Considerations for Managing Trades & Short Verticals |Technically Speaking: Trading Stocks & Options
[Music] [Music] good afternoon everyone welcome to our webcast on technically speaking trading stocks and options we get to combine some of my favorite things which are technical analysis and what we see on the charts as well as looking at option trades and stock trades now how many of you find it easy to get into trades because you find your signals but you find it harder to manage your trades and to determine when the best point exit is that's a very common uh situation and and especially with newer traders or something that's new to you as far as the strategy goes so we're going to spend a little time on that today helping you identify maybe the management's uh style that you need to take with the trade but let me just say good afternoon here to vj osborne mike giles kingsley wayne mia edward bob skd welcome to all of you i'm glad that you're here today uh we probably are going to have barbara in here oh there i see barbara right there she's going to join us as far as helping me catch all your questions and answer all your questions so feel free to send those in if you're listening to this on a recording barb and i are there as you know so go ahead and put those questions in the comment section uh when you're looking at that archive very good you can see i have my twitter handle displayed here at chill underscore tda barbs is at b armstrong underscore tda and throughout the day we'll post educational information that we think might be helpful to you if we find it interesting we think that you might find it interesting as well now i should say i can't say hi to all of you but i am appreciative that you're here and and happy at your friendliness all right let's go through our disclosures and then i'll lay out our agenda for us today content intended for educational and informational purposes only shouldn't be construed as investment advice or recommendation of any security strategy or account type in order to 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 any investment decision in that you make in your self-directed account is your responsibility past performance of any security or strategy does not guarantee future results for success short options can be assigned at any time up to expiration regardless of the in the money amount and then the money option has a higher risk of being assigned early one thing that you do need to know as you're practicing with paper money paper money typically will not assign a short position early and so you might get accustomed to that in your paper account and think that maybe in the real world it doesn't happen that way either but in reality it really can so i like to make that distinction for you as far as what happens in paper and what happens in life all right our agenda for today we're going to take a just a quick peek at our market posture maybe what we might identify that is uh then we're going to review some open positions and address the question that i had here at the beginning as far as how many of you find it a little bit hard to determine when and how to get out of a trade sometimes getting in is so easy and we become geniuses at it and then the management can trip us up and then i would like to save some time to show you some new possible opportunities so let's jump into things i'm going to pop over here to think or swim and we are going to start out with the spx now the s p 500 as we zoom in here is it been making lower highs or is it making higher highs well it keeps making a slightly higher high in fact yesterday hit another all-time high all right so we look at the 30 day we can see that's clearly going up we can look at the candles and the price action and see making higher highs and higher lows does that mean there can not be any weakness in the market anywhere if we're seeing higher highs and higher levels well the answer is no we certainly can see some sectors not be in favor other sectors really pulling the weight of moving the index up now the dow jones if we look at it real quick we're going to see in our dji something very similar it is actually still up today just barely where the spx did turn negative just a few minutes ago uh but we're seeing the same sort of thing it did not create a brand new high here but you compared to that candle there where the high was it's up there in that high range right over the last three days okay so if we look at the dow jones would probably say okay i can see a case for bullishness there and the ndx ndx hit a brand new high point yesterday it got to 15 000 points which uh didn't take it that long if you look down here and we see uh the low down here was like 12 208 and that was just in march okay that it was 12-2 and where it's up there at 15 000 again we are still seeing higher highs and higher lows so that kind of gives us a perspective to look at things so if you look at the market first then you go look at your positions you have an idea which ones might be weaker which ones might be stronger we're looking at the nasdaq it's down almost a percent today so maybe some technology type stocks might be uh pulling back a little bit today all right next agenda item we're going to look at some trades that we need to pay attention to actually let me leave that off for a moment let's go over here to our monitor where we do have several things to look at one trade that we talked about last week that was going to expire friday i guess that is tomorrow its options and we had a very limited time frame on it that was stock lrcx now one thing i told you last week i said probably the window on this is getting so small that