They are the "footprints of trader psychology" left on a chart—classic patterns that can signal major turning points in the market. But just seeing them isn't enough. This episode is a deep dive into two of the most reliable reversal patterns and answers the question:

How do I use double tops and double bottoms in options strategies?

We provide a complete playbook for identifying and trading these powerful formations. Learn what a Double Top (bearish) and a Double Bottom (bullish) are, the psychology that drives them, and the non-negotiable confirmation signals—like a neckline break on strong volume—that you must wait for. We then break down multiple ways to play the move with options, comparing the high-risk/high-reward approach of buying puts or calls with the more controlled, defined-risk approach of using Bear Put Spreads and Bull Call Spreads.

This is your guide to turning chart patterns into a disciplined, high-probability trading process. Is your next big trade hiding in a simple "M" or "W" on the chart? Subscribe to learn how to spot it and trade it smartly.

Key Takeaways

• They Are Psychological Patterns, Not Magic: A Double Top ("M" shape) signals that buying pressure has failed twice at a key resistance level, indicating a potential bearish reversal. A Double Bottom ("W" shape) signals that selling pressure has failed twice at a key support level, suggesting a potential bullish reversal. They work because they reflect a clear shift in market psychology.
• Confirmation is Non-Negotiable: Just seeing a pattern is not a valid trade signal. You must wait for confirmation, which includes: a decisive price close across the neckline, a spike in volume on the break, and a clear prior trend for the pattern to reverse.
• Choose the Right Options Strategy for Your Risk Tolerance: You have multiple ways to trade these patterns. Buying puts/calls is a simple, direct bet but carries high risk from time decay (theta). Using spreads (e.g., a Bear Put Spread or a Bull Call Spread) defines your risk, lowers your cost, and is a more controlled, balanced approach for most traders.
• Credit Spreads Offer Another Way to Win: Instead of betting on the direction of the move, you can use credit spreads to bet on where the stock won't go. After a Double Top breaks down, you could sell a Bear Call Spreadabove the market, profiting from time decay as long as the stock doesn't rally back up.
• Risk Management is More Important Than the Pattern Itself: The pattern provides a potential edge, but discipline is what ensures survival. Always use small position sizes, have a predefined exit plan if the pattern fails (e.g., a close back across the neckline), and be highly selective, only trading the clearest, most confirmed setups.

"It's not voodoo at all. It's actually behavioral economics playing out. It's human psychology, pure and simple."

Timestamped Summary

• (01:24) What Are Double Tops and Double Bottoms?: A clear, visual explanation of the "M" (bearish) and "W" (bullish) patterns and what they signal about the battle between buyers and sellers.
• (03:52) The Non-Negotiable Confirmation Checklist: Learn the strict criteria you must see before trading—including trend context, volume spikes, and a decisive neckline break—to avoid getting caught in a fakeout.
• (05:03) Options Strategies for a Double Top (Bearish): A breakdown of three distinct ways to trade a bearish reversal, comparing the pros and cons of buying puts, using a Bear Put Spread, and selling a Bear Call Spread.
• (09:17) Options Strategies for a Double Bottom (Bullish): A look at the mirror-image strategies for a bullish rev

Support the show