Defined Risk Index Futures Options | Trading Futures

Defined Risk Index Futures Options | Trading Futures

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Good day, everyone John McNichol here and welcome to trading futures market is taken another down day. We'll take a look at that, as we explore index futures options. Will do some defined risk trades as we've done with some of our other commodity trades over last week , or should say last month, so I hope you stick around. Alright Hey, it's great to see those that are live with us today, such as VJ and Frank Jack Anthony Neil's checking in and everyone else. Thanks for being here. Mr Ken Rose is helping

Anna on the chat. Any questions ? I am unable to get to he'll be more than happy to help. Do appreciate can being with us.

You can follow us both on Twitter. Ah Ken is at Krose Underscore T d A. I can be followed at J. McNichol underscore TEDA. You'll see that Twitter handle on the lower right? Throughout the presentation there and those of you that are listening. The archive session do appreciate your joining us and following along at your convenience. Ah,

whether it's ah In the afternoon evening weekends as most of these sessions are recorded, and hopefully you get a chance to review them later as well. Thank you. Let's go ahead and take care of disclosures, and we'll get right into it. Contents intended for educational information purposes only. Options not suitable for all INVESTools investors spread straddles other motel adoption strategies often involve greater more complex risk than single leg option trades. Keep in mind.

A short option typically can be assigned at any time. Of the expiration regardless in the money amount, as well as long calls or put options can the entire position of the option is at risk. You're encouraged Practice what you learned here today with tools such as paperMoney application. Which is for educational purposes and successful virtual trading during one time period does not guarantee success of actual funds during later time periods . Marketing missions change continuously. Keep in mind trading futures. And futures

options does involve substantial risk not suitable for all investors. Likewise, trading on margin increases your level of market risk. Your downside. Financial risk is not limited to the amount of equity in your account. Charles Schwab Futures and Forex LLC may liquidate any or all your positions anytime your account equity drops below required margin levels. And keep in mind that house margin maintenance requirements can be increased at any time, and it's not required to provide your advance notice. And you can see

some of our other disclosures concerning transaction fees. Wireless Webcast may discuss technical analysis. Other approaches, including fundamental analysis may have served very different views. And as always, folks past performance of any security or strategy does not guarantee future resorts North success. Here's our agenda. We're gonna go ahead and take a look at some of the characteristics of index futures options. This is going

to tie us up. Ah as we're going to have a Holiday next week for Juneteenth, so this futures class will not be live next week . However in the following week will start going on to a series on technically trading futures with a bit of focus on the index future. So this is a good introduction Ah from the index futures options side of the House. That will spend some time on here today. Ah, and this is kind of a natural transition for some traders that have already traded equity. Ah equity options

and are considering futures or futures options that may be tied to some of the indexes that they may already be familiar with. So relatively, uh, maybe a relatively simple transition for some traders applying some defined risk option spread's. That's been a theme as we reviewed some of our various asset classes over the last several weeks, and you're encouraged to look at The playlist, which is in the description as well as just Google and John McNichol futures and you'll see all the different content that we've done. As always, we'll discuss some of the potential entry exit and trade management techniques. Not only with our example today with some of our previous examples that we've done and as always determining appropriate position , sizing as well as risk with each and every trade Certainly seems to be a bit more paramount in this market, but should always be applied. Whether

markets are volatile or not, or things are going your way or not going your way. So let's go ahead and get into it. There. I hope everyone enjoyed their weekend. And so in comparing options trading on futures to equities and those who have been joining us over the last several weeks, certainly become familiar with this with the access and diversification of multiple Commodities and various instruments. Trading hours in 24 hours a day, six days a week with pre brief uh with brief pauses there. And as we've gone

through some of our different asset classes there, you know, understanding. You know what happens to a future option at expiration, you know is it settled physically settled in an underlying future. Ah which ah is fine. How you know for some traders, however. That risk increases if a position is taken in an underlying futures contract, or is it cash settled there? Also it's important to understand when that underlying future contract expires as that can result in an assignment as well. However ah typically Well as far as with Charles Schwab.

