Explore Your Options  |  MAR 2004

Explore Your Options by Tom Gentile

TECHNICAL OR FUNDAMENTAL? Q: Which is a better form of analysis to use when trading options, technical or fundamental? A: Talk about a loaded question! Well, when trading options, the fact is that the life of an option is limited to the terms of the contract. Since the majority of options traders focus on contracts that expire within three months, it’s plain to see that fundamental analysis really isn’t going to help much. That’s not to say that certain fundamentals won’t be helpful in making a decision to place a trade, but you probably don’t care whether that offshore drilling company is projected to grow at a 15% annual rate for the next five years. You’d rather know if other traders are buying or selling on shorter term news. Fundamental events that will help you understand what’s going on in technical charts include earnings reports, press conferences, industry forums, shareholder meetings, and other news that will find its way to the financial news stations or journals.

by Tom Gentile