When I first began trading back during the '90's, I was very fortunate. I had started trading at a time when the market was headed virtually straight up. My initial technique was writing covered calls which blended with a rising market in such a way that I practically never lost.
The perspective of time has allowed me to understand that no market, good or bad lasts forever. The one constant is change. Under such conditions, I learned to 'go with the flow', adjusting my methods to complement market conditions.
Medium Term Trades
As I explained earlier, my favored medium term strategy has long been the covered call. This technique enabled me to manage my fiscal affairs. By setting up trades created specifically to 'mature' at a predetermined date thirty, sixty or ninety days out into the future, it gave me cash I could count on to help eliminate any slow periods of daily cash flow.
While the premium began to dry up, I found writing covered calls a lot more difficult. I began to look especially for those stocks which had been volatile, that 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 frequently. I have my Chart Navigator system provide this by instantly calculating the average daily range of stock for the past month or so. I will take a 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 also narrow this search of high volatility stock to only those stocks which move in a somewhat predictable range, a lot like a 'channeling' stock.
Given this information, let's look for a few more characteristics. For starters, notice that the stock has remained close to or within this range for quite a few months. Additionally, each 'oscillation takes upto a month, moving from the top of the channel to the bottom.
Bottom line, this stock is moving a whole lot, but going basically sideways. So now, let's trade this one medium term. If we can do this regularly, then maybe we can stop stressing regarding the availability of covered call trades!
The Trade
Before you trade a stock, it is generally a great idea to know which way it is going. This is the challenge! Trade it BOTH up AND down. These are the only two ways it's likely to go (bear in mind the high daily movement).
We know we can't acquire the stock And short the stock (at least not within the exact same account), so why wouldn't you buy a put And a call?! In this case we might think about purchasing the thirty five dollar put along with the thirty five dollar call. Typically referred to as a 'long straddle', the position enables 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 just a little hesitant or perplexed in any way, employ the help of an investment professional. They can be conveniently located online by doing a search for: reverse mergers, company going public, or reverse merger shell. Sooner or later, it will grow to be easier for you to 'go with the flow' too.
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