to all: an excellent question, with an obvious-but-not-known/practiced answer: the biggest single future-price-predictive factor, as far as the PUTS side has gone, has always been, "how far stock has already risen".... (off it's ALL-time lows)
in other words, the higher the previous rise was, the more steep it's paraboic rise was, the bigger the potential fall, when and if it cracks, and falls....still falling, generally, in 3 stages, as previously taught here....
the second biggest factior, is the shape and duration, of it's recently formed/forming top....shorter-term top formations, often have shorter-drops, unless stock is REALLY way up from it's 200 DMA before it's top, dig ? the corrolary, would be, if it's a blue chip, and/or top has been taking a while to form, say, months, versus weeks, then, it's drop may not be as large, percentage-wise, right ? (or as quick) it may just fall towards it's 200 DAM only, at least initially....
again, that's why we Diversify, but always buy ONLY, in-the-money, long-term options, to lower risk, while retaining high potential in time, when suitable....
the third factor, is whether or not that ind. group in in synch, chart-wise, or is the stock a rougue....rougues tend to drop MORE, when correct, if "eventually announced bad news" is real, than, when the whole group is just correcting, but still exploitable, put-wise...
we all have seen many "killed techs" have been "rogues" in recent years, with big down gaps, AFTER forming "PSYCLE sm" top formations.
hope this is clear....again, nothing is carved in stone, but generally applicable truths here....and, last, as earlier taught, a lot depends upon YOUR expectations, needs, goals, and "definitions", of things like, "short-term, long-term, big drop, small drop", etc., right ?
sorry if this seems a bit ephemeral, but that's how it is....the keys continue to involve, having a historically valuable overall idea of how drops transpire, then matching your situation to specific strategy and options, good money mgmt., stops, etc.
please ask me more if needed....hope this helps.... |
