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A Simple Options Trading Strategy based on Technical Indicators

Author

Listed:
  • Francesco Carlier

    (Ministero dell istruzione, Genova, Italy)

Abstract

This paper is devoted to research the validity of options strategies with a particular emphasis on weekly options. The author proves that options, when traded successfully, could be a better substitute than buying or selling the underlying and that options with a good given volatility strategy and with a well capitalised underlying stocks could give superb results. The author analysed a simple strategy using the simple moving average and the bollinger bands on the US market. Then a new capital allocation method is explained with the target of maximizing the results obtained. For further comparison the options strategy is compared with the same strategy made with selling or buying the underlying.

Suggested Citation

  • Francesco Carlier, 2021. "A Simple Options Trading Strategy based on Technical Indicators," International Journal of Economics and Financial Issues, Econjournals, vol. 11(2), pages 88-91.
  • Handle: RePEc:eco:journ1:2021-02-12
    as

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    References listed on IDEAS

    as
    1. Ahmed S. Alanazi & Ammar S. Alanazi & David McMillan, 2020. "The profitability of technical analysis: Evidence from the piercing line and dark cloud cover patterns in the forex market," Cogent Economics & Finance, Taylor & Francis Journals, vol. 8(1), pages 1768648-176, January.
    2. Bakshi, Gurdip & Cao, Charles & Chen, Zhiwu, 1997. "Empirical Performance of Alternative Option Pricing Models," Journal of Finance, American Finance Association, vol. 52(5), pages 2003-2049, December.
    3. James Chong, 2004. "Options trading profits from correlation forecasts," Applied Financial Economics, Taylor & Francis Journals, vol. 14(15), pages 1075-1085.
    4. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    5. Bjørn Eraker, 2013. "The performance of model based option trading strategies," Review of Derivatives Research, Springer, vol. 16(1), pages 1-23, April.
    6. Anand, Amber & Chakravarty, Sugato, 2007. "Stealth Trading in Options Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 42(1), pages 167-187, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Financial markets; options; technical analysis indicators;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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