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The TRIN ($TRIN) is a good way to observe volume differences between buyersand sellers intraday. The TRIN, or Trader’s Index, is the difference between advancing and declining volume. Think of this in terms of a teeter-totter; a reading above 1means the market is selling off; below 1 the balance of volume is buying volume.The TRIN is useful intraday to act as a contrary indicator, signaling overbought oroversold conditions. A TRIN of 1.5 would indicate incredible selling pressure, and,according to the contrarian, a reversal is due. (The duration or magnitude of the reversal is not so easily spotted.) A TRIN of .35 indicates confidence levels are high,and is thus considered to be a bearish indicator. During the trading day, most traderswatch the direction the TRIN is going more than the levels themselves. Only at theextremes is the number itself truly important.Figures 12.13 and 12.14 show the interesting relationship between TRIN and theDow on one of the most volatile days ever experienced by investors. The TRINreached as low as .47 while the Dow went up 77 before a massive sell-off occurredsending the TRIN to +1.77 and the Dow off 506.
Tick ($TICK)This figure is derived by taking the number of stocks heading up and then subtractingthe number of stocks headed down. The typical tick will range anywhere from +500
Figure 12.13
TRIN on April 4, 2000 (Courtesy of QCharts (www.qcharts.com))
Figure 12.14
DOW on April 4, 2000 (Courtesy of QCharts (www.qcharts.com))
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to –500, give or take. However, the extreme readings of +1,000 or –1,000 serve asexcellent contrary indicators, because this type of a reading cannot be sustained; itmust return to the normal trading range. It’s also a good idea to track the direction thetick is going. Direction is more important most times than the actual reading.
Volatility LevelsWe’ve discussed volatility previously, but since it is a key factor in determining current stock or market conditions, let’s do a quick review. Volatility can be defined asa measure of the amount by which a stock price is expected to change. It’s no mystery that a stock that has fallen into a narrow trading pattern (directionless) has lowvolatility. These stocks are not hard to find and it can be very profitable to spot thembecause when they do come alive (as they often do), the only question is which waywill they move: up or down?Markets that move erratically have higher volatility than markets that are rangebound (i.e., directionless). That’s why it’s important to keep an eye on the volatility ofthe stocks you may want to trade. If the stock is already all over the map, trending upor down, at least you can determine the trend it’s in and employ a suitable strategy. Astock in such a trend might possibly warrant a spread to capture some of the volatility.
MARKET PRICING INEFFICIENCIESThe market may efficiently process information, but option pricing doesn’t work thatway. We learned in Chapter 6 about the Black-Scholes option pricing formula. Sometimes the actual market price will fall way above or below this line, but has a way of returning to normal pricing as time goes on. Calendar spreads take advantage of one ofthese scenarios, when close-in option contracts are priced well above what the BlackScholes model indicates the price should be. By looking at the Optionetics.com Platinum site, you can quickly determine the feasibility of putting on a calendar spread.Volatility skews in the option prices occur when the volatility is higher in somemonths than others, or in the higher (or lower) strike prices. Certain optionspreads provide the perfect dynamic to take advantage of specific skews.
I like to focus on calendar spreads since volatile markets make these trades so attractive. A calendar is a spread that combines the purchase and sale of options withthe same strike price but different expiration dates. The longer-term option is purchased and the shorter-term option is sold simultaneously. Calendar spreads can becreated with a bullish, bearish, or neutral bias, and the maximum risk on the trade isthe net debit paid to establish the position. The objective of this position is to havetime eat away at the short option while the long option retains its value. Usually,there are additional adjustments that can be made to the position in order to increaseits profitability. Here’s the way a calendar spread order would be entered when theXYZ October 35 puts are selling at $4 and the XYZ July 35 puts are selling for $21/2:
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Buy 1 XYZ October 35 put (XYZVG) and sell 1 XYZ July 35 put (XYZSG) for adebit of 11/2 or better, opening both sides.
The trick to finding great calendar spreads is finding options with unusually highimplied volatility in the front months and low to normal implied volatility in the backmonths. This difference in implied volatility across expiration months is referred toas volatility skew. Wild market fluctuations make this a relatively simple task to accomplish; implied volatility will normally skyrocket when fear and uncertainty hitinvestors. Actually, sometimes it is possible to get a net credit for a calendar spread,which means that you would have a no risk position! These are the types of tradesthat traders should be looking for in uncertain environments with an emphasis onrisk management. Before any trade is placed, the question that should always be answered is, “What are the consequences if I am wrong?” Never let any one trade putyou out of business. There are so many different opportunities the market providesthat it is not necessary to place an inordinate amount of risk in any one position.
