Double and Triple Bottoms

The double bottom is the opposite of a double top while the triple bottom is the opposite of a triple top. A double bottom is a scenario where the price of a security reaches a low twice before rising up. The price of the security is unable to make a lower low than the previous one. Also, the price makes a break above the significant peak. This is interpreted as a sign of strength.

A triple bottom is a scenario where the price of a security reaches a low thrice before rising up. Each low is maybe at or higher than the previous low. The price of the security is unable to make a lower low. It also eventually breaks above the most recent significant peak and moves upwards from then.

What should option traders do when they encounter a double or triple bottom?

When a double or triple bottom occurs and the downtrend is broken with the price rising above the most recent significant peak, a trader can enter into a bullish position at the point when the price breaks above the most recent significant peak or at the point when the trendline is broken.

Entry & Exit For Options Traders

Time is of the essence in the buying of options. So an options trader would have to take into account time value considerations. The idea is to have a significant price move during the life of the option that more than makes up for loss in time value. Hence, you would want to buy an option at or around a breakout. Please read more about Theta and how to mitigate the effects of time value erosion.

Read:
Head and shoulders
Double Triple Tops