probably will want to find an exit point either friday or monday right we use that um 10 to 4 day window where just think of it as i should get out of my trade quickly yes so jack yeah the the market posture for the ndx yes it is bullish i was just mentioning that it was down a little bit today that doesn't change the trend by any means no it's still definitely bullish after hitting that high there yesterday so yes good clarification all right um so on lrcx we went into our trade and we said you know if it gets to a certain point get me out of the trade we're not looking to make a big gain on it we know that it may not we were it was a short short put vertical i believe and the strike price was 610 which i usually try to draw those in on the chart with a green line so i know where my short leg is where we're aiming for the stock to go to now yesterday let me zoom in here a little bit it did some nice running up a few days before that yesterday it went running up as high as 640.5 i guess what it did it took our order out it accepted it i didn't have to do anything and then shortly after it executed what did we see we saw it start to pull back and in fact make a you know a fairly bearish candle on the day dipping back into this little bullish activity all right so we were able to get out of that if we want to see the numbers here real quick lrcx we can see it went off yeah about uh lunchish time okay it filled us it went and bought the spread back for 21 cents and initially we were hoping to get say 13 out of it but we were able to buy that back and capture the majority of the gain on that short foot vertical now think about if you had thought we have plenty of time it's moving up here we've got a little bit more time let's tempt fate what if you had those kind of thoughts so maybe you do sometimes all right we typically want to find an area of time like that four to ten day window and determine regardless i'm going to be out now in this particular case it actually went a day longer than uh somebody might look at if they were actively managing the account and i have to be honest with you i sometimes don't actively manage our paper traits all right which is why it's kind of nice to be able to set up some orders for it to execute automatically for you all right just checking to see if there's any questions i need to address here real quickly a capture gate amount we'll go back here we got filled on this trade in june we had a buck 40 credit and so we had we went and bought it back here for 21 cents oh i'm looking wrong sorry 13 cents uh the order was to get out at 21 cents so as soon as it reached that it went ahead and it triggered the order we actually got out buying it back at 13 cents so just kind of eyeballing that that's about a 90 percent uh max gain over the initial buck 40 credit we brought in initially all right that's where you're gonna find those in the trade history section the order just tells us what we set it to go at okay so in this case we set it at 21 cents and we got to buy it back cheaper you're like sweet that doesn't happen a whole lot does it okay next trade we need to look at here is a couple that just need some short adjustments on them okay first one we are going to look at is uh well actually i'm going to bring up a couple of charts here the first chart i want to bring up is the energy index so it is dollar sign s p 500 dollars or pound sign one zero okay it's kind of long all right but it is the energy sector and i want you to see what's been going on with it recently all right so we have had been an energy was coming back a little bit it was being a little bit strong and then it hit this peak that peak was on june 10th and what has it been doing since then we've got a lower high lower high and it was making some lows that were gradually not by a big shot but gradually getting a little bit lower and then yesterday it it was to my eye was kind of hanging in the support area right you know support is an area and so we don't get too caught off with oh my little line happens to be right here so uh we saw today yesterday i was watching this going okay it's breaching this area and then today clearly dropping down now we're going to have several stocks that you're going to see and find in searches or on watch lists that might be looking like this pattern that we're seeing here with the sector now one of our trades back to the monitor page here that is something that we needed to do something with fairly quickly is this one we had a short put on murphy oil we have one day before it expires all right we received a buck five for selling that put and remember with puts you sell it on stocks you don't mind owning all right and so this one i intentionally left it alone because i wanted you to see the impact of it uh i was watching oil and saw that chart dips down and as we come and look at murphy it's going to look very similar where it peaked its peak point was a little bit later it was the 25th of june instead of the 10th for the sector we got in right here it had made a peak it had pulled back and it was bouncing up that's the day that we got into the trade well it didn't go much further in fact the day we got in the trade it looked like that was a no-brainer easily it'll stay above 25 because we were so close to it right but indeed it didn't now the reason i wanted to keep it was to show you the impact of that now if our strike price was five dollars ever since we got into it what has this strike price been it's been in the money and you do run a greater risk of an option that's in the money being assigned early and uh for example we can see down here it was it was hovering around 23 for kind of