There has been a steady rise in the use of stock options by investors to maximize their leverage and returns over the past twelve months. Chicago Board Options Exchange confirms this observation when they recently reported that the month of March was their busiest on record with volume up 55% over the same month last year. In fact all previous stock option trading records were broken when over 5.6 million stock option contracts were traded in a single day.
Stock option trading enables investors to increase their leverage and thus their rate of return over simple stock trading. If an investor has a solid approach to picking stocks that go up in the short term, the returns can be increased by 10 to 15 times using stock options. The trade off for this increased return is that the investor has to also judge the time period over which the increase will occur.
Being able to pick the stock, direction, and time period are all critical for successful stock option trading. A recent statistical analysis of over 30 years of stock data has revealed certain reoccurring patterns that can yield high returns in stock option trading. The analysis was done with custom developed...