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Trading Vertical Option Spreads

What’s your (market) type?

By Billy Williams

March 26, 2013 • Reprints

Critical criteria

In the late 1990s, the dot-com era was in full bloom, with a record number of breakout stocks that were riding the crest of the Internet frenzy. Momentum trading was all the rage. Traders simply would wait for a breakout, buy and hold on. Substantial profits by mid-day were common.

The profits attracted a lot of money to the stock market, both from new investors and traders as well as additional investment from existing market participants. For many, the dot-com surge was an investor’s Golden Age. Many even borrowed additional cash to invest, thinking that it would never end.

But end it did.

Eventually, a financial bubble formed, followed by a bust in early 1999. The effects of the collapse in many ways still are being felt today. One effect has been a long-term shift in the market’s personality. Breakouts have dried up or failed to materialized. What worked in the late 1990s, no longer makes money. Traders who continued to bet big in old familiar ways faded into financial obscurity as their accounts dwindled.

In some ways, current markets mimic the sideways torment of the 1970s, when stock market profits were hard to come by and breakouts failed to provide easy money (see “Sideways seventies,” below).

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About the Author

Billy Williams is a 20-year veteran trader and publisher of www.StockOptionSystem.com, where you can read his commentary and a report on the fundamental keys for the aspiring trader.

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Free Newsletter Modern Trader Follow

Main menu

  • Futures
    • Modern Trader Magazine
    • Commodities
    • Futures Mag Archives
    • ETFs
    • Financials
    • Forex
    • Managed Funds
    • Market Analysis
    • News
    • Options
    • Regulation
    • Technology
    • Trading Strategies
    • Education
    • Futures Op-Ed
  • Favorites
    • Alpha Pages Most Popular
    • Futures Magazine
    • Modern Trader Magazine
    • Most Popular
    • Slideshows & Lists
    • Special Topics
      • Alpha Hunters
      • Bad Boys
      • FINtech
      • High-Frequency Trading
      • Trader's Life
      • Trading Strategies
      • FUTURES MAG's 500th ISSUE
      • We asked traders
  • Traders
    • Market Data
    • Hot Charts
    • Interactive Charts
    • Trading Calendar
  • FINalternatives
  • Hard Assets
    • Home
    • Base Metals
    • Precious Metals
    • Rare Earth Metals
    • Commodities
    • Mining Investments
    • Slideshows
  • Modern Trader
    • Subscribe
    • Past Issues
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