3 Option Trading Strategies that works in any market

3 Option Trading Strategies that works in any market

All trading requires in depth analysis and preparation if one expects to have success. There are many factors that can provide a roadmap or edge while trading. Putting the day’s trading plan in the context of the expected range can help traders manage their expectations. Putting the day’s range in the context of a larger timeframe like the weeklies, can provide an additional layer of context.

A simple way to estimate the daily range is by using an ATR (Average True Range)

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function. The Average True Range is the day’s, or week’s range plus any gaps that may be unfilled from the last time-period. For instance, if the SPY had a daily range of $4.30 but gapped up from yesterdays close by 0.25, the true range would be $4.55.

An Average True Range will be based on a look-back period. The look-back period can be ten to twenty periods, or whatever the trader sees as representative of the current trading environment.

The ability to set targets or construct trades utilizing normal market behavior is a confidence booster.

Using this data can be simple. Let us assume one is trading the front month of an oil futures contract.  As a day-trader, it could be advantageous to know statistically what a given day’s range is likely to look like. We can get a good representation by using our ATR function. Consider some recent data.

 

The Top 3 Option Trading strategies that 70% are successful

1- Iron Condor
2- Covered Call
3-Jade Lizard

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