As a special treat to Trader’s Blog readers, Ron Ianieri is offering you an in-depth look at how to optimize the ABC charting formation.
The ABC Charting Formation is one of the most basic and frequently occurring charting patterns that exist. Watch how this basic chart can be turned into a big payday with the use of options. Follow along as we use options to safely and easily follow the ABC's charting patterns twists and bends. We start out with the most basic and most easily understood strategy, roll it, morph it and finally close it. Suddenly, this simple charting pattern, traded with the simplest option strategy, becomes a sophisticated looking trading strategy that is incredibly simple to use, fully hedged at all times, and very profitable!
The concept of synthetics has always been fundamentally important to understanding options. Synthetics show us the mathematical relationship that exists between the stock, a call, and its corresponding put. This mathematical relationship not only relates the price of these instruments in relation to each other, but also shows how a call can be changed into a put, or a put can be changed into a call by simply adding the stock into the equation. Understanding synthetics allows investors the ability to morph positions from the wrong position to the right position quickly and efficiently. Understanding synthetics also allow investors to take advantage of the put/call skew we frequently see in the options market today.
Today, I am going to take an in-depth look into the world of crude oil. The question on most traders' minds is, has this market finally bottomed out?
As you can see on the chart, crude oil prices have been had been steadily moving higher for the most part of this year, until they peaked in September. We see (1) a strong supporting trend line which hit three places on the chart, making it a valid trend line of some importance. This trend line was dramatically broken in October and since then, the price of crude oil has fallen from over $100 a barrel to around the $94 a barrel level. Two events indicated this could happen, the (2) double top and divergence on the chart and (3) the divergence on the RSI indicator. Continue reading "Has Crude Oil Bottomed Out? Maybe."→