a long time that was kind of a support area ish all right until yesterday when it really crashed through there now what would be the implication for a trader that held on for to that trade okay come options expiration and the activity that takes place with it on saturday we would receive uh 100 shares of murphy okay at a cost basis of what the strike price and the strike price was 25 all right uh so if we think about okay what would our kind of our net be would have 25 strike price would have a dollar five credit and so we would be getting into it kind of on on a net of about 23.95 now it probably is not going to make you really happy to buy it at 23.95 when the stock is now trading on the open market at 21 and change right you're like i'm paying a whole lot more than the open market but that is a risk that you run when you're selling puts is that again you do it on stocks you don't mind owning all right i'm actually going to let this go through we're not going to go buy it back for a big loss i'm going to let it go through i'm going to allow it to sign us the 100 shares of stock and then we're going to continue with how would we trade it how would we play it okay so that's what's going on with murphy uh let's take a look at another stock here we have looked at quite a bit ihrt i heard radio we've got 500 shares of the stock and we got in this trade in march so we've been in all of march april may june and now we're still in july and it is trending for us so let's go take a look we are up on this trade about 4 200 we have lost 330 today though all right so that gives us the idea it's probably pulling back so i want to show you this i want to show you that nice uptrend we got here's the march 2nd date when we got into the trademark there with the green oval and it has performed pretty well for us however what's going on right now should we still be in the trade or should we have been locking in profits now i drew a diagonal support line here because it seemed that this is where it was responding it wasn't even going clear down to the 30 moving average it was hovering really tight along this line uh we had a nice little peak here at 28 and when we're trend trading which means we're writing the peak and the pullback and the peak and the pullback we don't necessarily intend to get out at the peak it's just not how it works okay and so we can see that it's it's crossing below this 30 period moving average it's kind of taking a cliff dive now i'm going to measure all right i'm going to measure oh i got to give us more room here i want to measure how far it was up to its peak to where it is now and then i want you guys to tell me if you think we should sell it out right put on a stop put on a trailing stop or any other way that you might consider handling it including staying in the trade all right we're down from the very peak point which don't expect to get out at the very peak we're down here about 13 to where the the stock is right now so it has had a significant pullback sometimes some technicians will think if something is off its highs by about 15 percent they think it might continue to go okay so it's not quite 15 but it is clearly off the highs now this particular stock i'll tell you another thing with it let's see here yeah it was a it was a longer term trade bj says i find pete placing trades and paper money much easier than placing in real account i have to master both entries and exits exactly and not just your entry and forget about it mike thinks we should take the profit off the table it's some pretty decent profit there right uh jack says it looks like it was a longer term trade and it was it was a trend trade and we'd been in it for a while tree thinks maybe we should do a stop lot a trailing stop loss um el diego let's see what you're oh you're just talking to bj all right osbourne says sell it we had a nice trade go ahead and sell it now the reason that you might consider doing that is because it's broken through support it is broken through diagonal support here if we were drawing on some horizontal support it's going to be a little bit trickier for us to find because the stock really hasn't been coming down to a horizontal level it's mostly stayed on that diagonal level but sometimes that 30-day access support we can see for the time period i have up here it was completely above the 30-period moving average and then yesterday breaking through it all right now some of you might say connie what are you waiting for just go sell it all right and we are we're going to just take our profits on it today um and i i see some of you agree with that the getting out is what kingsley says sell it it's a base hit it might even be bigger than a base hit okay we've got a nice return on this uh bj says maybe sell half and that's a possibility if you wanted to bank part of it and then maybe put a stop loss on the other half you could do that all right most of you are saying let's take the money and run on this nice trade that we have that's what we're going to do uh so let's see where did he go i heart and if you're wondering how big of a profit it is we got in at 1591 and right now we're going to be getting out around 24.32
