Change of Polarity of Verticals That Worked | Technically Speaking: Trading Stocks & Options

[Music] [Music] good afternoon everyone welcome to our webcast on technically speaking trading stocks and options i'm connie hill i'm happy you would join me here today how many of you have ever been in a situation where you've made a trade and you're just like crud this did not work out how i thought it was going to and you just wish you had a way that you could fix it okay now i'm not going to claim to have any magic secrets that is going to fix any trade gone wrong in your scenario but i want to walk you through the process that we started last week when we were trying to remedy a trade and we're going to follow up with it and see how well the trade did for us we might have some surprises there well welcome we've got so many friendlies here we've got vijay christa uh robert mary osborne kaysun wayne ernesto oda ganache welcome to each of you and i'm happy to say we have our own coach barb armstrong here with us in the chat she's going to help me out answering different questions maybe i can't get to or they're a little bit off topic and i love it when barb's here she's so qualified to help out and willing to do so so thank you barb for being here today let's do this let's get going let's lay out the agenda because i have a lot of ground that i really would like to make sure that i can cover with you today over here on my screen you can see my little blue bird of happiness my little twitter handle i'm at chill underscore tda and you can follow me there i'll post educational content throughout the day barb armstrong does a great deal of tweeting as well her handle is a armstrong underscore tda and i know she'd love to have you follow her as well didn't quite catch that we'll have barb type it in and so you can get her handle down as well all right welcome also to el diego odomasima richard guadrill here as well well what we talk about today is for educational and informational purposes only not investment advice or recommendation of any security strategy or account type options are not suitable for all investors as the special risks inherent to options trading may expose investors potentially rapid and substantial losses short puts can be assigned at any time up into expiration regardless of the in the money amount one thing we always like to let you be notified of is that the paper money account doesn't treat short options that are deep in the money very rarely does it exercise them but we want you to know that in real life in your live trading account it very much could occur so we try to warn you that that is one difference with paper money in order to demonstrate the platform the function or demonstrate the functionality of the platform we need to use actual symbols however td ameritrade does not give recommendations or determine suitability of any security or strategy for individual traders so any investment you make in your self-directed account will be solely your responsibility that's performance of any security or strategy does not guarantee future results or success all right our agenda is going to be as follows what we're going to follow up on some trades and that's where my my little lead in today was about fixing a trade not can't always fix a trade per se but we're going to talk about what happened last week that we attempted to do we're going to look for and find some short term bullish flags and practice our execution as far as entries exits targets stops using very specifically that flag pattern we'll also throw in there how to manage the trade some takes techniques and we'll of course we're going to do everything on paper money so let's jump over to our thinkorswim paper money account first of all we're going to follow up on a little stock called murphy now let me show you what the position looks like and uh we are sitting here with a hundred shares of stock we got into the position october 7th so that was two weeks ago today and it was a fairly uh was going to be a fairly short term position for at least that was the intent now i don't know what happened with my stop losses and my targets because usually when we identify a nice flat flag pole and a little flag pullback and a breakout typically we're going to treat that as a short-term trade we don't have any stops or targets in there for us and we need them so we're going to go ahead add that as part of our trade management so let me just kind of zoom in here this is the seventh this is when we placed this trade and sure enough it had broken out of this consolidating flag pattern right we have this flagpole which is just a sharp vertical movement up it's a pop pop pop i usually start with the first bullish candle in an uptrend and some of you might say well connie why don't you start down here there were some green candles here and there were but they weren't really in an uptrend yet it wasn't until the stock broke through this resistance at 22.89 that in my mind the flagpole really started okay so that's uh why we started where we did and then we drew the length of the flagpole using that trendline drawing icon typically i'll do that for you and we duplicated it and we pasted it and we stuck it at where the breakout would be from the flag and then this gives us an idea of where a potential target could go so it ends at 32 28 is quite a long flagpole so let's put a target in there maybe a little bit short let's go to 32.25 let's just pull three cents off of that target it's an aggressive target the way that it is okay so we're going to put in there that and then where should our stop loss go well initially on this breakout on the day that we get in if the price of the stock turns around and pulls back inside this consolidating flag pattern