Optionsmart Models

This is more complicated than traditional technical analysis models and outperforms them by taking into consideration the following factors:

Real predictive accuracy of technical indicators, which has been evaluated with a help of numerous back tests for all US stocks during 1985-2001. No “myths”! Only clear and most reliable technical signals should be used in decision making.
Probability estimates of certain stock price movements after technical signals taking place are computed and used in further analysis. This econometric model involves running thousands of computer simulations to estimate these probabilities. Thinking in terms of probabilities helps to “add more colors in the picture” and measure risks more precisely.
Sector/Industry technical signals are rarely considered by traders; however, our studies show that they should not be ignored. Our model helps to make the well known saying “don’t fight the trend” operational, measurable and practical.
The strength of a particular stock in its sector (industry) changes over time and so does the strength of a sector in the whole economy. These fluctuations are very important to be aware of. They are identified and taken into consideration for better timing and selection of entry/exit points.

The OptionSmart Technical Analysis Model produces short- and intermediate-term stock picks with exceptionally clear and powerful technical signals, which allow you to make reliable bets on their price movements.

Another model – The Option Strategies Comparison Model – allows to choose the appropriate financial instrument (option) to play out the market situation and the stock pick.

Most option traders underestimate technical analysis and fail to consider the probabilities of price movements of any given underlying stock. Indeed, most traditional option pricing models suggest that probabilities of upward and downward stock price movements are roughly equal. However, experience and our studies show that it is often not true. For example, in reversal points identified with the help of technical analysis, the probability of, for instance, upward movement is much higher, which means that the real price of the put option is far lower than the so-called fair price derived from a traditional option pricing model. A smart trader would sell this put option to another trader, who ignores technical signals, thus willing to pay more for this option than its real value.

Our model compares and pre-selects the most suitable option strategies (buy call, buy put, sell, naked put, establish call spread, etc.) taking into account the probabilities derived from technical analysis. It computes risk/reward parameters and probability estimates, such as the probability to avoid losses, etc. The final choice of the best option pick is yours because it depends on your personal risk tolerance. However, we compute key parameters per $1 invested so you could compare all published option picks across various option strategies and pre-selected stock picks.