okay so somebody that's a math genius will come up with that number pretty quickly probably if you do go ahead and feel free to share it with us okay and let's go ahead and create our closing order for those 500 shares and uh it looks like it's trading at a pretty tight bid ass feds bid ask spread so we'll just take what it's offering us we're going to go ahead we're going to sell we're going to bank that money and those are the kind of questions and the kind of process you want to go through with your existing trades and what you need to do with those existing trades all right let me get uh in a better spot here there's one other one i want to take a look at we're getting this one's going to be real quick is ath and this one we actually have a couple of holdings one in this class one on another class so in this class we have 200 shares and the stop boss is down here at 58. now we're up in the trade all right we are up in the trade about 2 800 we've been in since march 30th so again it's another trend trade writing the peaks and the pullbacks how many of you at this point would be satisfied putting a stop loss down there now for a period of time while it was going kind of sideways and that was the support area going a little bit below the support area made sense do we have a new support level all right well we kind of had some old resistance through here many times old resistance will act as new support so i'm going to kind of fix that line in there had a nice little run up is it making lower lows or lower highs yet so we have our peak just last week and the previous low i'm going to say was right here all right that's the previous really pullback point it's come down to that area again it hasn't necessarily broke that area and so if we wanted we could put on a trailing stop we could put on a point where we say if it goes beyond this we're not interested in keeping or having it in our portfolio anymore and from the peak it is down as close as i can measure about eight percent is eight percent a lot it really is not a lot when we're talking about peaks and pullbacks all right it's that fifteen percent that is a lot when the stock pulls back that much and on my heart radio was about 13 and a half uh so let's see what you've got here ath is not yet on new support is what jack says it hasn't hit it yet has it would you still be satisfied having a stop down here knowing that a new support level has been created here now i'm going to say some of you would not be happy about that and let's just switch this over to the calculator real quick so let's do this let's take that 6343 area of support 63.43 and let's multiply that by let's go 3 below it so we'll multiply it by 0.97 and that gives us 61.52 so we'd be
taking a little bit of risk off the table be locking in a little bit of profitability so i'm just going to drag and hopefully drop this in the right place you can do an edit uh create closing order or or change closing order if you want to on the monitor page but since we're on this page i'm just going to do it here so 61 57 is what we're looking for well that's pretty close 61.54 i'd be happy with that all right we're going to cancel the old one in is the new one all right now at the beginning of our session we defined and reviewed what our market posture was which is basically still bullish right but there are some transitions in sectors of what is strong right now what is weak all right and so one thing i showed you last week that we're going to use again today is i showed you a scan to identify stocks that were showing some weakness not necessarily by the sector although that is one approach that top-down approach this is just in actual numbers regardless of what sector or industry group they're in all right let's see tony says ath pulled back to almost the old range it's almost there it's not there yet so we want to let the stock be the stock right we want to allow it to come down and retest and possibly bounce off of that okay but if it violates it then it's not doing us any favors anymore right so that's why we would have our stop loss there to get us out if indeed it does violate it uh let's see very good so um i'm going to go to our scan tab and if you took a picture of this last week or you can take a screenshot of it here today keep in mind the results are not recommendations they are simply the results coming back from this query we've put in and so just briefly the criteria i put here is the stock needs to be at least fifty dollars if we're looking for stuff to drop man i want there to have room to drop we're looking for today to be down between 10 and 2 i should say 2 and 10 so not exceeding 10 all right but sometimes when stocks drop they drop drop a bigger percentage than maybe stocks going up we're going to look for volume at least around a million shares traded and then we're looking for our three month to be down about 25 well that 65 days that equals about three months is going to say okay that down that pullback from that area has got to be down about 25 and the pullback in a month has got to be about ten percent okay that's what this says you can change these parameters to put in anything you're comfortable with the idea with these numbers being so big is that we're looking for big drops we're looking for big weakness as opposed to maybe just a little weakness all right that was the purpose of setting that scan up that way and again whatever comes back is not necessarily a recommendation and let's see how many we get here about 58 that's pretty close to what i did earlier i saved this as a watch list earlier just click on that little icon save watch list give it a name all right so before our class started i started with what i called emm bears7 15 21 all right so today's watch or today's date on it all right now i'm going to tell you this from the get-go there are a lot of bearish type opportunities in there because of the way that we did the scan all right so again none of these are ever going to be considered recommendations but i think they could be a place for somebody to investigate maybe do some paper trading and practice their skills because that's kind of why i'm going down