then we know all right the pattern's broken it's not following through like we thought that it would and therefore we're going to get ourselves out of the trade so would that make sense to keep that as our stop loss right now does that would that make sense to say well let's let it i know it's gone journeying up here let it come clear back here to 25 when it's sitting at 28 right now well i'm going to argue with you that maybe that is not the best that is a lot of risk to assume after the stock's already actually been up for us made a little bit of money for us we want to be able to manage this trade and capture as many of the gains as we possibly can so i went ahead and i drew in a horizontal support here that it seems to be honoring right now really has not taken off here it still could uh possibly do that for us we could still use this as our target but as far as the stop goes let's just go maybe two percent below 28.05

i pull up our calculator here and let's plop in the 2805 multiply that by 0.98 because that gets us two percent two percent below that horizontal support that gives us a stop at 27 48. so i'm going to put 2748 is the stop and the target i believe up here was going to be 3225 if you still felt like that was too aggressive of a target for you you could adjust it you don't have to use still that flagpole because the pattern is broken somewhat but i still think it could be reasonable to think hey still could go the length of the flagpole it's already gone part of the way up so let's put our target here at 30 to 25. where did that 3225 come from if i put my mouse right on here let's see if it'll balloon out for me and it thinks i want to adjust it let's just put our mouse here there we go 3228 is where it shows that it was ending okay let's do it back to our monitor tab we go we didn't put in the stop initially that's okay we can work with it uh we're gonna do our right mouse click uh we can see we're up i mean it's not a we're not up a ton we're up one point nine percent which is about fifty three dollars at this point but still we're sitting in a profitable position so let's go ahead let's create our closing order as an ocl bracket order one cancels other that's what that ocl stands for if it hits our target first that we're going to put at 32.25 we're happy campers right it'll go out and cancel our stop loss if on the other hand it hits our stop loss at 27.48 first

or goes lower than that it's going to trigger a market order gets us out of the next available price and it'll go cancel our target order we don't want it sitting out there if we don't own the stock anymore doesn't make sense let's make both of these good till and we're going to follow up on them see how well they do just review it notice if you have any commissions or fees or any mistakes that's the great place to catch it we're going to go ahead and send this on now that should be sitting in our working orders to help execute for us uh just checking our comments here it looks like barb's taking care of you thank you so much barb to our next trade that we're following up on is target and i'm going to show you what we have in here and then i'm going to give you an explanation sitting in target we have two bullish traits we have a short 2 30 put still has 29 days to go we have a long 250 call it started out we paid 269 for it it is now worth nine dollars and 12 cents pretty decent gain right on our puts we sold it initially for 10.20 it is down to about 59 uh meaning we have been able to capture a wide majority of that gain in fact this is showing us we've been able to capture 84 percent of that gain now this is not how these trades started out was it this is where we kind of get into our our discussion here these initially were two bearish traits all right we had a short call vertical and a long put vertical and we were gonna track and see which one of those did the best well they kind of fell apart on us all right i'll show you this the trade here in just a moment but if you missed our discussion last week when we talked about it's called a change of polarity it's changing the trade that you initially put in you have to be convinced you're wrong but if you missed that i'm going to put a little link in our upper right hand corner of your screen so when you go back and review this you can take a look at it and kind of see the rationale and all the discussion that was put into that at that time now let's go take a look at target here i'll pop it in here got a little watch list for this but i'll just type this in so on target let's give us a little perspective the stock had been downward trending some of the retailers were really struggling so it had been downward trending we got in on this day when it was breaking down on us okay that was our point of entry on those two bearish trades a long put vertical a short call vertical well they didn't go negative on us it went negative for a little bit man it changed its tune it found some support here and even here it went up higher than our entry date and so we were looking in a situation where you know it doesn't look like it's bearish anymore we should not be in a bearish trade it has totally changed and if you're going to change your position up you've got to be convinced the stock trend has changed you can't change it because you're a little bit iffy you can't change it just because maybe it's going against you a little bit if if you're going to make a change and that was a severe change that we did you've got to be convinced the trend has changed and you're in the completely wrong trade now i went through and i'm not going to make you dig through the numbers with me i did this on my own but i went through and figured out what we paid for each option what we received from each option and when we closed it out how big of a loss we basically locked in and i want to compare that to where we are right now okay so without dragging you through all these numbers you're just going to have to take my word for it as i bring this up so the uh put initially sold for 16.20 and when we bought it back it we bought it back at 805 which gave us an 8.10 loss which uh we just have one