DETERMINING VOLATILITY LEVELSIn Chapter 10, we discussed the Volatility Index or VIX. It’s the easiest place tostart, because all it takes is punching in the ticker “$VIX,” or “VIX.X” dependingon your quote delivery source. Recently the VIX has faded in terms of accuracy fordetermining the market’s sentiment, simply because of the decline in OEX call andput buying—the determinants of the VIX. It still is a good indicator of fear (whenthe reading is above 30 or so); but the summer of 2000 saw the VIX trade down tothe low 20s, even the teens, and it stayed there. But I still watch it and take its levelinto consideration when assessing the current market mood.Assessing volatility levels of individual stocks isn’t quite as easy, but it’s still notvery difficult. There are several methods available, but they do require a computerto get the most accurate results. The fastest method is to use Bollinger bands, a toolwe learned about in Chapter 9, on technical analysis. The bands are a measurementusing standard deviations above and below a moving average, which is a long wayof saying recent price swings. If the bands are wide apart, volatility is high. Thismeans the stock has experienced a wide degree of price swings when compared toits moving average (usually 20 days). That’s not a good signal to be buying options,as a rule of thumb. You want to buy options when the volatility is low; the bands arenarrow (close together), indicating the premiums on the underlying options are low.Figure 12.15 shows a daily chart of JDS-Uniphase in its meteoric rise in the second half of 1999. The stock moved sideways and was quiet for several weeks. TheBollinger bands narrowed, indicating low volatility. But once it began to run, thebands expanded due to the increased demand (and expectations) for the stock.Those that purchased options when the implied volatility (IV) was low did well twoways: The price of the stock increased as well as the IV (extrinsic value). Just because the bands narrow doesn’t automatically indicate a stock or index will climb.Lower IV means the stock might move decisively one way or the other; there’s noaccurate way to tell.
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Figure 12.15 JDS-Uniphase Bollinger Bands—Depicts Volatility Swings in the Stock(Courtesy of QCharts (www.qcharts.com))
Another avenue is to go to Optionetics.com and using the free Platinum site justtype in the stock symbol, then select Charts on the pull-down menu. A six-monthchart of the stock and its implied volatility (IV) will be displayed, as well as a twoyear chart and the options tables as well. The six-month chart will show the level ofcurrent volatility. This is a good first step, and an important one as well.Just remember: Buy low volatility; sell high volatility.
ADDITIONAL TERMINOLOGY REGARDING MARKET BEHAVIOR• Stock Price Cycles: There exists a group of technicians that closely followprice patterns. Since patterns repeat themselves, cycles become observable.Probably the most notorious and well-known cycle is the Elliott Wave theory.Based on repetitive wave patterns and the Fibonacci ratio, Elliott Wave analysis enables traders to determine where the market is currently in comparison tothe overall market movement. There are three major aspects of wave analysis:pattern, time, and ratio. The basic Elliott pattern consists of a five-wave uptrend followed by a three-wave correction. Cycles are discerned by combiningthe application of moving averages and oscillators over extended periods.
