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Trading Options: Using Technical Analysis to Design Winning Trades

by Greg Harmon (2014)

Quick summary -- an in-depth PhD-level extended summary (10-30 pages) for this book is coming soon.

Trading Options: Using Technical Analysis to Design Winning Trades

By Greg Harmon

Quick Summary

A comprehensive guide that integrates technical analysis with options strategy selection, teaching traders how to identify market trends, analyze individual stocks using classical and modern technical tools, and then design options trades that capitalize on those technical views. Harmon covers trend identification, sector analysis, chart patterns, Japanese candlesticks, Fibonacci analysis, Elliott Wave theory, momentum indicators, and then maps each technical setup to appropriate options strategies with defined risk and reward profiles.

Categories

  • Options
  • Technical Analysis
  • Trading Systems

Detailed Summary

"Trading Options: Using Technical Analysis to Design Winning Trades" (John Wiley & Sons, Wiley Trading series) by Greg Harmon is an extensive 1,312-page reference that bridges the gap between technical analysis and options trading. Harmon's premise is that most options education focuses on strategy mechanics (Greeks, payoff diagrams, pricing models) while ignoring the equally important question of when and why to deploy each strategy -- a question that technical analysis can answer.

Part I: Identifying and Understanding the Trend establishes the top-down analytical framework. Chapter 1 covers identifying the major trend using market influencers and intermarket relationships (the connections between stocks, bonds, commodities, and currencies). It examines significant market ratios and other indicators for determining the broad market direction. Chapter 2 introduces sector review analysis, teaching readers to use sector rotation models and relative strength analysis to identify which sectors are leading and lagging. A detailed case study walks through the sector ranking process.

Part II: Technical Analysis for Identifying Individual Stocks provides a thorough education in chart analysis. Chapter 3 covers classical technical analysis -- support and resistance levels, trendlines, and traditional chart patterns (head and shoulders, double tops/bottoms, triangles, rectangles, flags, pennants). Chapter 4 addresses Japanese candlestick patterns, including reversal patterns (engulfing, hammer, shooting star, doji), continuation patterns, and indecision candles. Chapter 5 moves to derived and quantitative analysis: Fibonacci retracements and extensions, harmonic trading patterns (Gartley, butterfly, bat, crab), Elliott Wave Theory, and Andrews' Pitchfork. Chapter 6 covers price derivatives and momentum indicators: Relative Strength Index (RSI), Moving Average Convergence/Divergence (MACD), Bollinger Bands, and other oscillators.

Part III: Options Strategy Selection (inferred from the book's structure and scope) maps technical setups to appropriate options strategies. When technical analysis identifies a strong directional trend, the book teaches readers to select strategies like vertical spreads, calendar spreads, or outright calls/puts. When analysis suggests range-bound conditions, iron condors, butterflies, or straddles may be appropriate. The integration of technical signals with options Greeks means traders can design trades that profit from specific technical scenarios while defining maximum risk.

Part IV: Trade Management and Risk covers position management after entry -- when to adjust, roll, or close positions based on how the underlying's technical picture evolves. This section addresses the dynamic nature of options positions and the necessity of active management as time decay, implied volatility changes, and price movement affect position profitability.

The book's exceptional length reflects its comprehensive treatment of both technical analysis and options strategies. Harmon provides extensive chart examples throughout, making the text highly visual. The integration of two disciplines that are often taught separately makes this book particularly valuable for options traders who want to improve their timing and directional accuracy, and for technical analysts who want to leverage their chart-reading skills through options structures that offer defined risk and superior capital efficiency.