contract that translates to 810 right on the uh call that we sold uh we we uh basically sold it for five well we we bought it for 515 we went and bought it back at a loss we had to pay 855 for it which was a 3.00 loss you add those two together and we basically locked in our loss at 11.50 with the idea that we were expecting the stock to continue to go bullish and knowing we had a lot of time for that to occur because these don't expire for 29 days now i want to get you back here to the chart and let's really zoom in on what it's doing today when we flipped that trade it was the 14th let's see which day was the 14th right here where my where my icon is okay since that time did it keep running up yeah it did didn't it kept running up what's it doing right now it's making a little flag on us right if somebody wanted to enter into a new position here they might look at this as land has changed now it's bullish and going up we have a bullish flagpole and the stock is consolidating creating that little flag formation so some people might be looking at this for a brand new entry if you wanted to experiment with it you could but i want you to just have this picture of where the stock is right now does it look like it's going to be continuing to push up well we really don't know right because it's consolidating this consolidation ideal on a flag is two to five days what if it goes 10 days okay what what would that mean for our positions well let's go back and look on our activity and positions here this is the long call we bought it at 269 remember it was part of our hedge leg and that bear call spread it's now worth 9 17. we are up on it 241 okay it's a nice little pretty amount isn't it uh it is the 250 strike price and the price of the stock right now is at 253.

so we're not really deep in the money yet okay we're sitting kind of at the money where time decay can happen quickly all right so the thought there might be well gee we've been able to make up from that deficit of 1150 we've been able to make up 658 here that's pretty good chunk isn't it uh our short put if you were to go sideways for a while would that hurt the trade probably not not really right time decay works in your favor when you've got a short option uh it could even come down a little bit if we say well it just needs to stay above 230 well 230 is clear down here so some of you might say i don't have anything to worry about right it's not going to go there well it could go there but it just seems like it's such a far away away and so i could see some of you justifying it saying i don't need to do anything because it's not likely to close below there but this is what i want you to think about it worth risking our ten dollars and 20 cents on that short put to gain a buck 58 to gain 15 percent more right we've already brought in almost 85 percent does it make sense to do that you've got to weigh that all right i i have to tell you i've been in trades before when i thought there is no way in the world that stock is going to come down there and basically make this from a high probability trade of banking those profits to a low probability but i'll tell you if you do that once or twice or even three times if you're somebody that doesn't learn quickly right and that happens to you you start to start feeling like you know i'm going to play my winners to my advantage i'm going to bank these savings or this gain on the trade and not risk basically a buck 58 to or 10 20 just to make a buck 50 more okay you may have a different opinion about that just walking you through some logic for the purposes of our class we're going to go we're going to go buy that back and when in reality we've got 661 we've got 863 so that's what about fifteen hundred and thirty or fifteen hundred and twenty dollars does fifteen twenty i'm ballparking here okay does 1520 offset our loss of 11.50 yeah it does it actually brings us in again on a trade that we were totally bearish on in the beginning but now we've had some time to have a work to our advantage now i'm just going to look through your comments here because i'm curious wayne says take the money and run baby yeah um watson wasim says right but if we want to get assigned and sell a holding we have then it's only going to be on friday correct we're actually in this scenario of the only one that we could be exercised on is the short put in order for that to be exercised on us and have the shares put to us the price of the stock would have to be 230 or lower at or around options expiration day for certain if it's below 2 30 on say it's 229.99 i actually yeah say it's 229.99 one penny below it will be executed on you and there have been circumstances when it is executed even when it's not in the financial interest of the other side of the trade okay that's why we say it can happen and it has happened or bad news has come in okay so in that scenario uh wasim wassum wasim i hope i'm saying your name right uh if do we want to be assigned to stock sure we could we could do that especially if you're like yeah i wouldn't mind owning it or you could take walk in the i'm going to say the easy money and it's only easy money because it's already made it okay and that's what we're going to do for our class we're going to say we took a bearish trade that didn't work out we changed polarity on it and this does not happen all the time we actually