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Tags: Options

The Best Non-Directional Options Trading Strategy in the Markets

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades • October 16, 2015

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Tom GentileTom Gentile

Many of the options trading strategies I have shown you have been directional trades. That means the option position requires the underlying stock or exchange-traded fund (ETF) to make a particular move in price - either up or down - for the trade to work.

And that's exactly what makes directional trades so challenging - trying to predict which way a potential trade will go is difficult. You can plan your trades carefully, follow your rules to the letter, and still the markets can intervene, turning a perfectly good prediction about a stock's direction into a losing trade.

What's more, indecision about a stock's direction - and whether you want to buy calls or puts - can delay your trade, causing you to miss out on your predicted move.

How would you like a strategy that allows you to place a trade that doesn't care which way it moves, just so long as it moves?

That's what I'm going to show you today...

Profit No Matter Which Way a Stock Moves

Non-directional traders don't need to worry about making predictions based on complex market data, pages and pages of stock charts, or anything else. Non-directional traders make trades to benefit no matter which direction a stock moves... so long as it moves.

options trading

How? You might think you need to take two separate trades, one a long call and the other a long put.

Just Move!

How do you counter or prevent getting into a trade where the stock doesn't move? You want to take an options trade on a stock that has what's called a catalyst for a move coming up in the near future.

A catalyst is a reason. There has to be a reason for traders to make a decision to either buy the stock or sell the stock and do so in a fashion that causes the price to move higher or lower.

What types of events or announcements can a stock make that causes a big move one way or the other?

  • A pending FDA approval for a new drug
  • The hiring or firing of a CEO
  • An upcoming earnings report
  • The launch of a new product

That's almost correct...

The straddle is a non-directional trading strategy that incorporates buying a call option and a put option on the same stock with the same strike and the same expiration.

A straddle allows you to have a bearish and bullish play on a stock at the same time, with each acting as a hedge or insurance against the other, so long as the underlying stock moves up or down in a big enough price move to cover the cost of the trade.

Now, I should point out that the cost of a straddle is considerably more than a straight bearish or bullish options play - because instead of just buying one option, you are buying two. Since cost is risk, the straddle trade has an increased price risk over the directional options trade because of this.

But your odds of making money are greater.

Look at it this way...

Here Are 10 “One-Click” Ways to Earn 10% or Better on Your Money Every Quarter

Appreciation is great, but it’s possible to get even more out of the shares you own. A lot more: you can easily beat inflation and collect regular income to spare. There are no complicated trades to put on, no high-level options clearances necessary. In fact, you can do this with a couple of mouse clicks – passive income redefined. Click here for the report…

Claim My Free Report

Tom GentileTom Gentile

About the Author

Browse Tom's articles |

Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.

… Read full bio

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