this path is that i want you to be able to practice something before you might actually need it okay and that's why at the beginning we talked about well our posture is probably still bullish because we haven't seen uh especially the spx make at lower lows and lower highs all right so these are the results of the watch list and you're going to see several of these come up in the scan kind of crossing over here let's pull up a couple of charts here first one we are going to take a look at on our list is this take two and um let's do a little documentation here so definitely is making lower highs and lower lows and then it looks like let's look you in it looks like maybe some support that was horizontal was violated today all right uh we're just gonna kind of eyeball this and see yeah looks like it's breaking through there today it's not on earnings i don't know if there's any major news about it because the volume isn't tremendously large but nonetheless it's following that pattern and those of you that are familiar with price patterns might recognize this as a descending triangle formation and on the descending triangle formation we're basically seeing these peak points get lower and then we're seeing some horizontal action here and then we're seeing it go from one to the other back up all right that's what we see in a descending triangle and so this for a descending triangle to a technician could be used as an entry signal now if it's just barely a breach some technicians might say i want a little bit more confirmation that that's the case now we are going to jump over here to the trade tab for take two we can see it has some weeklies uh however the monthlies uh the august 20 expiration has a lot more open interest here's my open interest column here looks like there was some good volume taking place in these strike prices today and then over here on the put side there's decent open interest but not if you're somebody that likes to trade a lot of contracts all at once okay now we're going to talk about constructing together here a short call vertical all right we don't have earnings on the horizon immediately it's out a little bit we can see in terms of implied volatility it's kind of in that medium range right it's not super low it's not below 15 percent and so we're seeing it it has some implied volatility which means the premiums are a little bit juicier and there's an expectation of movement in this stock all right a couple places you can learn about short call verticals barb armstrong teaches getting started with options because if this is a strategy you're not that familiar with you may want to hit her class or some of her archives i think recently she did do some short verticals but her class is on tuesdays at 2 eastern time all right so at 2 eastern time is when you can attend that and she might even give us some information uh let's see here or if you specifically are interested in learning more about short verticals i had classes taught on it it was yesterday that it was taught by kenro so it's wednesdays at 3 eastern time that is specifically on that let's see just checking out barb's helping me out here so i wanted to see what she's saying she's thinking i'm having a lot of crackling you guys i'm sorry that you're having crackling on your side of things on my microphone i i can turn it down a little bit and see if that helps the crackling all right see if that's any better and you guys can let me know or barb you can let me know as well all right so a couple places if you're not familiar with this strategy you can go and learn now uh many times people that are looking to place a short vertical try to find this selling leg first all right that's kind of the big driver and so we'll focus on well what are we looking for so for some technical traders they're looking for a delta between 0.3 and 0.4 now could it go higher sure it could go higher could it go lower yes it would it could go lower and you're trying to find this balance of selling a spread for some premium and getting a high probability trade that kind of puts odds in your favor although it doesn't guarantee anything all right let's go ahead here we've got a 48 delta kind of higher for our range a 37 delta right in that range or a 28 delta that's a little bit below that now as i look at these columns here i'm i'm pleased with the open interest we're seeing on this uh 37 delta we even have 1800 new contracts being exchanged today and the spread the difference between the bid and the ask price well it was really a little bit tighter than that a second ago i saw it flash it was like 4 might have been 4 30 or 4 40. in any case we're going to construct this trade we're going to do a right mouse click we're going to say sell and then we're going to check we're going to choose what's uh what type of spread we're going to trade and we're going to do a vertical a short vertical now at the same time i want to show you how to put in an order so it'll go execute it so you don't have to be babysitting it okay we're going to do a first trigger sequential i know somebody's going to ask me if we could do a first triggers oco and the answer is you absolutely could all right let's just do a first trigger sequential here and we're going to create an opposite order now we're going to to get this credit in the neighborhood of a buck 45 and when we do that that credit comes into your account immediately but when i talk about capturing the credit what i mean by that is getting in as much as you can of that buck 45 by buying it back at a much smaller value so let's go ahead and clear out in our calculator i'm going to put in there okay we've got 147 now i'm going to