Options trader Izzy Charanek presented on Benzinga's Options Boot Camp an introduction guide to single-leg options strategy.
What Is A Single Leg? Simply put, a single leg options strategy consists of buying a single option (either a call or put), or selling a single option (either a call or put). But new option traders are strongly encouraged to stick with buying an option at first.
Of course, investors and traders can buy multiple single legs with different expiration dates or different strike prices.
Some important tips and takeaways for new option traders and investors to keep in mind include:
- Understand your risk.
- Give yourself enough time.
- Check for key events like dividend dates or earnings.
- Always have a plan of execution.
Triple Bottom Chart: The use of technical patterns can be particularly helpful in evaluating potential options trade. Specifically, a bullish chart pattern known as a triple bottom can be used to identify a potential breakout and a good opportunity to buy call options.
A triple bottom is defined by three roughly equal lows that rebound off support levels followed by a move higher above a resistance level.
Tweezer Bottom Play: A tweezer bottom refers to a candlestick pattern highlighted by a bearish trend switching to bullish. This can easily be identified through two adjacent candles with similar lows. The first candle is red followed by a green candle and signals at the very least a near-term reversal pattern.
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