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• Declining Stock Behavior: A stock that changes direction, shifting from anuptrend to a down one, tends to exhibit similar chart patterns, although notevery stock reverses the same way every time. Some important indicators willflash warnings beforehand, in most cases. Some of these include:Price/Volume Divergence: The stock keeps going up, but on decliningvolume.A Series of Lower Highs and Lower Lows: This occurs in a stock wherethere are increasing amounts of supply earlier on in each rally. Trend linescan easily illustrate this scenario.A “Gap Down” Opening: This one is tough to miss, especially if you ownit. A stock will open lower than the previous day’s close, creating a gap inthe chart. If it’s on heavy volume, this could spell trouble.On-Balance Volume (OBV) Is Negative: OBV tracks the volume of buyersand sellers, and clearly illustrates on charts whether a stock is under accumulation or distribution. The OBV line will trend downward in a distribution circumstance while the stock price is still increasing.Analyst Downgrades a Stock: This kind of event will likely cause theabove signals to show. Brokerage firm analysts can exert a lot of influenceover a stock’s performance. A downgrade can mean just an adjustment, oran obscure signal to the firm’s clients to get out.Earnings Warning: A warning from a company announcing it will missStreet expectations for the current quarter is enough to send a stock to thedoghouse for a long time. Sometimes it’s a timing issue, sales being pushedback or didn’t get booked in time. Nonetheless, pay attention to any corresponding downgrades from analysts. Cut losses sooner rather than later.• Averaging Down: If you are long stock and it takes a significant drop in price,many traders buy more shares of the stock at the lower price to reduce thebreakeven of all of the shares. The concept of averaging down on a stock thatmoves against you sounds okay at face value, but in reality is discouraged. Thetheory is that a lower cost basis will mean profitability sooner when the stockturns back up. The fact remains you were wrong in the first place as to thestock’s direction. Averaging down is throwing good money after a bad tradeand should be avoided.• Rallies and Sell-Offs: The markets experience exaggerated displays of confidence and fear as shown by rallies and sell-offs. A rally can mean the beginning of an extended up move, or a retracement back to where it fell from. Asell-off could mean profit taking or a serious correction. In both cases it’s hardto tell without getting some confirmation from other indicators. Volume, market breadth as discussed earlier, and the evaluation of technical and sentimentindicators all provide pieces to what is a very big puzzle.• Buybacks: Corporations do their best to continually boost their profitability, andsometimes the market just doesn’t appreciate it. It’s at these times a company
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will announce that they will go into the open market and buy back or repurchaseshares they have previously sold to the public. For a company to do this, it is ineffect stating that the best use of capital is to invest in them. This is a bullish signand a strong display of confidence.• Stock Splits: Stock splits occur when a company decides its stock price is(usually) too high in price, making it beyond the reach of most noninstitutionalinvestors. A common form is a 2:1 split, in which a shareholder receives twoshares for every one owned. If you owned 100 shares at $200 in a 2:1 split,you’d end up owning 200 shares at $100. A reverse split works the other way.If it was a 1:2 reverse split and you had 100 shares at $50, originally, you’down 50 shares at $100 afterward. Stock splits increase as a market goes up,and they work as an indicator of market sentiment.• Advancing Stock Behavior: Stocks in a bullish mode will exhibit similar patterns. Fundamentally, demand will begin to outweigh supply, but before thenvolume will increase. There’s an old saying: “Volume precedes price.” Volumechanges are a good way to spot a stock before it begins a move up. Technically, an advancing stock will have higher highs and higher lows. Each advance is progressively higher before selling moves it back, and even then itdoesn’t go back as far as before. This trend is easily identified by using trendlines (as discussed in Chapter 9, on technical analysis). Volume should continue strong as the price increases, and pullbacks should be seen as buying opportunities. If volume tapers off as the price advances, this is known as adivergence, a serious sign that the advance is not sustainable.• Divergence: Divergence is a term applied to any two indicators that begin togenerate conflicting signals. Popular divergence signals include price and volume (as discussed earlier); MACD lines and the histogram; the advance/decline line moving down while the index rises. Divergences represent anearly warning sign of a reversal in the current trend of an index or stock, andare of great significance to traders.• Correction: A correction is a mild down move in an up leg of the market, andlasts a relatively short time. A correction turns into a bear market at 20% of adown move from its recent high.• Capitulation: A capitulation occurs most often in bear markets. It’s that pointwhere the last optimist says, “I’ve had enough,” throws in the towel, and quitsthe market. Signs of capitulation occurring are a huge down move on big volume, with market sentiment indicators turning extremely pessimistic. From acontrarian viewpoint, the majority is wrong at market extremes, so if everyonehas sold, it can’t go any lower.• Market Tops and Bottoms: Spotting a bottom is almost easier than a top, dueto the near-cataclysmic cave-in of a bottom (as discussed in capitulationabove). A top is marked by an impressive display of confidence and wanton
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TAKING ADVANTAGE OF MARKET BEHAVIORdisregard of fear—big up day, impressive volume, low VIX, and every indicator flashing buy. A top may look like a flagpole in a parking lot, sticking wayup and giving the impression it looks overextended, as it probably is. The luxury of hindsight can identify a top; but when everything seems to be goingyour way, a downturn is probably looming in the not too distant future.
