A dip against the long-term trend offers a high probability setup for the contrarian trader to adjust options positions that haven’t been working and to put on positions that will take advantage of a possible trend resumption. In this most recent example, we can see that the price traded down to the lower band of the LRC Channel. Regardless of the long-term trend, we know that this has a greater than 60% probability of being a good buying opportunity. By selling put spreads and rolling short call spreads up to higher levels when the price was at the lower band, a trader would have been well positioned for the next leg to the upper band.

The LRC Channel was developed using more than 40 years of market data and statistics. SMB is currently preparing a course on LRC Credit Spreads in which Andrew Falde will teach options traders the basics of using the LRC Channel to enter, exit, and manage credit spreads. The course includes eight years of options back testing data and more than one year of example trades.

Please sign up below to learn more about the LRC Channel and to receive information about the upcoming course. You will also receive a pre-launch discount on our new video series.