Why Tops and Bottoms Are the Optimal Options Setup
At a potential reversal, the option premium is typically at a minimum (before the move is confirmed, implied volatility is often low). The potential move — if the reversal occurs — is from the extremity of one price range to the next. The risk is the premium paid, which is small. The reward is the full projected move.
Step One: The Time Cycle Window Must Come First
Every Gann-informed options trade begins with time, not price. The analyst identifies a major time cycle window — a date range during which a significant turn is projected. This window is the fundamental prerequisite.
Step Two: The Price Level Must Confirm
Within the time cycle window, the analyst identifies the Gann geometric price level where a reversal is most likely — using the Square of Nine or the Gann angle structure. When price approaches this level within the time window, the analyst is at the setup zone.
Step Three: Price Action Confirms the Direction
The final and most important step is waiting for price action to confirm the reversal direction. A reversal candle at the Gann level within the time window is the entry signal. Only at this point does the option position open.
A cheap out-of-the-money option purchased at a Gann-identified top or bottom — before the pattern forms, within the time window, with the price level geometrically confirmed — is one of the most powerful trade constructions available in any market.