lock that in and what if we get a majority of it right some people might say i've got a majority in a week i'm taking it maybe that's 50 or 60 there might be others that want to hang with the trade a little bit longer we have after all it's a 36 days to expiration it's in that uh 20 to 50 day range and we aren't going to plan on holding it all the way to options expiration we are going to plan to hold it until it hits a majority of the game is what we're doing right here so we're going to take 147 i am going to multiply that by 0.15 what does that mean we are looking to lock in 85 of it which means only 15 percent is less and you can use whatever numbers you feel comfortable with okay so i'm going to say what that is okay 22 cents that means we are going to put in here to go buy it back at 22 cents all right it's going to be automatic just like our trade was on lrcx to yesterday we ran right up there hit our amount we got filled we're out uh you could be out at lunch and come back and see hey sweet you've got it uh i'm going to go ahead and make this good till cancelled the one thing i also want you to know is it's not guaranteed to fill at 22 cents but that is going to be our trigger and the expectation is that you'd get filled somewhat close to that we're going to do oh let's do let's position size this this is a five dollar wide spread and so we want to determine how many contracts we can do here so if we take 5 minus 1.47 our risk on the trade is about 353 all right in our portfolio we don't want to risk more than hundred and fifty dollars in any single trade so this tells us we could do two contracts here right it's going to be pretty close to that anyway it felt like it was taking you way over just do the one contractor if you're practicing uh you can practice your position sizing when you do that and paper money so it becomes natural to you now i'm gonna hit confirm and send we're going to read through of this our max potential loss is going to be 706 our max profit is going to be 294 because we've got the two contracts here now so just review it make sure it makes sense we've got some figures for commissions and fees and i'm going to put this in our short term let's see i'm going to put it in here trading stocks and options and i'm going to hit it off hit send all right now what are we looking to do to monitor this to manage it well we want to see that the stock stays above that short leg right we want to see it stay i mean below 175 i said above and that below so if we come out here and we say okay where's 175 let's go draw a line for it i'm going to just kind of look along the side there see when i get super close oh good it went to 175 for us i'm going to make it green [Music] because that's when i just gives me this visual clue where i would like it to be okay so we want it to stay below 175.
so in this scenario can the stock go up and maybe hit 175 or even go above it yeah because it's not guaranteed that it's going to execute right at that point although theoretically it can execute at any time all right typically it's not until the the strike gets in the money could it go sideways forever yeah because that's still work for a profitable trade yeah so it can go up meaning the direction you're not thinking it's going to go it can go up a little bit it can go sideways or it can drop now the more quickly it drops the easier it is to lock in your majority of that credit that we're receiving upfront uh now vj's letting us know that there are earnings on august 2nd well with these being august 20 expiration dates some people may say you know i'm going to within my rules i'm going to make sure that i'm out before the options or before earnings and there may be other people that say i like this trade the way it is and maybe i will hold through earnings okay it's going to be a personal choice you just want to make sure you're aware of when that is you don't want to go into a blind so thank you for looking that up for us vj um edward says should we use probability of touching on a trigger like this somebody certainly could and what is being referred to here from edward is that we could put in a column here in fact i'll just adjust it real quick we'll go customize we'll get rid of feel price and we'll put in probability of touching and the probability of touching more likely than not is going to be higher than the actual probability of expiring out of the money so let's take a look here in this case it's pretty close isn't it the probability that it's going to go touch that's about 67 sometimes it's higher for example like uh this one here the 170 strike that's a little bit closer to at the money it's the probability it would expire out of the money is 57 but the likelihood that the probability of touching is much higher at 89 on the one we just did here they're pretty close to the same all right now i think we submitted that because we have a buying a cell out there and um yep it is just sitting out here looking to get filled if it doesn't fill by the time we're done i'll go out and change that that value there now i want to make sure to do one more of these with you okay and the one i'm gonna choose here is chewy i don't know if any of you guys use chewy it's a place you can uh get some pet supplies through the mail and i don't use chewy but i know some people that love chewy alright so if you have pets you might be familiar with them now what's going on with chewy here it has mostly been in an uptrend and using kind of this diagonal support area i'm drawing in so i can get it to stick yesterday it came down it looked like it broke through the diagonal support so first sign of weakness there and then today