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An Introduction to Candlesticks for OptionsPresented by Steve Nison
Using Nison Candlesticks as the Foundation to your option trading
An Introduction to Candlesticks for Options
Presented by Steve Nison, CMTPresident: Candlecharts.com
An Introduction to Candlesticks for OptionsPresented by Steve Nison
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• Easy to Understand• Early Reversals• “Safety First”• East + West• All markets• All Time Frames
Candlestick Benefits
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
open close
open
RealBody
high
low
Real Bodies / Shadows
ANATOMY OF THE CANDLESTICK LINE
close
Shadow
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
Who’s in control?
Who’s in control?
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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Good buy?
Negative Selection
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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Nison Candlesticks for ExitingNison Candlesticks for Exiting
“I find that the candlesticks are wonderful for EXITS.”
“I use candlesticks to tell me to get out”
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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Get into a newtrend before other
traders see it
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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Basic Criteria• Market in a downtrend
• Small real body (either color)at, or near, top of range.
• Lower shadow at least 2xheight real body
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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HAMMER AND BULL SHADOWS
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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Benefits of Options
• Leverage
• Risk Control
• Trade high price markets
• Easy to short
• Portfolio protection
• Can profit in any market environment
• Easy to change market stance
• Generate Income
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
Buy at 144.50Sell at 151.50% gain on stock = 4.8%$700
Buy ATM 145 call14 days expiration@ 3.25
Sell to close call 11 days later for 6.60with mkt @ 151 ½% gain on options =103%$335
Leverage
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
CandlestickCharting
Strategies
Candlesticks +Western
Indicators
Candlesticks + Trade Management
Steve Nison’s
Trading TriadSuccessSystem
Steve Nison’s
Trading TriadSuccessSystem
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
www.nisonoptionsacademy.com
Four Basic TradesFour Basic Trades
Right tobuy
Right tosell
CALL PUT
Obligationto buy
Obligationto sell
Buyer(long)
Seller(short)
ExamplesXYZ January 70 Call at $3.10: Call buyer can buy XYZ (up to expiration
date) for $70. And call seller must sell to him at that price.
ABC February 35 Put at $1.20 (Put buyer can sell XYZ (up to expirationdate ) for $35. And put seller must buy it from him at that price.
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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Scenario 1 – buy at hammerMkt @ $395: 400 call @ $11.30
Exit at doji ( red arrow 13 daysafter hammer) mkt @ 447: 400call @ $47.50 (320 % return)
Scenario 2 – buy based on MACDMkt @ $418 : 420 call @ $13.45
Exit at doji (5 days later) mkt @447: 420 call @ $31.20 (132%return)
Result: Nison candlesticksgenerated over 2x the profit!
Nison Candlestick strategies for long calls
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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Direction is the single most important thing you needto know to make money on any options trade
Directionblows away
impliedvolatility
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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AAPL
1) Hold IV constant at 26% and price +20% over 30 days
APPL @ 300: 60-day 300 call = $12.70
APPL @ 360: 30-day 300 call = $60.10
2) Hold Price Constant at $300 and IV +20% over 30 days
300 strike 60-day call: Vol @26% = 12.70
300 strike 30-day call: Vol 31.2% = 10.70
Result:
20% change in price = +$47.40 (374% gain)
20% change in Vol = -$2.00 (15% loss)
Implied Volatility vs. DirectionImplied Volatility vs. Direction
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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Nison Chart Challenge #1Nison Chart Challenge #1
1) What are two times to consider a long put?
2) For each of these what would be your target?
3) For each of these what would be your protective stop?
4) When would you close out the long puts and why?
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
CandlestickCharting
Strategies
Candlesticks +Western
Indicators
Candlesticks + Trade Management
Steve Nison’s
Trading TriadSuccessSystem
Steve Nison’s
Trading TriadSuccessSystem
21
An Introduction to Candlesticks for OptionsPresented by Steve Nison
www.nisonoptionsacademy.com
Nison Chart Challenge #2Nison Chart Challenge #2
1) In the boxed area above when would you consider a long call?
2) What is you protective stop?
3) What is your target?
4) When would you have closed out the trade and why?
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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S&P
VIX
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
Bullish Bearish
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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Candles as resistance for option trading
Scenario1:
Long call at hammerTarget = bear engulf resistance
mkt @ 1775, 185 call @ 3.20
close out long call 8 days later @8.00 with market @ 1875
Scenario 2:
Long put at 2nd bear engulfTarget = hammer
mkt @ 1875, 185 put @ 5.20
close out put 13 days later @9.75 with market @ 1700
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
target
Market holds a support areaset with a bullish engulfingpattern.
The target is a dark cloudcover at 51 ½
We are looking for a quickrally (within 10 days)
Assuming we are doing along call, should we do a 45call or a 50 call?
Using the What…If Concept
Successful test of support
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
50 calltheoreticalgoes from 1.40to 3.50 = 150%
What...If analysis for 50 call
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
45 calltheoreticalgoes from 3.40to 7.00 = 106%
What...If analysis for 45 call
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
Remember Implied Volatility!
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
www.candlecharts.com
Use the highest high ofthose two sessions (topof upper shadow) asresistance
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
Candles and Momentum Trading
Look at all thereversal signals
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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Nison Candle strategies for portfolio protection
Worried about a move to 178 area.Mkt @ 200
Buy a 30–day 200 put @ 6.85Close out put at support at 178 withput @ 22.45
Paper loss on stock of $ $2,200 on 100shares and made $1,560 on protectiveput
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
How NOT to use candlesticks
Oh my goodness! Themarket rallied after theshooting star!
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
CandlestickCharting
Strategies
Candlesticks +Western
Indicators
Candlesticks + Trade Management37
An Introduction to Candlesticks for OptionsPresented by Steve Nison
EAST & WEST CONFIRMATIONEAST & WEST CONFIRMATION
Where acandle signalconfirms aWesternTechnical signal
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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resistance doji
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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Bullish Engulfing Pattern at Support
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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Bull Call Spreads
Buy lower strike (95) call
Sell higher strike (100) call (same expiration)Which of these two strikes will be more worth more?
So will be buying the more expensive lower strike call- andselling the cheaper call: Result is net cost to you - hence adebit call spread
Buy 1 XYZ 30-day 95 Call @ 3.50Sell 1 XYZ 30-day 100 Call @ 1.50Net Debit (2.00)
At expiration:
Maximum Profit = Difference in Strike Prices (5) - Net Debit (2) = 3
Max Risk is net debit = 2
Breakeven = Lower Strike (95) + Net Debit (2) = 97
Concept: less costly way to buy call. But give up profit potential
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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East + West = Increased Confidence
1) What are these candle signals?2) What are they confirming?
Bull call spread at hammer (assume $1 strikes):Buy 81 call @ 2.80 with market @ 81Sell 87 call (resistance area) @ .85Net debit = 1.95Max profit = 4.05BE= 82.95
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
Snap
Crack
Target
Stop
Buy
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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1) What western signal is at theclose of the session with arrow?2) What is target3) What is stop4) What outright option, and strike,would you do and why. Assume$10 strikes
Nison Chart Challenge #3
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
What if you knew howsolid support orresistance was, and byknowing this be rocksolid confident aboutwhat outright or spreadoption strategy to use?
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
Your Special Thank You Bonus:$79 value
Exclusive:
Get Steve’s FREE videoshowing exactly how hedetermines how strongsupport or resistance is.
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An Introduction to Candlesticks for OptionsPresented by Steve Nison
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