Typical options traders will overwhelm you with technical ideas. While technical analysis has its place, it is far too often used wrongly. Many traders think because they are in a bull market and just about any analysis for buying on the dips works, they are geniuses. Many technical anaylsis comes about during great bull runs. As you will soon notice this great bull run in commodities will bring about many new and improved technical ideas.
Reality is that just about any analysis works in a strong market.
Now back to the idea that you can trade by technical analysis. The overall trend is what you need to be watching. Then when you have the corrections that always come along, you buy more. With options this is not the appropriate way to trade. Options lose value each and every day due to time decay. So to buy and hold for even 6 months is a losing proposition. That is why the technical is supported so much, trying to get in just as the underlying is about to move. If you are great at timing, (which I am terrible at) you can buy calls and puts and make a very nice return. If you are like most mortals, then you cannot time with any exactness to avoid time decay.
For that reason I trade the way I do. Taking advantage of time decay. Find the fundamental forces driving a particular market and then jump on board with calendars or diagonals. Then if my timing as it usually is, fails, I still am in a position to prosper.
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Hi Dell,
Your calendar strategy is working well for me too. My USO put calendar is doing very well, not so much with XLE but still in the green (black). XLE lost some good value lately.
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