True Range

The following charts illustrate the unbelievable trading range of stocks these days - using the Dow as an example. The true range is the maximum of the following:

• The current High less the current Low.
• The absolute value of the current High less the previous Close.
• The absolute value of the current Low less the previous Close.

It basically just accounts for gaps (both up and down) between yesterday's close and today's open. The y-axis represents points that the Dow moved on a daily basis. So today's date for example, would have a single plot at 782.















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Expiration day is tomorrow. I am going to start looking at some Nov/Dec call and put spreads with at least a 3:1 risk/reward ratio. I'm currently under the belief that Monday was not THE bounce everyone was expecting and I still like the odds of short-term upside (weeks, not days). But I also think that too much strength (i.e. SPY 110) will be just that - a bounce.