Futures does not allow physical settlement. Of commodity futures and therefore liquidation would be required prior to expiration , whereas we know in equity options trading This settlement may result in a assignment or an exercise. If those options are into money, however, there are some index options that may be cash settled. Here's a breakdown. Some of the major

Index futures that will be utilizing in the coming weeks. One being forward slash e s, which is the E. Mini S and P 500 contract with the contract. The multiplier is important to understand that's going to help us understand a bit about leverage as well as the size of each tick with the multiplier on the forward slash es it is a $50 times. Whatever the premium is. And we'll be taking a look at a few of these. Ah tick size minimum tick fluctuation, which is tied to that multiplier there as far as its value quarter point. $TYX so that's about

$12.50 per tick. There You can see the trading hours. Daily settlement. Is typically going to be, uh um and in this case, usually within about 15 minutes after the equities markets closed. And what occurs at the end of trading. There are

various options that one can potentially trade. There are American style options, which refers to options that can be Exercised. Or signed at any time up to that expiration, whereas there are some European style options, which can only be settled on those appropriate expirations. And over the years there has been expansion of various expirations. Not only on the third Friday of each month, but ah weekly options and options that may expire on different days of the week. And

that's something to keep in mind of as we look at some of the option contracts On the days expiration. Keep in mind when it does come to. Ah, days expiration as as far as a note, many of you may have seen that some of the commodities or in index futures have rolled over from the past week, even though AH, June's futures, for instance , on these indices would be expiring on Friday. The front month has rolled to the next future. That's important as liquidity does have a tendency to shift and just like in the case of with options, trading futures is very similar to as you get closer and closer expiration. Ah there's less trading potentially in that contract. Spread's can open up

and the ability of closing out that contract can be increasingly difficult there. So keep that in mind and you know, exit rules are very important. And, uh and focusing on some of that time management. Alright,

so. In this case on the S and P on option. If the options exercise it would result in a position in the underlying cash settled futures contract, and that's important as well. Look at margins that would increase the amount of equity that needs to be tied to that position there. And again we're typically we look to close out these option positions well before expiration. Alright, let's look

at some of the other contracts and we'll get right into our trade example and seeing how things may be setting up for the week with the rest of the market. Since we will be continuing talking about these in the sea futures. There's a NASDAQ forward slash and Q E Mini. Ah, Main takeaway on this one Here is, as we look at these indexes is the multiplier forward slash thank you as a multiplier of $20, so that's going to be timed times of premium, so basically each tick dependent on how it fluctuates. Ah, Quarter Tex would be, uh, $5 per tick. Ah, if it AH, is increment options Price Lower that increment maybe a bit lower in this case and nickel. Um

Nickel protect, which is worth a dollar there knows how that translates into the multiplier. The small caps. Forward slash r T Y futures based off the Russell $2050 premium. And you can see how that translates onto tick size for the options. Now

the underlying futures may fluctuate a little bit differently will take a look at that as well. But notice the availability as we looked at some of the other indexes, you know, some American style weekly in the month. And as well as how that option would settle there. Let's go ahead and kind of what we'll do is we'll Talk about with some of the news coming in the week, and I think a lot of your tracking as far as with the Fed the FOMC. Certainly last speculation on what the Fed is going to do based off the heels of some other economic news from Friday, so we'll break that down . Ah so you know, being familiar with some of the Various news that comes out that point towards economic strength.

Things like GDP, industrial production, retail sales, durable goods, housing data. Ah! Consumer confidence is another thing that came out that was, uh Much more negative than expected on Friday. Ah accelerate in some of the selloff interest rates. Another big driver, We're seeing that impacting the market today. Ah, as we've seen yields continue to rise. We've seen. I

believe a bit of inversion Ah, on the shorter term yields going up faster than the longer term yields, which, uh, some investors point to that as a signs of some economic slowdown. And that's kind of the battle going on. As far as with the markets between both inflation ah as well as growth and the markets battling out pretty violently on that. Over this last week and beyond inflationary numbers, such as consumer price Index Tuesday Price index personal consumption , You know all ties of that supply and demand along with costs. Ah some speculation on some demand destruction out there as well as prices get higher as well as potentially think slowing down. And all

