Tuesday, March 14, 2006

Trading Skill: Take Advantage from the Volatility

Google Again!

If we look the chart of Google for the past few days, we could see almost every price direction change is very clear. Each wave draws its almost straight line until its turn around. Each turn has about $5 to $15 margin.

This is an excellent opportunity for an option trader.

Suppose you saw the price is starting to bounce back, you can quickly buy a call. After the price went up, if you recognized the price is going down, you can quickly sell your call and buy a put. When the price is at the bottom, you can sell the put and buy the call again…

The practice sounds risky because people might be afraid of making wrong judgment. But I think if you handle your risk properly: getting out quickly when wrong, your risk is limited.

The big benefit of this strategy is whenever there is a big direction move, regardless a big jump up or a big drop down, you are always on the right track. This guaranteed you make the big money.

For stock like GOOG, it is worth to try this strategy. And don’t forget, by doing so, you will accumulate your experience, check your decisions, improve your skill, and HAVING FUN.


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