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
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