How to Determine a High-Probability Trade

I get asked these questions all the time. [Jeff Clark's Market Minute]( How to Determine a High-Probability Trade By Jeff Clark, editor, Market Minute Lately, I’ve been receiving a lot of questions about some of the methods I use when trading options and thought it would be a good opportunity to go over a couple of them. So, for today, let’s take a look in the mailbag and see what people have been curious about… Recommended Link [The NFT Craze]( [image]( Famous athletes and public figures are getting on board…. Even former First Lady Melania Trump announced in February that she’s working on her second group of NFTs… She plans to sell 10,000 NFTs for $50 each, featuring pictures from the Trumps’ time in office. And she’s not the only one. But there may be a better way… [Check this out.]( -- You frequently use Bollinger Bands when analyzing the [VIX]( but do you use them for individual stocks as well? – Jonathan Thanks for the question, Jonathan. [Bollinger Bands]( (BBs) indicate the most probable trading range for a stock or index. They’re a useful tool for determining overbought and oversold conditions, and for pinpointing possible reversal trades. For example, I often look for the major index charts to trade above their upper BBs, or below their lower BBs. Those moves set up the potential for a sell signal or a buy signal when the indexes close back inside their bands. These sell and buy signals have been quite reliable indicators, producing high-probability reversal trades on the indexes. On individual stocks, however, the Bollinger Band buy and sell signals are not as reliable. Yes, the BBs do help indicate overbought and oversold conditions. But individual stocks can typically persist in those conditions where broad market indexes can’t. So, BBs are less reliable at predicting reversal trades on stocks than they are on indexes. When looking at individual stocks, perhaps the best thing to do is to see how the stock has behaved previously when it traded outside of its BBs. Then, you can see if there’s a consistent pattern for that stock. Free Trading Resources Have you checked out Jeff's free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. When you’re looking at various options, do you pay attention to the option interest and/or volume? Do you have a volume figure you look for before you go further or is it more the interest that you look at? I see lots of options that have the interest at 5,000 or 10,000 and the volume only 200 or 300. Just curious on how much attention you pay to those two sets of figures. Thanks for taking the time to answer questions. – Dave Good question, Dave. Volume and open interest are both important factors when determining the liquidity of an option. Since my trade recommendations go out to thousands of subscribers, we’ll often generate a huge amount of activity in the options I recommend. It’s important that the recommendations be liquid enough to allow all subscribers to get into and out of positions relatively easily. But, the most important factor in determining liquidity is the spread between the [bid]( and [ask prices]( for the option. (The “bid” is the highest price buyers are willing to pay for the option. The “ask” is the lowest price sellers are willing to accept.) If an option trades with a one-cent spread, then there’s plenty of liquidity. It doesn’t matter how much volume there is or how large the open interest is. If the difference between the bid and ask prices is only $0.01, subscribers will have an easy time trading the option. On the other hand, if the difference between the bid and ask prices is greater than $0.20, then there may not be enough liquidity to allow us to get into and out of the position at fair prices. [‘Failure to Comply’ – Are You Next to be Banned?]( Most of the trades I recommend tend to be short-term oriented. So, we need to be able to get into and out of positions quickly. That’s not possible to do if hundreds, or thousands, of subscribers have to negotiate a wide spread between the bid and ask prices. So, in addition to volume and open interest, I also look at the bid/ask spread before considering an option recommendation. Best regards and good trading, [signature] Jeff Clark Reader Mailbag In today’s mailbag, Jeff Clark Alliance member Michael shares his gains on Jeff’s new earnings strategy… Hi Jeff, My results were good on the earnings reversal strategy. First, I bought CWH options for $595 and sold them for $875 for a 47.05% profit. I also bought an UBER option for $2.51 and sold it for $3.40 for a 35% profit. I want to say that I’ve been a lifetime Alliance member for a couple of years now. I’m happy with my purchase and look forward to many more years and opportunities. – Michael B. Thank you, as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at feedback@jeffclarktrader.com. In Case You Missed It… [Rare “Wealth Event” Unlike Anything America Has Seen Since 1999…]( Is something BIG about to trigger in the markets? - Why are billionaires like Mark Cuban and Peter Thiel stockpiling one special $5 trillion asset class? (Not tech stocks, commodities, NFTs, blockchain, or crypto…) - Why are we seeing an average of [4,657 new millionaires every single day]( – and where are they coming from? - And why does Teeka Tiwari (millionaire investor) say: [“we are on the cusp of the rarest wealth-building event I’ve seen since I was on Wall Street over 22 years ago… a defining moment is coming to America…”]( Teeka called Apple in 2003... Bitcoin at $428… and the rise of altcoins for a 151,000% gain – but now he says he’s on to his [NEXT big secret investment.]( Teeka is uncovering (in a new interview) how you can invest along with tech billionaires and Warren Buffett into a special $5 trillion asset class – for as little as $100. [Click Here to Watch Millionaire Teeka Tiwari Demonstrate This Live on Camera…]( [image]( Get Instant Access Click to read these free reports and automatically sign up for daily research. [The Ultimate Guide to Taking Back Your Privacy]( [An Insider’s Guide to Making a Fortune from Small Tech Stocks]( [How to Earn Free Bitcoin]( [Jeff Clark's Market Minute]( Jeff Clark Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.jeffclarktrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. Jeff Clark Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-800-752-0820, Mon–Fri, 9am–7pm ET, or email us [here](mailto:contactus@jeffclarktrader.com). © 2022 Omnia Research, LLC. All rights reserved. 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