SELECTING A PROFITABLE STOCKFinding a profitable stock is the question of the ages. Even Will Rogers advised investors to “just buy stocks that go up.” But since it is a lot easier said than done,here’s a process to follow to help identify stocks on the rise.• Find a Promising Stock: To find one stock to buy requires looking at a number of them. I like to be in the right sector—one that is either already strong oris showing signs of turning. Sector selection has a lot to do with performance.Investor’s Business Daily has a complete list each day in the back of the firstsection, or check out Rabbitt Analytics to see how it ranks the sectors using itsown proprietary system (www.rabbittanalytics.com/default.htm).• Screen It: Screens give you the opportunity to narrow your search by filtering out the characteristics you don’t want in a stock, and leaving you withthe ones you do want. Maybe I’m looking for a mid-cap stock with lowvolatility in the defense sector with a good debt-to-equity ratio and earningsincreasing at a 20% rate the past four quarters. This is where the computercan be a valuable aid. Zacks Investment Research offers excellent screeningtools (my.zacks.com/screening/index.php3), and so does HardRightEdge.com(www.hardrightedge.com).• Rank It: Once you’ve found a good candidate, how does it stack up against itspeer group, or similar companies in the same industry group? Investor’s Business Daily ranks virtually every stock that’s traded according to profitabilityand its comparative rank in the industry group.• Consult Fundamental and Sentiment Analysis: There’s nothing that compares with studying the balance sheet to dig out those tidbits of informationthat help identify a stock that’s ready to move. While you’re at it, see how theStreet looks at it and try to assess the way they feel. Is it out of favor? Is it thecurrent darling of institutions? Optionetics.com (www.optionetics.com) has aranking system that indicates implied volatility, which is another way to checksentiment. Also take a look at Bollinger bands for a quick read on a stock’svolatility as a gauge of sentiment.• Watch Technicals for Perfect Timing: Break out the charts and start drawinglines. How do you know what a good entry point is without a chart? Look for astock that has retreated back to a 50-day MA support line and shows signs ofturning, or a stock that is breaking out (or down) to a new high or low. Perhapsit’s a surge in volume for several days but the stock hasn’t moved. New highs,support and resistance, and volume increases should be a part of your criteria.
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SCREENING METHODSToday’s technology has provided any person with access to a computer and the Internet the ability to search the entire universe of stocks and stock options in order tofind and create profitable trades. If you actually think about this fact for a moment itis mind-boggling. The average investor now has access to information that in yearspast was only available to professional firms. In the old days, an investor’s researchwas limited to Value Line Investment Survey, Standard & Poor’s Stock Reports, andthe occasional analyst report from the investor’s brokerage firm. Unfortunately,these reports were usually months behind and outdated when the investors receivedthem. Technology has now provided direct access to all the information investorsand traders need to make informed and intelligent decisions regarding their investments almost instantaneously. This places the individual investor in a position to research his (or her) own ideas more efficiently and effectively while substantiallyincreasing returns over the course of time.There are countless combinations of criteria that investors and traders have comeup with in order to find companies that demonstrate the characteristics that they areseeking. Value investors have different criteria they are searching for than have thegrowth and momentum investors. It is important to note that as the market changes,the types of criteria that you, the investor, will be screening for is going to change aswell. Nothing ever stays the same in the stock market and your stock screeningshould continue to evolve with what is currently working in the market. The mostimportant quality of a great investor is to be able to discern what is working in thecurrent market environment and find trades that profit from that market insight.Here are lists of different screens for value, growth, and momentum investors.The value screen searches for stocks that meet these parameters:1. Stocks whose P/E ratios are among the lowest 40% of all firms.2. A market price to book value calculation could be built into the screen.3. Minimum compound annual growth rate for sales and earnings could bespecified.4. A minimum dividend payout ratio or dividend yield could be specified.5. A minimum return on total assets or owners’ equity could be required to reflect the profitability of the firm.The growth screen searches for stocks that meet these parameters:1. Current quarterly earnings are exploding.2. Annual earnings growth rate is greater than the overall market’s earningsgrowth rate.3. Close to or making new highs.4. Has a smaller number of shares outstanding.5. Price is greater than $30 per share.
