OPTIONS Using Technical Analysis to Design Winning Trades Greg Harmon - - PDF document

TRADING OPTIONS

Using Technical Analysis to Design Winning Trades

Greg Harmon

WlLEY

CONTENTS

Foreword xi Introduction 1

PART I

IDENTIFYING AND UNDERSTANDING THETREND

7

CHARTER 1

Identifying the Major Trend 9

Market Influencers and Intermarket Relationships 14 Significant Market Ratlos 19 Other Indicators 22 Conclusion 27 CHARTER 2

Sector Review Analysis

29 Case Study: Sector Ranking 30 Relative Strength 37 Conclusion 38

PART II

TECHNICAL ANALYSIS FOR IDENTIFYING INDIVIDUAL STOCKS

41

CHARTER 3 Classical Technical Analysis 45 Support and Resistance 45 Patterns 49 Conclusion 63

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CHARTER 4

Japanese Candlestick Patterns

Reversal Patterns Continuation Patterns Indecision Candles Conclusion CHARTER S

Derived and Quantitative Analysis

Fibonacci Analysis Harmonie Trading Elliott Wave Andrews' Pitchfork Conclusion

CHARTER 6

Price Derivatives, Momentum, and Other Indicators

Relative Strength Index (RSI) Moving Average Convergence/Divergence (MACD) Indicator Bollinger Bands Moving Averages Conclusion CHARTER 7

TheWatch List and Initial Plan

Create the Mosaic Other Information The Plan Conclusion

PART III

OPTIONS STRATEGIES

CHARTER 8

Introduction to Options

Definitions Expiration and Exercise Contract Size Price Terminologv Why Use Options How Different from Stock Option Tables Some Basics Applied Conclusion 65 66 76 80 83 85 85 91 100 101 103 105 105 110 112 114 119 121 121 123 125 130

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135 135 136 137 137 138 139 140 142 144

CHARTER 9

PART IV 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

ISO

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 DESIGN AND EXECUTION

169 The Elements of Design

171 The Elements 171

ix

Position Sizing and Stop Losses 174 n Conclusion 179

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Trading Plan

181

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What to Look For 181 Conclusion 198

Execution and Beyond

199 Execution 199 Hedging, Profit Taking, and Adjustments 203 Conclusion 209 Conclusion 211 Additional Resources 213 Aboutthe Companion Website 215

Ab

• ut the Author

217 Index 219