When I initially began trading back during the '90's, I was very fortunate. I had begun trading at a time when the market was headed virtually straight up. My primary strategy was writing covered calls which blended with a rising market in such a way that I virtually never lost.
The perspective of time allowed me to discover that no market, good or bad lasts forever. The only constant is change. Under such conditions, I learned to 'go with the flow', adjusting my techniques to match market conditions.
Medium Term Trades
As I explained earlier, my favored medium term technique has long been the covered call. This technique enabled me to manage my fiscal affairs. By setting up trades designed specifically to 'mature' at a predetermined date thirty, sixty or 90 days out into the future, it gave me cash I could count on to help eliminate any slow periods of day-to-day cash flow.
When the premium began to dry up, I found writing covered calls more and more difficult. I began to look particularly for those stocks which had been volatile, which could be employed to temporarily substitute covered calls as my medium term strategy of choice.
Stock Movement
Let's look for a stock which moves a lot. I have my Chart Navigator system provide this by quickly calculating the average daily range of stock for the past month or so. I will then look only at the stocks which have at least a dollar and fifty cents or more movement every day.
You've got to have some concept of WHICH way they're most likely to move. We further narrow this search of high volatility stock to only those stocks which move in a somewhat predictable range, very much like a 'channeling' stock.
Given these facts, let's look for a few more characteristics. For starters, notice that the stock has stayed close to or within this range for a number of months. Additionally, each 'oscillation takes about a month, moving from the top of the channel to the bottom.
Bottom line, this stock is moving considerably, but going basically sideways. Next, let's trade this one medium term. If we can do that regularly, then maybe we can stop stressing regarding the availability of covered call trades!
The Trade
Before you trade a stock, it's generally an excellent idea to know which way it is going. That's the challenge! Trade it BOTH up AND down. These are the only two ways it is likely to go (keep in mind the high daily movement).
We know we can't buy the stock And short the stock (at least not inside the exact same account), so why not buy a put And a call?! In this case we might think about purchasing the thirty five dollar put as well as the thirty five dollar call. Typically referred to as a 'long straddle', the position allows us to profit no matter WHICH way the stock moves.
Now, isn't it time to adjust your technique to match market conditions? If you're a little hesitant or perplexed in any way, employ the help of an investment professional. They may be quickly located online by doing a search for: reverse mergers, company going public, or reverse merger shell. Eventually, it will grow to be easier for you to 'go with the flow' too.
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