Notes   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Introduction 
                                                                                                                                                                                                                                                                 1  .                                  “High-Frequency  Trading,”  N                                                                                                                                                                                                                                                                                                                                                     ew York Times , October 10, 2011.  
                                                                                                                                                                                                                                                                 2  .                                  Securities  and  Exchange  Commission  (SEC)  at   www.sec.gov/answers/
                                                                                                                                                                                                                                                                                                     pumpdump.htm.   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               1                                               Options: Trading Basics 
                                                                                                                                                                                                                                                                 1  .    In future references to underlying stock, the term “underlying” will be 
                                                                                                                                                                                                                                                                                                     used by itself as a noun, conforming to the industry usage (or jargon). 
                                                                                                                                                                                                                                                                                                     When the term refers to price, that will be specified.  
                                                                                                                                                                                                                                                                                                                                                                                                                                                                           2                                              Swing Trading: The Basics 
                                                                                                                                                                                                                                                                 1  .    Josef Lakonishok, Andrei Shleifer, and Robert W. Vishny, “The impact 
                                                                                                                                                                                                                                                                                                     of institutional trading on stock prices,”  Journal of Financial Economics  
                                                                                                                                                                                                                                                                                                     31(1992), 42.  
                                                                                                                                                                                                                                                                 2  .                                  Thomas  Bulkowski,   Encyclopedia of Candlestick Charts  (Hoboken, NJ: 
                                                                                                                                                                                                                                                                                                     Wiley, 2008). This book is the result of the author’s study of thousands 
                                                                                                                                                                                                                                                                                                     of candlestick trades, and Bulkowski concludes that the engulfing pat-
                                                                                                                                                                                                                                                                                                     tern is highly reliable. The bear engulfing pattern leads to reversal 79% 
                                                                                                                                                                                                                                                                                                     of the time, and the bull engulfing pattern leads to reversal 63% of the 
                                                                                                                                                                                                                                                                                                     time. Two additional signals of exceptional reliability are the bullish three 
                                                                                                                                                                                                                                                                                                     white soldiers (82%) and the bearish three black crows (78%). Less reli-
                                                                                                                                                                                                                                                                                                     able signals approximating fifty-fifty reliability include the bull and bear 
                                                                                                                                                                                                                                                                                                     harami (both leading to reversal only 53% of the time) and the grave-
                                                                                                                                                                                                                                                                                                     stone, dragonfly, and long-legged doji (51% average). Source: http://www.
                                                                                                                                                                                                                                                                                                     thepatternsite.com.  
                                                                                                                                                                                                                                                                                                                                                     7                                               Powerful Timing Tools: Expanding Swing 
                                                                                                                                                                                                                                                                                                                                                                                                          Signals with Candlestick Reversals 
                                                                                                                                                                                                                                                                 1              .                      J       e f f                                            A u g e n ,                                                                                              Trading Options at Expiration: Strategies and Models for 
                                                                                                                                                                                                                                                                                                     Winning the Endgame  (Upper Saddle River, NJ: FT Press, 2009), 4.  
                                                  348                                                                                                      Notes
                                                                                          10            Strategy # 1: Long-Option Approach, 
                                                                                                                                       a Basic Solution 
                                                                1  .     Chicago Board Options Exchange (CBOE), link to “ Advisors ” and then to 
                                                                       “ Advisor Knowledge Center ,”  http://www.cboe.com/advisors/knowledge/
                                                                       myth1.aspx.  
                                                    
                                                                                                                           Bibliography   
                                                                                                                         A     n s b a c h e r  ,    M a x    .    The New Options Market.  4th ed. Hoboken, NJ: Wiley,  2000.  
                                                                                                                        A     u g e n  ,    J e f f    .    Day Trading Options . Upper Saddle River NJ: FT Press,  2010.  
                                                                                                                        „ „ „      .  Trading Options at Expiration: Strategies and Models for Winning the Endgame . 
                                                                                                                                         Upper Saddle River, NJ, FT Press,  2009.  
