Bollinger Bands
Volatility & Bandsdraws on the price
Two standard deviations either side of the 20-day average. Price at the lower band is stretched to the downside — where put premium is often worth a look.
On this chart: 20-period SMA, ±2 standard deviations.
What it measures
Bollinger Bands measure how far price has strayed from its 20-day average, in units of its own recent volatility. The bands breathe: quiet weeks pull them tight, volatile ones push them wide. That self-scaling is the point — "two standard deviations" means the same thing on a sleepy utility and a runaway growth name.
How to read it
Price at the lower band is statistically stretched downward for this stock's current volatility; the upper band is the mirror. Band width itself is a reading — see BandWidth and the TTM Squeeze for that dimension. "Walking the band" (closing along the upper band day after day) is what a strong trend looks like, not a reversal setup.
Using it on the wheel
The entry-signal engine reads Bollinger position as one of its factors: a close near the lower band on a quality name describes the stretched-pullback condition where cash-secured put premium runs rich. For covered calls, the upper band frames how far above spot the current volatility regime considers stretched.
Like everything in this guide, these are descriptions of conditions and reference levels — context for your own decisions, not instructions to trade.