Trading Options Using Technical Analysis: Book Review
A New Book on Trading Options Also Offers Value for Stock Investors.
You might conclude after reading the cover of the new book by Greg Harmon entitled "Trading Options: Using Technical Analysis to Design Winning Trades" that there is nothing of value in it for those who only trade or invest in stocks. That conclusion would be incorrect.
In fact, Harmon, who is a Wall Street veteran and a Certified Financial Analyst, wrote the book in four separate sections, each of which is designed to stand on its own.
Consequently, the first two, "Identifying and Understanding the Trend" and "Technical Analysis for Individual Stocks," provide valuable information even for those who just invest in equities.
In "Identifying and Understanding the Trend" Harmon explains in great detail the top down process he uses to find the major trend in the market.
A large part of this identification process involves understanding the inter-relationship between markets and asset classes. Using historical data and charting Harmon shows how the relationship between indexes like the S&P500 and other markets can help identify the trend and determine if it is likely to continue.
This section alone is a must-read because trends in the market provide a tailwind for your investments, and being on the right side of that trend gives you a better chance to be profitable.
Then Harmon drills down on sector analysis, explaining how relative strength can be used to find which are the strongest and the weakest sectors and how they are performing in relation to the major trend.
The second section of the book deals with how to use technical analysis to develop a watchlist of stocks and to formulate an initial plan to trade them. It’s in this section that Harmon’s plainspoken and straightforward approach really pays off for the reader, as he is able to take a subject that is often intimidating to investors and break it down in an easy to understand way.
The third section dives into the world of options and how to use them. Once again, this section provides a good amount of information for equities investors on how to use options to hedge positions or to bring down the cost basis of long-term holdings.
Finally, the book ends with a section devoted to designing options strategies, from the most basic to the very complex, and the best way to execute them.
As you would expect with a book this comprehensive, it is chock full of charts and illustrations to better help the reader understand the concepts being discussed, but a very nice added feature is the ability to access a companion website where you can not only view all the charts in full-color but can download them for your own use.
What’s even better for those who purchase the book is that they can actively engage with Harmon on a daily basis both his StockTwits stream, as well as on the blog for his money management firm Dragonfly Capital.
I’ve seen Greg Harmon speak a number of times at industry and investment events and it’s no wonder that Wiley & Sons, one of the most respected publishers in the financial category, chose him to write this book. His ability to take complex investing topics like this one and break them down in to digestible and understandable pieces is second to none.
He has also pulled off the impressive feat of writing a book about options trading that will even appeal, and be of value, to those who have never traded an option, nor plan to in the future.
*Update* Greg also offers premium content on his website.