                                                                                                                        Bittman ,   James  B   .   Options for the Stock Investor . New York: McGraw-Hill,  1997.  
                                                                                                                      Bulkowski,  Thomas  J.,  Encyclopedia of Candlestick Charts. Hoboken, NJ: Wiley, 2008  
                                                                                                                      Crane,  John.  Advanced Swing Trading. Hoboken, NJ: Wiley, 2003  
                                                                                                                        F   a r l e y  ,    A l a n   S    .    The Master Swing Trader . New York: McGraw-Hill,  2001.  
                                                                                                                        K      a e p p e l  ,    J a y    .    The Option Traders Guide to Probability, Volatility, and Timing .  Hoboken, 
                                                                                                                                         NJ: Wiley,  2002.  
                                                                                                                        K     y l e  ,    S c o t t   G    .    The Power Curve . New York: Nautilus Press,  2009.  
                                                                                                                        M c M i l l a n  ,    L a w r e n c e   G    .    Options as a Strategic Investment.  4th ed. New York: New York 
                                                                                                                                         Institute of Finance,  2002.  
                                                                                                                        „ „ „    .    Profit with Options . Hoboken, NJ: Wiley,  2002.  
                                                                                                                        Natenberg ,   Sheldon   .  Op                                                                                                                        tion Volatility & Pricing.  New York: McGraw-Hill,  1994.  
                                                                                                                      Pring,  Martin.  Technicians Guide to Day and Swing Trading. New York: McGraw-Hill, 
                                                                                                                                         2003  
                                                                                                                        S   c h a e f f e r  ,    B e r n i e    .    The Option Advisor . Hoboken, NJ: Wiley,  1997.  
                                                                                                                       
                 Index
                 Accumulation Distribution (A/D), 59        Chaikin Money Flow (CMF), 59
                 automatic exercise, 11                     chartists, 32–33, 44
                                                            confirmation, 31, 54–59. 137–138
                 Bollinger Bands, 59                        contrarian trading, 4, 29
                 breakeven return, 66–67
                                                            diversification, 8, 30–31
                 candlestick:                               double top and bottom, 12, 32, 45, 54, 
                    abandoned baby, 148–149                      59, 100
                    basics, 53–55                           Dow Theory, 33
                    black crows, 31, 32, 54
                    charting, 133–137                       Eastern technical analysis, 138
                    confirmation, 59                        ex-dividend date, 179–183, 270–271, 
                    continuation, 133, 152–163                   340–341
                    doji, 31, 126, 130, 140–142             extrinsic value, 15
                    doji star, 150–153
                    engulfing, 31, 32, 53, 100, 138         falling range, 37
                    evening star, 150                       Federal Reserve, 78
                    gap filled, 161, 163                    Fibonacci Sequence, 111–115
                    hammer, 127, 139–140                    Financial Industry Regulatory Authority 
                    hanging man, 127, 139–140                    (FINRA), 96
                    harami, 31, 142, 143
                    harami cross, 142–144                   head and shoulders, 44–45, 54, 100
                    i n neck, 155–157                       herding, 27
                    inside patterns, 146–147                high-frequency trading (HFT), 1–2
                    inverted hammer, 144–146                horizontal range, 35
                    long-legged doji, 130, 140–142
                    morning star, 150                       implied volatility, 15, 91–94, 165–166
                    on neck, 154–156                        Internet, 32
                    outside patterns, 147–148               intrinsic, value, 14–15
                    reversals, 12, 133, 137–152
                    separating lines, 154, 156              leverage, 8, 24–25
                    side-by-side lines, 157–161
                    spinning top, 126–127, 130, 142         margin:
                    squeeze alert, 150, 151                   advantage, 79–80
                    tasuki gap, 161–162                       calls, 78–79
                    thrusting lines, 153–154, 155             CBOE Margin Manual, 64, 84
                    white soldiers, 31, 32, 53–54             collateral, 296–297, 309