these habitats we have coming into the mix and what we'll do is We'll go in and look at the calendar for this week. Ah you know, tying into you know what's going to happen with the Fed Now you know, the market typically or the Fed has been Generally transparent as far as with their expectations on raising rates seems the market has been pricing in half point increases at different meetings, although the market was kind of speculating, you know, as we saw some signs of slow in that the Fed may kind of back off of that going into the end of the year. Ah now, as we've seen some of the heat coming in from Some of the more inflationary reports that the Fed would continue to be aggressive and with even some speculating three quarters of a point uh and even on the far end, even a full point rise, whether it be in this meeting or possibly later on if things continue heating up there, But the market generally has been looking at more. Hikes along the

half percent variety there. So let's go ahead and go to the Tdameritrade website. By the way , there we are on Twitter there looks like you have to go ahead and log back in. Ah you follow on Twitter. You can learn a little more about your instructors as well as hopefully a little more about the markets as well. Ah from the weekend did

a bit of a road trip up to vernal kind of close to the Colorado border. There we have. Ah some my engineer soldiers out there. Working with the National Park Service. It's a it's a great way for them to keep their construction skills. Ah in tune. Few of these kids are master electricians and plumbers and Ah , you know, and ah civilian engineers as well. So making some improvements on the campsite up there belong to Green River. Welders out there,

working on some cattle gates and , ah, some cattle guards there, so ah, it's nice to get up there long ride but also tweeted about the market as well. Along with some of my cooking habits. Ah! You know, as we ended last week. And this is the cash indexes for the S and P. Well all the major

market indices weekly and the indexes Ah, going into the end of the week. We're coming pretty close to some of those lows from last week. And kind of potential for a basin pattern for the market. Now, that may be a bit dashed here this week. We'll see how similar is levels are looking here in a bit. Same thing with the Dow. Now as we

went into the selling on Friday , there was a little relative strength on both the NASDAQ Ah as well as the Russell with the small caps. Some of that may be dashed here this week. But it will be interesting to see if the markets at least going to try to weather hold some lows or if they do take out those lows, whether that momentum increases Or kind of slows down as we've seen on some previous selling, but with this being a news driven week with the Fed Traders may expect some volatility with that if I go to the Tdameritrade website It looks like I'll need to go ahead and log in here. Go iron. Let's see. Get that end. As this goes up, we'll go to a research and ideas go under the economic calendar. On the

calendar. We can also get insights on earnings, but we're going to go over here to the far right. Click on economic events once there We're going to scroll down. Not much news today. As

far as on the economic front outside the market falling Going into tomorrow. Here you can see Some of the price input for inflation. We got the P P I Which is the producer Price Index and the core pp, I, You can typically click on these and as you click on them. Ah needless to say, we all understand on how Ah! The costs have been increasing for producers and Consumers alike. The challenges, you know? Are we coming to a peak, you know, up until fairly recently, there has been more speculation on potentially a little bit of a peak. On inflation. Ah some traders are tossing that a bit more aside, and we may get some more fuel to that this week tomorrow with some of the producer price indexes. If we go

into Wednesday. Pointed towards growth. There's retail sales. So we're going into Wednesday of the week and already hitting another big event there. Likewise housing has been in the forefront as well and seeing how things are going there. There has been some points. Ah to Ah,

a bit of slow in there. There's the FOMC rate decision. And then rolling into Thursday. More on

housing housing starts will get some initial claims as well. There has been layoffs in the in the tech front. Whether that has a major impact. As you know, other companies are still looking higher Summer or moderating a bit. We'll see if there's any changes to that going into Thursday. And then Friday, there's that industrial production there. So this is

going to be a Generally a much larger week, folks as you look at that slide on things that point towards economic strength , interest rates inflation. Ah there's usually something that comes out every week. But this is going to be ah, a more more heavier one tied to this as we can see all three of these being covered Alright. Ah, let's go ahead and Oh, that is ah! A bit of a typo there. Um I should say index options there, but it's gonna be applied to some of the other commands. We've talked to.