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The momentum screen searches for stocks that meet these parameters:1. Stocks that are in the strongest industry groups.2. Stocks that have recently made new highs and pulled back off those highs.3. Stocks that have given a technical signal that they are ready to resume theirupward trend (e.g., stochastic positive breakout).This is by no means an exhaustive listing of potential screens; however, it shouldgive you a good idea on how you may want to create your own screens and adjustthem to suit your own personal trading style.Screening Sites: Here’s a list of sites that offer screening tools.• Morningstar.com: (screen.morningstar.com/StockSelector.html)• Wall Street Research: (www.wsrn.com/home/dataset/search.html)• Zacks: (my.zacks.com/index.php3)• Silicon Investor: (www.siliconinvestor.com/stockscreen/simplescreen.gsp)• Quicken Stock Screen: (www.quicken.com/investments/stocks/search)• ClearStation Technical Events: (www.clearstation.com/cgi-bin/events?Cmd=techev)• Hoover’s Advanced Stock Screener: (www.hoovers.com/search/forms/stockscreener/0,2221,71,00.html)
SELLING SIGNALSOne of the most difficult disciplines that traders and investors must incorporate intotheir trading routine is taking profits. Until a position has been exited, any profitsare only paper profits and are at risk to be taken away by the market at any moment.How do you know when to get into another stock? How do you know when to letyour profits run? When do you sell? I always analyze a stock’s risk-to-reward relationship when answering these questions for myself. When I go long a stock, the anticipation is that the potential upside is substantially greater than the potentialdownside. However, once I am in that position, if that favorable risk-to-reward relationship changes, then I begin looking to exit the position. Theoretically, this is aneasy thing to say; however, in reality it is a discipline that needs to be cultivated.There are different warning signs that a stock will give signaling to the investorthat a change in the risk-to-reward relationship has occurred. Again, I like to keepmy analysis as simple as possible, and there are three primary events that will trigger me to sell or exit a long position. First, if there is something that has negativelyimpacted the fundamentals of the company then I will sell it, no questions asked.This could include a multitude of factors such as, a change in management, a lessoptimistic view of future performance than originally expected by the company, orproducts that have the possibility of becoming obsolete.The second event that will cause me to exit a long position is if the stock breaksthe support of where I originally entered. Remember, I am trying to get into the
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stock when its primary uptrend has resumed. If the stock breaks down at that entrypoint, then there is a high probability that the up trend is not intact. Lastly, I will usethe stochastics indicator to help exit a trade when profits have already been accrued.Just as stochastics can help pinpoint when to enter a stock, it can also help the traderto exit a position. When the stochastic indicates that there is a high probability thatthe stock in an upward trend is going to reverse direction, I will go ahead and takemy profits, because the risk-to-reward relationship has changed from when I originally entered the position.Figure 12.16 summarizes the buy and sell indicators.
TRADING SOFTWAREThere are a multitude of software programs available that make technical analysis, fundamental analysis, and all of the searches and screens discussed above extremely simple to complete. In many cases, all you will need to do is click your mouse, and bingo,your reports are generated in a matter of seconds. Every trader and investor has theirown opinions about software for their own personal reasons; therefore, it is really notpossible to claim that one program is greater than another. However, I will review afew of the primary software packages that I use to perform the above functions.Omega Research offers some of the finest software products on the market. I canpersonally recommend TradeStation, OptionStation, and SuperCharts. TradeStationis one of the most advanced charting programs on the market today. It literallytransforms your computer into an intelligent trading assistant that scans the marketfor you, instantly alerting you to profitable buy/sell opportunities based on theguidelines of your trading system. It has all the bells and whistles to help you makethe most of your time and money.OptionStation is a software program designed to help options traders make educated trade decisions. After Omega Research’s initial development, the companyasked me to review it to make sure that everything that I needed as an options traderBuy Signals
Sell Signals
• New highs• New lows• Trend line support• Trend line resistance• Divergence in technicals• Divergence in technicals• Volume spikes• Support level broken• OBV (on-balance volume) turns positive • OBV trends negative• Higher highs, higher lows in trend line• Lower highs, lower lows in trend line• Gaps up on heavy volume• “Gap down” opening• Closes at high of day• Closing at the lows of the day• Option volume increases (open interest) • Option volume increases (open interest)• Sentiment indicators flash very• Sentiment indicators flash verystrong pessimismstrong confidenceFigure 12.16
Buy and Sell Indicators
