Using Technical Analysis To Generate Options Opportunities

Last week I did a free webinar for the SMB Options Tribe describing my process and some recent setups. They have been kind enough to unlock it for the general public for a few weeks so I am happy to share the link with you here. They have invited me back in the future to dive deeper and answer more questions so I will let you know when that is happening.

Additionally there were some questions that came out of the session which I am answering below:

1. What is your track record on the types of trades you are demonstrating?

I publish performance at the end of each options cycle. For the 11 cycles ending in August the Model Portfolio is up 110%.

2. Do you prefer daily or weekly charts when analyzing set ups?

Most of the trades I take are short term, a few days so I use daily charts, and then weekly charts for confirmation at time. If I am looking for a longer term trade or macro trend then I use weekly and often monthly charts.

3. Do you make your decisions based on end of day, or mid-day market pricing?

All of the trade idea generation is done on the closing data. I may adjust strikes for intraday movements or just walk away if they are extreme. This means that for intraday trades I may decide based on a closing 5 minute or 15 minute candlestick view.

4. Do you use simple or exponential Bollinger Bands?

Bollinger bands, like RSI and MACD are used to confirm the price action so I keep it simple and use Simple Moving Averages.

5. Do you take into consideration the Implied Volatility of the Options that you are contemplating?

For event driven trades the Implied Volatility is important. It can sometimes drive a trade when there is a large differential between IV on different Expirations. For longer term directional plays I pay less attention to IV and more to price action in the stock.

6. How many days before expiration do you typically enter options trades?

This varies. For some earnings trades it may be 1 day and and for longer term directional plays it may be that I use LEAPs. The majority are for the next two monthly Expirations.

7. When you do an earnings play, how many days prior to earnings will you enter the trade typically?

There is a constant stream of stocks reporting earnings so I almost always enter into an earnings trade very near the reporting date, and most often the day before.

8. Do you ever base any decision on fundamentals? Or is it always technical analysis?

Technicals drive my trading style but I do read the news paper and see what is going on in the world and that impacts my trades. For instance if Diamond Foods chart looked good I would still not trade it given the accounting questions. I would say that I use Macro News and Relative strength or weakness within an industry and rarely look at P/E or other metrics for a single company in isolation.

So much process and writing. Maybe I should write a book.

Disclaimer: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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