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Chapter 7. Option Strategies in Down Markets > Evaluating Your Stock Positions

Evaluating Your Stock Positions

Whenever a stock's price falls, you have to ask whether the decline is part of a short-term technical correction that will reverse in the future. If so, then the buying opportunities should not be ignored. However, there is also the chance that the stock's volatility and technical safety have changed. Why?

Changes in volatility can be caused by a number of company-specific reasons. Marketwide volatility is better understood because investors tend, as a whole, to think of the market singularly. This can be a deceptive point of view, because a long-term quality investment may demonstrate short-term volatility, so it may appear higher risk than you thought it was. A temporary problem can be ignored or exploited with the well-timed use of options.


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