Using Technical Analysis to Trade Options

Description: technical analysis, options trading, qqq, trading system, spy, uncovered options, pricem, system, analysis

To anticipate the future movement of the options we trade, we use a form of volume-based technical analysis. For anyone who wants to predict financial market movements and successfully trade options, this is a very powerful tool.

Technical analysis does not always need to focus on price. Because price is always a function of volume, we focus on volume. The technical analysis of options centers on an analysis of the volume of ALL contracts traded for a particular security, and is not based on the volume of any particular contract. This allows us to anticipate the markets probable future direction and to get its accurate picture. JavaVolume charts are used for this type of options volume analysis.

Because our trading system is not 100% mechanical, it involves a certain degree of subjectivity. The basic technology behind this trading system is volume-based technical analysis. A charting technology allows our analysts to make informed, but still somewhat subjective, decisions as to where the market is likely headed in the mid- and long-term. The trades are than placed on the results of that analysis. In addition, we also incorporate other forms of technical analysis.

Every options trader and options analyst knows the importance of consulting index charts and index indicators; however, these do not provide the whole picture. The fact that our analysts and traders concentrate on the collective volume of all options, is what sets them apart from the "traditional" technical analyst. The type of technical analysis we use is "Fundamental Options Volume Analysis. We analyze the CAUSE of price movements, as opposed to their results, which is PRICE.