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Defending Against Whipsaws

Options Jive

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Recently we’ve seen more and more underlying prices exhibit whipsaw. Whipsaw occurs when the price moves sharply in one direction and then reverses severely in the opposite direction. This is common around big announcement days as prices move more aggressively.

In this piece we explore the probability of touch as a proxy for whipsaw price movements and discuss what traders can do to protect against these unforeseen movements.

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