ended up making a gain on it we don't want to turn that trade from now we'll lose a winning trade back into a losing trade that's why we're going to secure those profits we have so we are going to buy back this november put i know we've got time i know it's far away from the strike price but we we're going to take it out of play all right we're going to go we're going to buy it back it looks like a buck 59 you could see if the market maker will work with us payback 57 and uh we're gonna uh we should get executed on this right now if you were putting in a value you didn't think would execute right away make this a good till canceled all right but we're going to do a day order i'm expecting to get filled immediately and shazam were filled immediately now on the long call all right this is the one that initially we bought way out of the money it was our hedge lag on that bear call and so right now we are sitting we paid 269 for it it's actually been dropped a little bit as we've been talking here in terms of the value maybe it's close it's still pretty close saying you know it's worth 663. does that help make up the deficit of the 1150 we banked last week absolutely it does okay uh what would happen if the stock went sideways here this number this 932 will dwindle right then it's only going to be worth 9 10. that time decay starts kicking in and just gradually gradually it starts to eat away at the value of that long call so in this case same thing we are going to do that oh let's see okay barbara's helping me out here you barb was saying if it was a covered talking about a covered call okay so that's thank you barbara i appreciate you setting me straight and understanding what wasim is trying to communicate here to me uh because this call is uh we're long the call it's not a short call it's not a covered call therefore there would be no exercise at all unless you and h initiated it if you did prefer to want to buy the stock at the strike price of 250 you could do it if you wanted to exercise it no problem doing that however the biggest gain on the trade is typically going to be by selling the option not by exercising your right but you could if you really wanted ownership of the stock let's go ahead we're going to lock our gains in here we're going to sell this option it's saying it's worth about 9.20 right

now midpoint price is 9.35 we'll see if we can get a little bit more out of it we don't want to be too greedy but we are going to see if we can't get a little bit more out of the market maker paper money is nice sometimes the real market isn't quite as nice as paper money now let me ask and i'm going to look in and see if we have any questions any questions on what we did with this trait those of you that have been following along might remember what we did last week but i tried to kind of lay that situation out for you um let me just look here for a moment oh what's it was you might see your call up there or your your comment up there earlier that if you were going to use a cover to call cell gotcha all right so i think we're okay now um mary says what if the trade has more than 29 days to go and has 80 returns already that's where you have to weigh it mary you have to wait is it worth keeping my money tied up for 29 more days like say on the short put uh and possibly risking um a lot that 10 and 20 cents i think it was to gain i think was a buck 50 something in that range you have to weigh that decision yourself and decide if to you it's worth it or not sometimes some people want to un unravel that that holding right on their what their money's tied up in and basically say i've made most of it let's move on to a new trade or maybe the possibility is to make even more okay so you'll get to make that decision all right perfect for a futures i'm glad that is helpful to you to walk through that and have some discussion on how we could treat it perfect all right we want to move to our next topic and that is looking at some flats let's review what a flag is because there may be some of you that aren't as familiar with it and i'm going to show you a couple flags and we're going to do some short-term swing trades with it when you have a flag formation most of the time it's intended to to give you a short-term forecast now sometimes it maybe it doesn't take five days maybe it takes 15 days all right but the intent is that it's just a short swing of momentum now i'm going to come over here to the charts i'm going to bring up here uh let's use this one splunk on splunk i want to show you the overall trend here this stock has been up higher in the past let's go out here to a year i want you to see uh in the last year it's been up as high as 220 222 all right quite a ways away from where it is now it did bottom out here about 110 right after this pullback it's just been gradually making higher highs and higher lows but they have been quite gradual until recently now i had this little bit of a pullback and it came back to the support area that it was seen around 138 bottomed out and started to rally up now a flat pull is where we see real sharp movement either up or down in a bullish flag we're talking up all right we're seeing almost a straight vertical move up now there's two ways somebody could look at this somebody could look at this and say well um maybe the flagpole really started clear down here right they could say it started here i don't have a little problem with that in that during that period of time for most of that it really was more bearish than bullish okay um but maybe once the stock maybe gets over this consolidation area and you say okay now i have an uptrend i have a higher high then some people might say i'm going to take advantage of that so i could lean either way with having a really long