The Market Taker Take: Option Trading Blog

Use VIX to Adapt in Extraordinary Times

There is a toxic cocktail that traders are forced to swallow. The pandemic, election, lockdowns, and divided House and Senate comprise a nasty drink. The current trading environment is extraordinary and challenging on normally reliable strategies. As traders we must adapt. When volatility is at lofty levels, regulating risk and profit targets

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Stop loss orders

Put Your Profit Taking Orders in Immediately

The market has been a volatile beast and there are no signs of that slowing down especially with the election on the horizon. This post will not only be an eye-opener to some but will also remind others of something they should already be doing: Set up a profit taking order as

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Having Anxiety About Your Long Stock?

If the market has not been volatile enough for you recently, add in quarterly earnings and you have even more potential volatility into the mix. If you own stock, you would love your stock to gap higher after the release. Unfortunately, that is not always the case. The way 2020 has progressed

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Use Daily Candles to Spot Changing Trends

To recognize change in trend we must understand “responsive activity.” As a market moves lower, we need to identify when buyers respond to the cheap prices. Conversely, as prices move higher, we have to note when sellers consider prices too rich. Daily candlesticks are a useful tool to determine when momentum has

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Before You Enter That Trade…

I have a bunch of different sayings when it some to options trading, but this one might be my absolute favorite: “Know exactly what you will do no matter what happens.” What this really means is that I want traders to have a trade management plan in place before they enter a

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This image shows a trader performing technical analysis

The Essential Elements of Trade Analysis

Acronyms and mnemonic devices are learning techniques that aid in information retention. I use them to recall patterns in charts and when teaching a logical approach to trading. The acronym I use most often when creating trade strategy is VERTEX. Each letter in this acronym is an element I research for every

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Option Bid-Ask Spreads Can Hurt You

I have always wondered why there has to be a spread between what you can buy an option for and what you can sell it for. The simple answer is someone needs to make money and that someone is usually the market maker. All kidding aside, many option traders do not even

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Your Trading Plan of Attack

When scanning for trades I do it with purpose. When searching for directional or vertical trades, there are conditions that must be met. And the first one is that the market has come into a long-term support/resistance zone. Markets frequently reverse when revisiting previous extremes. When a market reaches such an area,

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What Triggered Today’s Stock Tumble?

Stocks had been trending steadily for a couple of weeks, but today they took a tumble, seemingly out of the blue. In the Wednesday MTM Daily Edge session, we prepared for a possible reversal or consolidation phase to begin. A day before the sharp decline there were subtle changes that are common

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How to Compete With Pro Traders

I have three sons who grew up in a unique era. Little league and soccer were their first social gatherings. Around that time electronic games were just taking hold. Baseball, football, soccer, hockey, water polo, lacrosse, boy scouts and music were options for youngsters, and my kids tried them all. They embraced

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bollinger bands

What You Should Know About Bollinger Bands

I have researched and tested many technical tools and indicators. My goal has always been to find the ideal combination of instruments without overloading my charts. When traders use too many tools, they often get conflicting signals making it difficult to execute trades confidently. I began testing new disciplines years ago and

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Iron Condors Are Not as Complicated as You Think

An iron condor is an option strategy that may sound complicated, but it really is not. It is as simple as combining two credit spreads. It is not complicated but managing the position may be. A call credit spread is implemented above the current stock price and a put credit spread is

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What’s in Your Trading Toolbox?

As an educator I make it a point to help students build a solid fundamental and technical foundation. Years ago, I started my own “toolbox” that is now filled with facts, axioms and statistics I use to guide me when trading and creating strategies. My first experience in the markets was on

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Put Volatility to Work When Trading Earnings

With another round of quarterly earnings under way, it feels like a good time to talk about an option strategy that revolves around the expected volatility event. The great thing about options is that there are a variety of ways to profit with them depending on the outlook and strategy. At Market

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candlestick patterns

Keep It Simple When Viewing Candles

Arguably daily candlesticks are the most widely used technical tool to analyze price action. The reason for this is because they are designed to track opens and closes, which are the most volatile and liquid times of the trading day. When a market closes above the opening price, it is thought to

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Horizontal Support and Resistance Should Catch Your Eye

Scanning for opportunities based on charts is never really easy. In fact, sometimes it can be quite difficult. But if you keep in mind that support like resistance has a better chance to hold than break, you will be a better technical analyst. To me, one of the easiest things to do

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A Volatile Market Is an Excuse to Review Your Trades

With volatility picking up in the market once again, option traders can have an instant edge. But sometimes, because of market uncertainty or wider than normal bid-ask spreads, it may be hard to profit. As you hear me say plenty of times, no position is sometimes the best position. Traders need to

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Volatility Apt to Remain High Amid Fed Uncertainty

On Wednesday afternoon the FOMC meeting culminated with no changes in monetary policy. The equity indexes rallied on the news that the Fed will continue to be accommodative and use all their tools to ensure Americans receive financial aid where needed. However, 30 minutes after this news was reported, Chairman Powell held

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Relative Strength Index

Use RSI to Navigate Uncertain Markets

Technical indicators can be quite helpful when fundamentals are absent. Now more than ever traders need to interpret price action using charts because the stock market lacks guidance. Earnings estimates and guidance mainly drive stock prices. With much of the economy shut down and the uncertainty of when it will be running

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Using Double Distributions to Identify Trends

To be a good market analyst and trader, you should make it a point to learn intricate details that are illustrated in charts. The study of charts or technical analysis is what most trading systems are built upon. Learning and problem solving are a big part of artificial intelligence (AI). The idea

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3 Things You Need to Know Before You Trade a Straddle

It’s shocking. Most people simply don’t make money trading straddles—even when things are volatile. Why, you ask? It comes down to just 3 simple factors that are often overlooked by traders. And once you know them, you’ll be a better trader in all situations—especially when expecting high volatility. How Straddles Work Straddles

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