http://www.candlestickforums.com/ Why Buying Options Works Buying options can be profitable, can reduce investment risk, and can provide a welcome degree of leverage in stock trading. Why buying options works is highlighted in the recent travails of LinkedIn, the online professional networking company that just went public and began options trading. LinkedIn rose quickly from its $45 a share opening to over $90 a share on its opening day a month ago. The fact that LinkedIn employees hold stock options worth a fifth of the value of the company did not deter first day investors and traders from bidding the stock price up. Traders doing technical analysis of LinkedIn with Candlestick analysis were able to see the stock market indecision at the top of the LinkedIn price curve and could commonly predict the subsequent and continuing fall of LinkedIn to progressively lower stock prices. Those who were buying puts on LinkedIn over the last weeks have demonstrated why buying options works. Why buying options works is not limited to buying puts before a stock price falls or buying calls in anticipation of a rise in stock price. Traders profited by buying puts on LinkedIn before the stock price fell. Given what happened to LinkedIn stock, stock traders could also have profited by selling short on LinkedIn. Why buying options works in this sort of situation is that even with the best fundamental and technical analysis a stock price may move contrary to expectations. Why buying options works is that the trader can buy options and practice trading risk management as compared to buying stock directly or short selling in which case the trader can incur substantial losses when there is an unexpected and dramatic price move. In all cases of stock and options trading the trader or investor is well advised to use technical analysis tools such as Candlestick patterns to assist him in profitably anticipating price changes. In doing so he limits his risk of being caught in a market reversal or whipsawed by heavy market volatility. The point of using options trading is that the trader limits his risk while using Candlestick pattern formations as a tool for increasing profits though prediction of price direction.

1. Why Buying
Options Works
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2. Buying options can be profitable, can reduce
investment risk, and can provide a
welcome degree of leverage in stock
trading.
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3. Why buying options works is highlighted in
the recent travails of LinkedIn, the online
professional networking company that just
went public and began options trading.
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5. LinkedIn rose quickly from its $45 a share
opening to over $90 a share on its
opening day a month ago.
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6. The fact that LinkedIn employees hold stock
options worth a fifth of the value of the
company did not deter first day investors
and traders from bidding the stock price
up.
www.CandlestickForums.com

7. Traders doing technical analysis of LinkedIn
with Candlestick analysis were able to see
the stock market indecision at the top of
the LinkedIn price curve and could
commonly predict the subsequent and
continuing fall of LinkedIn to progressively
lower stock prices.
www.CandlestickForums.com

8. Traders doing technical analysis of LinkedIn
with Candlestick analysis were able to see
the stock market indecision at the top of
the LinkedIn price curve and could
commonly predict the subsequent and
continuing fall of LinkedIn to progressively
lower stock prices.
www.CandlestickForums.com

9. Traders doing technical analysis of LinkedIn
with Candlestick analysis were able to see
the stock market indecision at the top of
the LinkedIn price curve and could
commonly predict the subsequent and
continuing fall of LinkedIn to progressively
lower stock prices.
www.CandlestickForums.com

10. Traders profited by buying puts on LinkedIn
before the stock price fell.
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11. Given what happened to LinkedIn stock,
stock traders could also have profited by
selling short on LinkedIn.
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12. Why buying options works in this sort of
situation is that even with the best
fundamental and technical analysis a
stock price may move contrary to
expectations.
www.CandlestickForums.com

13. Why buying options works is that the trader
can buy options and practice trading risk
management as compared to buying stock
directly or short selling in which case the
trader can incur substantial losses when
there is an unexpected and dramatic price
move.
www.CandlestickForums.com

14. In all cases of stock and options trading the
trader or investor is well advised to use
technical analysis tools such as
Candlestick patterns to assist him in
profitably anticipating price changes.
www.CandlestickForums.com

15. In doing so he limits his risk of being caught
in a market reversal or whipsawed by
heavy market volatility.
www.CandlestickForums.com

16. The point of using options trading is that the
trader limits his risk while using
Candlestick pattern formations as a tool
for increasing profits though prediction of
price direction.
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17. Why options trading works for profits is also
because of the trading leverage it offers.
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18. Let’s look at the case of a stock like
LinkedIn.
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19. Its IPO gets everyone excited and the
psychology of trading takes over for many
traders and investors.
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20. They drive the stock price up and then, in
despair, sell for progressively greater
losses as the price falls.
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21. Traders using Candlestick trading tactics
take a dispassionate view and avoid
paying too much for a stock.
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22. When they see the stock peaking they buy
puts on the stock.
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23. Why buying options works so well in this
situation has to do with the trader’s return
on investment.
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24. Trading an American option style the
options buyer pays for the right to execute
the options contract at any point up until
expiration.
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25. Thus the trader can wait until the stock price
falls, buy stock at the new spot price and
then sell at the strike price, then contract
price.
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26. However, he does not need to buy or sell
stock.
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27. options trading works well for return on
investment is that the options trader can
simply exit his contract by executing the
opposite trade.
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28. His profit is virtually the same and his
investment is limited to the options
premium, not the price of the stock.
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