flagpole starting down here at 140 or a shorter flagpole uh kind of starting here after this little sideways action and then breaking up so we have this swift vertical move up and then we have consolidation now sometimes the consolidation looks like this it looks like uh the price is pulling back contrary to the overall direction of that flagpole right two to five days is ideal sometimes we don't get ideal a lot of times we don't right maybe it's eight days maybe it's ten days key point is we do not wanna see it retrace more than three quarters of the way down the flagpole if it retraces more than that that's when we say okay it's really not a flag anymore it is becoming a retracement at the initial price and therefore the flag pattern is off we're not going to play it we're not going to trade it because it's broken now in this case the flag did this the flag was consolidating like it was in a stiff breeze right you hang your flag out the wind comes along and man it just kind of shoots straight out and that's kind of the imagery of the type of flag that we see on splunk here well some people might not have been so sure that was a breakout yesterday but it looks like we're seeing some follow-through of that today all right so let's go ahead let's add our flag pole and see what its destination could be now i have to tell you this is a very long flagpole all right i'm going to take the shorter of these two i'm going to take the more conservative one we're going to say duplicate i'm going to grab it and i am going to stick it right where my eye sees the breakout of the flag all right i put it there and then the distance up here if i put my mouse on it looks like the target area is about 185 and some change okay now i'm going to write i'm going to write that number down 185 will leave off the change right some of you might go for the full amount some of you might pull a little bit back off of it you might not even not even feel comfortable going to 185 but when we see the history and we see what it did before earlier in the year it was up to 220 now that it's got some momentum and some wills yeah possibly could go back to that level we'll have to wait and see if it really does but the the flag poll can give us a target for something shorter term now shorter term doesn't mean it's going to happen in the next five days it may take longer i mean even though this flagpole here is five candles it doesn't mean it's only going to take five candles to get up but we do expect it to move quickly if this momentum holds all right what about a stop well again if the price of the stock dips down into the flag consolidation area whether it was flat or whether it was sloping down pattern is broken we're going to put a tie a tight stop loss in there and if we get stopped out we get stopped out but we are not interested in getting in and having a big retracement down the flagpole it's just not part of our plan it's not a profitable way to do it we've got to minimize our loss if indeed it doesn't work out for us so looking here looks like this this value here is about 160 256 which could be kind of the below the flag here it look is looking like so what if we said maybe one percent below okay what if we said 162 56 times .99 not given a very much leeway is about 160 93. you know you can put your mouse in there see if it looks reasonable to you if it seems like it's too tight change it do another calculation another calculation somebody might do is they'd say well in this flat area where was the lowest price and going a little bit below that lowest price if we did that the low price on this day where it goes the lowest is 168 70 or 161 78 and so somebody might say well let's put the stop at 161 and 25 cents less right that would be like 161 53. if i did my math right 160 153

so it would be even a little bit tighter than going that one percent below and you don't have to use either of these you can come up with your own way where you feel comfortable that says if this is what the price does the flag pattern is broken okay for our purposes right now let's use the more lenient stop loss at 160 293 we're going to come over here to the trade tab um we're going to do a right mouse click we're going to say buy custom with oco bracket now typically in this account we really don't want to spend more than fifteen thousand dollars in any trade if we bought a hundred shares of this stock at 169 we're going to be spending um more than that right we'd be spending almost 17 000. so let's figure out how many shares we could do we'll put in our fifteen thousand uh that represents oops that represents ten percent of our one hundred fifty dollar or one hundred fifty thousand dollar account we're working with in this class and if you didn't even feel comfortable at 10 you could go 5 you could pick whatever number that maybe doesn't exceed that 10 but we'll take 15 000 we're going to divide that by what the price of the stock so we're going to divide that by 169 point 29 that says all right instead maybe don't buy more than 88 shares okay if you did want to go less than that if you wanted to only do like five percent then you're going to be looking at what 44 shares for our case today we're going to go 88 shares i'm going to click on this little link so that it makes the two quantities equal we've got a first triggers oco that means this order has to fill and if it doesn't our oco order is not going to be any good we're expecting it to fill right now we're putting in a close to market price we said we'd use a target about 185 and we said we'll put our stop down here at 160.93 if it goes there or lower it's going to trigger a market order that says get me out at the next available price but we're not controlling that price we're going to make both