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CPR Setup for Option TradingThe Central Pivot Range (CPR) is a valuable tool for option traders, offering key insights into price levels and market sentiment. It helps identify potential entry and exit points, allowing traders to plan their trades with greater precision. How CPR Works in Option TradingCPR consists of three levels:Central Pivot Point (CPP): The midpoint of the range.
Top Central Pivot (TC): Acts as resistance in a bullish market. Bottom Central Pivot (BC): Serves as support in a bearish market. For option traders, CPR levels provide a framework to predict price movements and volatility trends, essential for both buying and selling options.
Using CPR in Option TradingTrend Analysis:Narrow CPR: Signals potential high volatility, ideal for option buying. Wide CPR: Suggests a low volatility range, suitable for selling strategies like credit spreads. Entry and Exit Points:Buy calls if the price breaks above the TC with volume confirmation.
Buy puts if the price breaks below the BC with a strong downward trend. Support and Resistance:Use the TC and BC to set stop-loss or profit targets based on market movement. Combine with Other Indicators:Pair CPR with RSI or Bollinger Bands to confirm trends and avoid false signals.
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