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The Market Taker Take: Option Trading Blog

What Has a Better Chance of Happening?

When it comes to technical analysis, there are certain indicators traders rely on. For me, monitoring simple support and resistance is the main way I feel I am putting the odds on my side. Support and Resistance Support is a level that keeps the underlying from moving lower. Resistance is a level

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Reduce Anxiety by Decreasing Risk

Tariffs, China, Hong Kong, Russia, Iran, inflation, central banks, recession, negative yields, inverted yield curve: All these terms have dominated headlines, and they incite anxiety for investors. Even agile short-term traders struggle in an environment where unvetted stories and half truths move markets. Rumors and threats in social media have had more

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Consider a Collar as an Investor

Although this last round of quarterly earnings is almost in the books, I feel the need to remind investors that options can provide protection even when earnings season is not going on. Let’s face it, the market is going to move lower like it did suddenly last Thursday, so it may be

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Big News From the Fed This Week

The Federal Open Market Committee has a mandate to promote full employment and keep inflation in check. It raises interest rates when the economy is overheating, and it lowers rates to promote spending or increase economic activity. Lately, Fed Chair Jerome Powell has taken a dovish or more accommodative stance. Many economists

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Support and Resistance on the 15-Minute Chart

If you know me even a little as a trader, you know how I feel about support and resistance when it comes to trading. I feel knowing that support and resistance has a better chance to keep the underlying advancing gives the trader a much-needed “edge.” As traders, we want to put

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Know Average Daily Range and Average True Range

Around holidays, especially in the summer, the participation rate often decreases, and subsequently so do volume and ranges. The typical seasonal lulls and end of each quarter are ideal times to do research and update statistics. I keep a spreadsheet with statistics covering average ranges over the most frequently analyzed time frames:

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Go-To Strategies for Any Market

As you probably know, there are several option strategies available to option traders depending on what the trader thinks the market and underlying will do. Of course, there are market risk, implied volatility bid/ask spreads and other factors to take into account as well. But every option trader should have a few

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How to Improve Trade Entry and Exit

One of the more difficult issues traders face is choosing prices that are apt to be extremes, or highs and lows, over a given time frame. Pinpointing daily entry and exit levels, also known as support and resistance areas, requires a view of recent history of the market you are trading. When

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Key Candles to Add to Your Trading Toolbox

All technical tools work at times, but none work all the time. The trick to technical trading is to identify when an indicator is likely to detect a high percentage trade. I have studied many charting techniques and tools in my 30-plus years in the commodity markets. Whenever I came across a

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How to Trade This Options Market

This is just a little blog to remind you about your options trading management. Everyone needs reminders, especially option traders. I will often say in my Group Coaching class to know exactly what you will do no matter what happens before you enter any trade. The same can be said about the

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Trade Talk and Tweets: the New Fundamentals

Fundamental data are also known as event risk. Professional traders keep a close eye on the economic calendar for events or reports that could alter a trend or start a new one. A treasury trader might hedge a long position by buying 10-year note puts or selling calls just before employment or

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How to Save Time Analyzing Markets

Since leaving the trading floor at the Chicago Board of Trade I’ve been tethered to my desktop computer. My office is my workshop, and all the tools I need for trading market analysis are there. Since the futures markets virtually never close except on Saturday, the leash to my tools is short

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Option Traders Need a Plan

When I became a retail option trader, I was told by many that I needed to write and follow a plan. Although many of you know this as well, you may have either not written or finished your plan. As I always like to say, if you were opening a restaurant, would

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How to Catch Directional Moves

One of my chores is to write a weekly piece that enlightens traders. At times my interpretations are spot on, almost prophetic. And sometimes I am clueless. My 30 years of experience in the futures markets has taught me to accept, almost embrace, being wrong. Traders must embrace risk. No one likes

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A Bullish Trade Setup to Consider

The market remains predominantly bullish, and we have considered potential bullish trade more than a few times in our Group Coaching class. One setup I continue to love is the 2-bar bullish break from a bullish base. When a Bullish Base is Created? A bullish base is created when a stock moves

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What Makes a Well-Rounded Trader?

I was fortunate to spend most of my career at the Chicago Board of Trade as a broker in the 30-year bond pit. The ’80s and ’90s were the heyday for interest trading pits. Most days were filled with big swings and lots of volume. The pits were packed and often became

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How Do Option Collars Work?

The market has been on some run since the holidays. After investors were worried that stocks would continue to sink into 2019, many stocks have recovered quite nicely. If you are a smart investor and know what an option collar is, the threat of another decline is not as scary. If you

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How to Avoid Technical Overload

My search for the ideal trading tool ended about 30 years ago after attending the Market Logic School conducted by Pete Steidlmayer, the creator of Market Profile. These days I do not think it is necessary to use Market Profile. But applying the logic behind the tool allowed me to create charting

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Is Option Trading a Good Idea?

I have often been asked whether option trading is a good idea. The answer is fairly simple, I believe. I tell those who ask it depends on two things: you and what you hope to accomplish. I will elaborate a little on each point, but there are certain things option trading can

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Think Like a Pro Trader

Spend time with a broker or pit trader from the era when all trades were executed at an exchange and you will learn about the auction process and the information it provides. Pits were created to facilitate trade. To an untrained eye a trading pit looks like a mess of mad, aggressive

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A Reminder to Review Your Trades

I have mentioned this before and will continue to mention it as much as I can: Please record your trades and review them often. Simply put, there is no better way to see what you are doing wrong and doing right. To me, it has always been an eye-opening experience to go

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