InvestorQ : Is there use of charts and technical pivots in trading in options?
Niraja Mehta made post

Is there use of charts and technical pivots in trading in options?

Answer
user profile image
Mary Joseph answered.
2 years ago


There surely is because this way you get to know at why price you can take the bigger risk and at what price you must take a smaller risk. If you want to trade call options successfully, you need to understand the resistances and supports on technical charts. Buying a call option when the stock is holding support levels makes more sense than buying call options when the stock is hitting resistance. When you evaluate the exit price, remember your price is not your break-even point. If you bought an Rs.920 RIL call options at Rs.6 then your break-even is Rs.926. You make profits only after the stock crosses that level. With call options and put options, remember that trend is your friend.

The connection with technicals is that both are short term tools and hence can be safely used to predict the undertone. Call options are short term trading tools. Don’t try to adopt a value investor approach by bottom fishing on stocks. That is not to be done with call options. When it comes to buying call options remember that trend is your friend. Always make it a point to trade on the same side as the underlying market trend. Avoid buying call options when the market undertone is bearish.