 Introduction to Options 135

Definitions 135

Expiration and Exercise 136

Contract Size 137

Price Terminology 137

Why Use Options 138

How Different from Stock 139

Option Tables 140

Some Basics Applied 142

Conclusion 144

Chapter 9 Options Combinations 145

Covered Call or Buy Write 146

Long a Put or Call 147

Short a Put or Call 147

Long a Put Spread or Call Spread 149

Short a Put Spread or Call Spread 150

Long a Ratio Put or Call Spread 152

Long or Short a Calendar 154

Long or Short a Diagonal 156

Long or Short a Butterfly 158

Long or Short a Straddle 161

Long or Short a Strangle 163

Long or Short an Iron Condor 164

Long or Short a Risk Reversal 165

Conclusion 167

Part IV Design and Execution 169

Chapter 10 The Elements of Design 171

The Elements 171

Position Sizing and Stop Losses 174

Conclusion 179

Chapter 11 Trading Plan 181

What to Look For 181

Conclusion 198

Chapter 12 Execution and Beyond 199

Execution 199

Hedging, Profit Taking, and Adjustments 203

Conclusion 209

Conclusion 211

Additional Resources 213

About the Companion Website 215

About the Author 217

Index 219