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Channels

Capturing profits when a stock is channeling

Stocks have an inherent ability to form patterns. One of these patterns is that a lot of stocks will bounce between two imaginary lines that will trap the stock and when channels are paired with another technical indicator such as Bollinger Bands. Channels can be used by just buying and selling stock, but like reversals they become very profitable while using options. Option strategies such as iron condors profit off of a stocks inability to break out of a channel. Another option strategy is using strangles to slightly hedge your risk in one direction and to protect you and profit if a stock decides to breakout of its channel.