of these good till cancelled this should get filled here today if you wanted it you know get it closer to the midpoint you could i'm just going to take whatever they're wanting for right now we're going to go ahead and hit confirm and send just review it no commissions on this trade and there we go so it bought our stock i forgot to stick it in our account i'll go back and do that later all right let's look at another one here this one is a stock that has been coming up frequently in my early morning movers scan that i run every morning most mornings i should say and i typically will post some of the results from that scan and really what it's looking for are stocks that are in an uptrend over the last month an uptrend over the last three months and looking for a stock that's up today trades at least 500 000 in volume if you want to make that higher certainly go higher and the minimum price has to be more than ten dollars that's kind of the criteria that goes into that search and so this next stock keeps coming up frequently uh it is a e hr and just because it comes up frequently does not mean that it's recommended okay but we're just going to use it for an example but i do want to point out some things see what a low price this stock was just in july you think about the 4th of july doesn't seem like it was that long ago but it was shortly after that when they had their earnings and look at this huge volume that piled in with whatever it said whatever they said that made everybody so excited and very bullish on them lots of buying activity they had another earnings announcement what happened they gapped up retraced a little bit basically filled that gap all right once it filled that gap then it's continuing to go up now i have to say this is an incredibly long flagpole incredibly like maybe the longest one i've seen in a long time type of flagpole starts down here the low price is 11.88 and it gets up here to 22.65 okay we're talking 100 movement just in the flagpole is that realistic it may not be because the price of the stock is lower through that period of time is growing exponentially we already saw it was a two dollar stock so of course it's growing exponentially but even this flagpole i don't want to paint the rosiest picture that you're going to find these all over the place and in this scenario we might want to be really cautious and have a really a target that is not looking at a 100 flagpole this is about 11 flagpole and if we add 11 to say where the price of the stock is where say maybe the flagpole would go it would go about twenty dollars that's looking at about a thirty one dollar target and if we if i stretch this down here so we can see it it's like that's a long ways away right yeah that is a really long ways away from where the price of the stock is now it would represent about a 50 move so let's do this i'm going to take our flagpole that's super idealistic don't plan on seeing them a lot okay but once in a while i'm going to duplicate it i'm going to grab it and i'm just going to put it to where it broke out today all right to me it looks like it is breaking out of that two-day consolidation two days is long enough all right if it's a one day uh you probably wouldn't be all that excited about it but two days is great now how high does that go does that let's see if it really goes to about 31 looks like i'm going to put my mouse here it's ballooning out at 30 and 25 cents what if you decided you're only going to use half a target or maybe take your shares maybe sell half of them at the halfway point and leave the order on to see if they go up a little bit more actually would be quite a bit more you could do that couldn't you you do not have to play everything all at once you don't have to say i'm going to take an entire position here you could say maybe i'll just do half of a position instead of maybe putting fifteen thousand dollars in the trade maybe i only want to put in twenty or seventy five hundred dollars or maybe i only want to put in five thousand dollars you certainly could do that and then see if the stock continues to go gee maybe you add to that position right maybe you spend five thousand dollars first and if it gives you a fresh new entry you're still liking it add another five thousand dollars into it and still not exceed what your risk tolerance is hopefully that makes sense to you and gives you some ideas of what you possibly could do all right uh so on this if the target is 30 25 and we're starting at 1974. so we're looking at about a 10.50

uh poll what if we just kind of went halfway all right let's say halfway would be what let me get those numbers up again halfway is going to be about 25 okay so on our first target here we're going to say it's 25 and then let's say on our second target and this may take a while to 30 25 what if we just go to 30 okay we'll we'll back off a little bit a quarter and we'll just say uh 30 equals the second target how's that work where should our stop loss be hopefully you know we've talked about it in the other examples we looked at if we think it's breaking down all right if we see it going back down here the pattern is broken we're going to make a quick exit on it because we're going to put in a tight stop loss with the idea that we're not writing it down the flagpole we're just not that's not going to do us any favors now if i put my mouse in this area to me it looks like you know if it got down to about that 1830 area it would definitely be closing back where the flagpole or the flag consolidation kind of the bottom edge of that okay so we'll be conservative let's go 1830 for our stop loss uh mike says how are you determining my profit targets is are we using the atr mike we're not using the atr we are using the flagpole distance