Now The Italian here is, if you're already training options on equities, we can possibly utilize some of the same strategies. When it comes to trading options and apply them to futures. Now there's certainly some considerations just as with any asset as far as liquidity, Uh and, um, you know, trying to find the you know instruments that are more widely traded. And we'll talk about that a little bit more. Also understanding that index options on futures. They may be American

style or European style, with the latter only being exercised upon their expiration. And some of the resources and the tie in here as far as the contracts are available, both on TD Ameritrade dot com Forward slash futures as well as on the CMI group. .com Ah, let's go ahead and go to Tdameritrade. .com FORWARD slash futures. You'll also see that in my scratch pad here, go ahead. I'll pace that in the chat. For

those of that are live with us. Today Those you're listening to the archive session can follow along. Go back up to here. Yeah. And when you're on, you don't even have to log in. But once we're on tdameritrade .com forward slash future's going to come over here under available products. Ah, click on that.

Scroll down. And here since we're talking about stock indices, there's the S and P Mini Ford slash e s multiplier. And as you look at there's NASDAQ, there's the Russell And you'll also notice there's one for the Dow forward slash y and y m now we didn't talk about the contract specs for this one, since we're focusing on options and notice as this example, it says, under tradable options. No

Now this may change at various times. Ah but tradable options would basically point that there are options available for trading. Ah that you know, from the perspective as far as liquidity. No, not necessarily

that all of these will be You know, highly liquid at times, but the ability of trading options is usually gonna be tied to Ah, the liquidity of those options contracts there, and some of these may not have that here as you can go ahead and look at some of the volatility indices, Maybe some of the international indices even though there may be options, they may not be allowed for trading on our platform. Okay so notice emphasis here. We got the Emini s and P. The evening NASDAQ. There's even any Russell . Now There's also some micro contracts. We may talk more about these as we get into more of the technical trading two weeks from now, after the holiday week. Ah there are no

options here, but knows the multipliers for these micro's. Are about 1/10. The multiplier for the mini contract so traders with small accounts or when it comes to hedging. Ah some of

these contracts may useful, depending on the size of the account and the amount of leverage Or if one is utilizing for a hedge the amount of hedging that they're looking to utilize their All right. And likewise, as I mentioned CMI website semi group, another great resource for you. Let's go ahead and take a look at Some of the charts and let's make sure we're tracking here on covering down what we said we would here today. So, so far we've went

ahead and discussed a breakdown of some of the index futures We've talked about. Ah, Looking at some of the news that's related to it. Let's go and look at the example of a defined risk spread will pick out one of the indices and go ahead and place a trade on that, and then we'll follow up on some of our example trades that we've done previously. Alright, so let's go ahead, think or swim. Look at the daily charts on a few of these. And we'll look at some entry days in coming weeks here , so we got forward slash es.

Now keep in mind when you look at the underlying futures. And you can always click on the drop down and go to the futures tab. If one was trading the underlying future. There's that multiplier. There's a tick size

. There's a tick value, so $50 per point. That's the amount of required margin to trade. Ah, forward slash E s. And it kind of put that in perspective. If

we were talking about $50 per point And we just look at the move. In the S and P otherwise window popped up. Just with this last vicious downswing here. I'm gonna go and measure that. Pretty much from that resistance. Try another line

here. You know, going from that resistance down to the current price action? That's 396. That's a 9.5% drop. Essentially over the last four sessions, so pretty vicious here, although we have seen some of those moves down, the trend is still firmly down. Even tweeted about that last week. Ah, with the Russell

In between my smash burgers. Ah! I believe this was from Wednesday or Thursday. I think it was when I can't remember his Wednesday or Thursday as a Russell went ahead and traded up to 50 day moving average. They

have been demonstrating relative strength as we mentioned. Of a kind of got back into this congestion area from early May and also a Fibonacci retracement kind of a make or break point, finding some resistance there. Ah that would potentially support Some resistance, whether that base continue informant or possibly prices rolling over again, whereas the prices broke out to the upside, even though we still have more of a down trend here. More of a bullish

sign of a reversal, and that was kind of the question posed. As we came out of Wednesday there, and obviously, that was more answered to the downside. Ah, here for the end of last week, as well as starting this week. So here we are, If we look at the Russell Ah, well, look at the Russell future. Forward slash r T Y. You can see where that price action is. Right now.