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was accessible (which I did with gusto). It enables you to manage and analyze riskand reward potentials for your market positions, works with real-time and/or endof-day data, delayed quotes, and manual input. All the important options strategiesare available as well as such key analysis criteria as implied volatility, risk curves,and the ability to evaluate option prices to determine fair value.SuperCharts Real-Time is an excellent charting program that works with OptionStation to enhance your ability to watch the markets that you are interested in and thencarry that information right into OptionStation. As a comprehensive technical analysissoftware, it has real-time capabilities built into all of its analysis and charting features.You can use the live quote window to get quick and easy access to up-to-date information. It keeps track of trading volumes and fundamental data, or takes advantage of 80technical indicators, 15 drawing tools, real-time alerts on trend lines and prices, automatic candlestick patterning, and real-time news updates. Both SuperCharts andTradeStation make it easy to know your P&L on a tick-by-tick basis so that you can accurately make adjustments, maximize profits, and minimize losses. Go to www.omegaresearch.com for more information on on these excellent software programs.Another excellent tool is Telescan Investor’s Platform, otherwise known as TIP.This system offers a wealth of statistical and textual information on more than300,000 securities, market indexes, currencies, and commodities. The Telescandatabase contains online quotes delayed by 20 minutes, historical price and volumedata dating back to 1973, more than 80 technical and fundamental indicators thatcan be charted, insider trading information, and news from Reuters and PRNewswire. The most powerful tool of the TIP software is its stock searching/screening capabilities. This program offers over 200 fundamental and technical indicatorsfor defining a search request that enables investors to customize their searches andapply them to their own trading methods. For more information on the products offered by Telescan, please visit the web site: www.telescan.com.There is also software that can be downloaded off the Internet for free that iscalled BigEasyInvestor. This software package has many of the same features asTelescan and has extremely powerful searching/screening capabilities as well. Anytype of technical criteria can be typed in and the software will search the entire universe of stocks and list the securities that meet your request. For more informationon this software visit the web site: www.bigeasyinvestor.com.Investor’s Business Daily has an excellent online program called Daily GraphsOnline. This program is an interactive, financial information service that offersgraphs for equities traded on the NYSE, Nasdaq, and AMEX. The service also provides technical and fundamental data for over 11,000 companies as well as individual databases on mutual funds, bonds, economic variables, industries, sectors, andmarket indicators that are tracked by their proprietary database. Additionally, thereare weekly reports that are generated based on William J. O’Neil’s investment philosophy and his proprietary performance criteria. Please visit www.dailygraphs.comfor more information on this service.AIQ (Artificial Intelligence Quotient) has an options program, Option Expert,that generates real-time quotes, ranks the options according to volatility, and offers
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strategies to trade based on current premiums and time remaining before expirationdate. It’s fast and easy to use, and has another, separate program for stocks (TradingExpert Pro), too. You pay a low price for both programs (or you can purchase themseparately), then pay a monthly charge for the data feed. For more information, goto www.aiq.systems.com.Some software programs have very steep learning curves that discourage manya trader. The Omega program can be a little tough at first, but it’s what I use. People who do utilize it could not imagine trading without it. Many programs havetheir own proprietary indicators and signals. This is an area I feel chat rooms canreally help. Pose the question to a virtual room of investors, and you’ll get plentyof feedback. Look for the ones mentioned most to get an idea of what works forthe average trader.
CONCLUSIONThis chapter pulled together many of the concepts you’ve learned, and showed youhow to utilize them to make money in the stock market. Like any market, the stockmarket is firmly rooted in the principles of supply and demand. If you keep this inmind, it will help you in assessing market conditions.If you see greed forming as fear is being erased, you can:• Buy the stock.• Buy a call option.• Buy a bull call spread.If you see fear forming as greed is being erased, you can:• Sell your stock and take a profit.• Sell the stock short.• Buy a put option or bear put spread.If the market is trendless, and you determine that the volatility levels havedropped, you can buy a straddle using LEAPS options and go on vacation untilthings heat back up. If you determine volatility is high, check the options tables andlook for pricing discrepancies, which could offer calendar spread opportunities.Like I said before, try to get good at one trading strategy. Look for the breakoutor the range-bound chart pattern. Study a sector and look for possible situations toutilize your trade specialty. This is somewhat like considering a new car; you nevernotice Dodge Vipers until you consider buying one. Then, suddenly, you begin seeing them all over town. The same holds true with bull call spreads, or straddles.Look for that formation that has been profitable for you in the past. You’ll be surprised how often they occur and you’ll be ast