all right what the expectation is is whatever this flagpole is after it consolidates creates that flag and breaks out again the expectation is that it could rise another flagpole length it's not guaranteed that it will many times it comes up sharp sometimes it's right on but that's what we're using for the target so no we're not using atr um kw has a question here could we do a long call with an oco bracket absolutely absolutely could um cash says uh do implied volatility go higher the further away from the money i guess like out of the money or in the money um actually a little bit more out of the money the volatility increases and creeps a little bit let me come over here i want to show you the implied volatility on this one 122 those are on the november options 117 all right uh and what i would like to do here is i wanted to do a vertical uh do something with the idea that we're looking for a big target but man that's a lot of implied volatility to just pay out of your pocket and so it might be nice to say well let's offset that uh possibility um with something that is basically lowers our risk our net debit but also the idea that we can use the advantage in a long vertical to do that kind of a trade as well now our first trade that we looked at here i'm just going to go back to it for a second that was splunk on splunk we just did the shares but your question is could we have done options you certainly could and its implied volatility isn't quite as high but the value of the stock is bigger and so some people might say you know it's an expensive option just by one option for 725 or 870 maybe i would do it in a vertical spread in addition to what you were saying kw if you could just do it with long calls edward says wouldn't you want to draw the poll projecting the target from the bottom of the low date that is another variation on this you certainly could let's go back to our aehm ah ae hr that's why i've got the wrong letter there some people will do that that's a variation on the flagpole and and how technicians may draw it differently if you felt more comfortable saying let's yeah let's go down to the low here yes that is a variation you could click and drag it you could put it there and then our target wouldn't be as high now it's at 28.88 instead of at 30. so uh in this scenario actually i kind of like that idea because of the length of the flagpole that it's so enormous yeah that might be a good idea so what was this 28 88 what if we just go 28.50 instead we're going to change our target to 28 50 for our long target and for our short target about midway here is going to be about 23 right so instead of having our first target at 25 we're going to put it at 23. all right let's go set this up in paper money and do it good questions you guys and good thoughts behind those questions if we were just doing the stock out right we could do that this is a lower price stock uh you can see if you wanted because the implied volatility is so high if you were going to do a spread trade you may want to do it as uh make sure you got enough open interest okay this is looking like it has quite a bit of open interest that gives you a little bit of um idea that you're not the only one trading these contracts okay i'm going to show you how to do this with the stock sometimes i cater to option traders and sometimes to stock traders but since we're running out of time i'm going to have to do it this way we're going to do a bike custom with the no seal bracket and what we might do here we we could take some time and do it all together as a blast i'll order but what we could do here is we said okay how many shares could we buy let's just go with 100 shares would be spent actually let's do 200 shares we would be spending in the neighborhood of 400 okay so we're going to do 200 shares here here's our get in price if we started our half our target we could go to 23 and our stop would be at 18 30. now you could do this with options and you could say based around the price of the stock and the way that you would do that is by clicking on this gear brings it to this little page here and then you could fill it out here and say base it on the price of the stock not on the price of the option let's make these good till cancelled and let's throw it into our class account trading stocks and options send it off notice no commissions on this because they're stock trades all right well i do need to let you know that yes coming up next is james boyd at the top of the are trading the trend thank you barb for doing that uh some additional comments and unfortunately i'm out of time and can't address any more comments but i do appreciate you having some ideas and having some questions how this might roll out differently so um just in summary we did some trade management we talked about short-term bullish flags talked about the entry point the stock price the target price how to handle that talked about trade management techniques as far as maybe not going for the full target and of course we did everything in our paper money account now i just need to remind you that what we've talked about today is for educational and informational purposes only not investment advice to buy sell or recommend any security strategy or account type and options are not suitable for all investors as a special risk inherent options trading may expose investors to potentially rapid and substantial losses this was helpful for you today go ahead and hit the like button we don't have a survey uh so you're off the hook there but if you hit the like button for me i would appreciate it hey everyone have a great afternoon go to james class you'll enjoy it thanks everyone bye [Music] [Music] you

2021-10-23 13:09

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