it traded down below the low of the previous low candle so somebody wanting to be maybe a little bit aggressive with it might say all right we're getting some technical cues that the stock is is showing some weakness so again we're going to come over to the trade tab chewie has lots of open interest here all right lots of contracts being exchanged where again we're going to use the monthlies all right and let's see what our choices are we have a delta of 41 or a delta of 26. do they fall perfectly in the scenario that we're looking for between a 30ish to 40-ish delta neither of them really hits that and so if you do want to treat it you're going to have to make a choice do you want something more conservative or something more aggressive so let's do this a nice tight spread here we're going to say cell vertical and i'm going to change this to a blast all and we're going to put in the more conservative one that brings in lower premium but has a higher probability of the option expiring out of the money so we're going to say cell vertical and so that first one i'm going to i'm going to round this up to 140 this one is 78 i'm gonna lock it so this one certainly you get a higher return uh more credit on the trade when i figured the numbers out earlier it's about a 42 return okay this one that has a higher probability of success right the strike price here in the 85 is about 78 chance it would expire out of the money which is really high especially to start with but do you think it's going to pay us as much it really isn't going to pay us as much uh the return on that let's just calculate that real quick would be uh 5 minus 0.78 so that's going to be about our 422 that could be our potential max loss so we're going to take 78 cents divided by 4.22 and that's going to give us an 18 return now there may be some of you that say ah that's not good enough i want something higher and so you might kick this out and then you also might say well that is giving me about a little bit higher return than typically what i expect of 42 so some of you might be comfortable doing it some of you might not okay there's no magic answer here it's all going to be in your determining of what you're willing to risk and what your probabilities are and how you weigh those out for today we're going to be more aggressive we're going to get rid of the second trade here on chewy and we will do another one first trigger sequential we'll create an opposite order and what is a big chunk of 140 all right in this case let's go uh let's go 140 times 0.25 okay that would be locking in about 75 percent of the game so we'd say okay let's go buy this back at 35 cents and not until all right but if it does that and you've got it set up to go that's great you don't have to babysit all right so we've got that set ready to go i'm going to hit confirm and send just review it actually same thing here if our our loss was 422 and our max that we want to lose in any trade is 750 we can only do the one contract and i should have said that before i went ahead to confirm and sand just review it and then we're going to put it in our trading stocks and options we're going to hit send so now we've got three bearish trades underway okay and you're saying but we're in a bullish market and you're right so that's why you're picking on the losers to continue to lose right you're not picking on something that's been strong upward trending and just barely pulling back a bit no no no remember the criteria in the scan was that it would be down trending they were lower in price than it was three months ago as well as one month ago all right um yes chesapeake bay would like to see the scam one more time and the thing i need to caution you when you look at this just use it as maybe a template and put your own values in there and just know that anything that comes up and the scan itself is not a recommendation all right just need to make that clear to you hopefully that gives you enough time perfect well we've accomplished a lot today all right we took a brief look at the market to make sure we knew what our posture was we reviewed some open positions that needed attention which was great and then we were able to put on two new trades both bearish so we're going to watch them closely uh we're just picking on losers to continue to lose as opposed to winners that are showing a little weakness all right looks like we have been able to answer your questions along the way barb armstrong thank you so much for helping me out with the questions she always does such a super job as we wrap up here i do need to remind you that the content intended today is for educational and informational purposes only not investment advice or recommendation of any security strategy or account type and any decisions you make in your self-directed account are solely your responsibility if you found this helpful today go ahead and hit the the like button that'll let others know you found it valuable and could be valuable to them i did not see a survey out in here if there was a survey i'll ask barb to repost it but i didn't see one out here so you're off the hook for doing that but subscribe to our trader talks our investor insights channel that way you don't miss out on anything and again subscribe to barb and mine twitter accounts i'm at chill underscore tda barb is at the armstrong underscore tda have a great day everyone now coming up next is going to be another technically speaking class it's going to be trading the trend so looking for a little bit longer moves in there james boyd will be your host and as you know he always does a super job thanks everyone we'll see you soon bye [Music] you
2021-07-23 07:17
