A New, Non-Directional, Volatility-Based Approach to Options Trading. The compression methodology by Don Fishback compares a stock price to its short and long term methodologies. It is a method he uses daily to find opportunities to purchase non directional securities. It is inspired by the work of Darrel Guppy.
ODDS Compression System looks to find opportunities when a stock's price have converged into a very narrow range. This indicates the stock has become tightly wound and compressed -- like a coiled spring.
The methods used are very selective and designed to find only the best stocks to take advantage of a non-directional volatility trade.
Traders looking to take advantage of this as a trading opportunity would use option strategies designed to make money as the stock breaks out of this narrow range. Options Traders should look for options purchases. Because the direction is unknown using this methodology on its own, neutral strategies, such as an at-the-money straddle purchase are well suited.
A straddle purchase, or long straddle, is the simultaneous purchase of a put and a call, with the same strike price and same expiration month. At-the-money means that the option's strike price and the current price of the asset are about the same.
Customers looking to take advantage of this trade should make sure the options have a reasonable bid/ask spread, have at least 500 contracts open interest - OR- trade at least 50 contracts per day. It is also important to look for straddles that are inexpensive and have a statistical edge.
- ODDS®Volatility Ratio
- ODDS®Volatility Compression Signal
- ODDS®Straddle Compression
- ODDS®Compression Bars
About Don Fishback
Don Fishback is a 30-year veteran of the Finance Industry, is the world's leading authority on helping people instantly make options investing easier, more profitable and less risky so you can enjoy the peace of mind that comes with financial freedom.
Don is also one of the foremost experts in the field of probability analysis and its application to options trading. In 1994, Don introduced the retail public to the concept of utilizing volatility to calculate probability, using a method he calls ODDS®. His ODDS® Probability Cone tool, introduced in MetaStock back in 1998, has become an essential tool in nearly every options brokerage toolkit.
The "original VIX guru", Don's comments on the VIX and volatility have appeared in the financial media for over 20 years, including:The New York Times, The Wall Street Journal, Reuters, Barron's, Forbes, Investor's Business Daily, on TV and radio
His insights on probability have even appeared in The New England Journal of Medicine! POWER and SIMPLICITY, FAST and EASY:In today's fast-paced, overloaded environment, cutting through the noise and getting what you really need is becoming harder and harder.
Don's simple tools give you the most vital information you need at a glance so you can focus on taking action.