Trading in the Blowoff Phase Flashcards
In the blowoff phase of the market, when can buying a call be initiated?
a) Buy the call anytime the technical signals are bullish.
b) Buy the call when the shortest time frame you are observing turns positive.
c) Buy the call when the market breaks out above 3𝜎.
d) Buying a call in blowoff is not suggested.
d) Buying a call in blowoff is not suggested.
In the blowoff phase of the market, when can buying a put be initiated?
a) Buy the put anytime technical signals are bearish.
b) Buy when the shortest time frame you are observing turns negative.
c) Buy when your technical indicators turn negative.
d) None of the above is correct.
d) None of the above is correct.
In the blowoff phase of the market, volatility will be:
a) low, as price is not moving between +/− 2, 3𝜎
b) high, if the market is rallying
c) at extremes, particularly if the market is breaking
d) none of the above
c) at extremes, particularly if the market is breaking
In the blowoff phase of the market, buying options outright is usually:
a) the first choice of most traders
b) a safe bet, as the risk is limited and the reward is unlimited
c) dangerous, as you might be right with price direction but still suffer premium losses
d) none of the above
c) dangerous, as you might be right with price direction but still suffer premium losses
As a general rule, in the blowoff phase of the market, buying options:
a) is not a good trade, if the market is rallying
b) can make money even if the price goes down slightly
c) is no longer a safe trade
d) is difficult to overcome the premium levels
d) is difficult to overcome the premium levels
When should a bull credit spread (vertical) be initiated?
a) The market goes through your longest strike.
b) Your shortest technical indicator turns positive.
c) Volatility is dropping.
d) Both a and b.
b) Your shortest technical indicator turns positive.
In a blowoff market, a bull ATM credit spread (vertical) can make money even if:
a) the market remains at the same price
b) the market rallies strongly
c) volatility collapses
d) all of the above
d) all of the above
In a blowoff market, a bear ATM credit spread (vertical) can make money even if:
a) the market remains at the same price
b) the market rallies slightly
c) the market breaks
d) all of the above
d) all of the above
In a blowoff market, a 60/40 bull credit spread:
a) has more reward possible than a 60/40 bear spread
b) has a greater reward than an ATM bull credit spread
c) can only make money if you are correct in predicting price
d) only b and c
d) only b and c
In a blowoff market, never use a credit spread:
a) when volatility is rising
b) when you can buy an outright option for the same risk
c) A credit spread can always be used in any market condition
d) all of the above
c) A credit spread can always be used in any market condition
In a blowoff market, profit can be taken on a credit spread:
a) when price goes through the long strike
b) when your shortest-term signal gives you a reversal
c) on any Friday
d) when it expires
d) when it expires
In a blowoff market, how can an ATM credit spread be defended?
a) Stop yourself out and reverse to the opposite credit spread.
b) Turn it into an iron condor.
c) You have limited risk; don’t defend it.
d) None of the above is correct.
c) You have limited risk; don’t defend it.
In a blowoff market, if you turn an ATM credit spread into an iron condor, you can:
a) never lose more than the net credit no matter what price does
b) cash one side of the trade if you don’t readjust
c) cash both sides of the trade if price expires between your short strikes
d) both b and c
d) both b and c
During a blowoff market, a risk reversal should be initiated:
a) when the shortest time frame you are observing turns bearish
b) when the shortest time frame you are observing turns positive
c) when your technical indicators turn positive
d) all of the above
d) all of the above
A bullish risk reversal resembles a call in that:
a) both have unlimited reward and limited risk
b) both should be initiated in a low-volatility environment
c) both can make money even if the price goes slightly lower
d) both b and c
a) both have unlimited reward and limited risk