We're at lows of the day that may continue sessions. Early question is, Will there be an attempt to hold these lows? And wait on the Fed. That would be obviously be determined. And from a relative strength standpoint, uh, you know, are the larger caps already taken out those lows. Let's go to

SPX-. We can see on SPX-- a bit more uglier. As entry day. Those lows have been taken out. Also breaking below. Uh 61.8 retracement and this will be a talking point. Ah, and in coming weeks It was lows being taken out in today. See if there is

any type of tail or an attempt for prices to fill back in that range again. And that's around that 38 39 area. Looking at the NASDAQ, and that's a cash index. Let's look at the NASDAQ Cash Index. NASDAQ Cash Index as well is taken out those lows. With

that gap down. Knows a little smaller of a body trying to form there. So whether that attempts to try to be Any attempt at support. Ah, that will be determined. Let's go ahead and look at the future Forward slash E s. And then as we look at the

futures now, keep in mind, the futures are usually going to be a little more continuous meaning there from one contract to the next. If you do go to the trade tab, and as we're looking at Forward slash e s, which is the root symbol. It will default to the front month, which right now is the September contract. And notice. The June contract is still trading. However, there's

only four days left in that trade. Okay, so something to keep in mind. And let's go ahead and bring up. Do the other things here. Go back on the

chart. So that's where we're looking right now on the forward slash e s Go ahead and look at the Ford slash. Uh, And Q, which is the NASDAQ future. And

similar to the cash contract. It did take out that low. Maybe kind of settling in at it. Let's just double check on that. Lows, 11 40 11 4 91. Hmm. Yeah 11 4 56

certainly took that out. Question is, Is it going to snap back above it? We shall see. And let's go ahead and look at forward slash R T Y. Again. And then here's R T y notice still off of those lows close to these lows from May so again, little relative strength. So one of the Initial thoughts as I was looking at this was well, maybe , uh, look at the Russell if one's expecting at least those lows to hold or not necessarily to go Much lower than that over the near term. Now, that would

only be a form of speculation there. But when I went to the trade tab Look at Ford slash r T Y and looked at examples of some futures and let's say going about 30 days out. And you can see the various expirations. And this kind of falls into some of the weekly contracts. Now, some of the weekly contracts like equity options. There can be

some concerns for liquidity. We're looking for spreads that are relatively smaller. Now it looks like these actually did close up a bit, but earlier in the session meeting before the equity market open, these spreads were very wide. Ah, saw some spreads to the tune of about 10. Ah 8 $10 or more now

here They have tightened up a bit. But they are still a little bit wide. One guideline is looking at the asp Rice. And making sure that the difference between the bid and the ask doesn't exceed 10% of the ask price. So you know as we look at, let's say 30 Delta in this area. You know, we got an ask of about $41. And here we can see

that the spread here is about you know 2 to $3 so That kind of falls within that 10. Now, if we go ahead and look at let's say forward slash e s. Around the same month. About 30 days out. And scroll down. 30-40 Delta now

knows that the spreads Ah, you know, some of these spreads of wind up a little bit, and those are kind of going a little bit back and forth. Ah, but a little bit tighter than what we saw with the Russell now that can be a consideration as far as when You know, one is trading these now We're gonna look at this from an example of more of a time based trade. You know where I think of what are some of those common time based spreads at one may have done such as a short vertical. Let's say if one's expecting that the base will continue to form albeit maybe a little more volatile with the indices. We may be able

to look at something such as a Ah put vertical now, if one's bearish, and you know they expect the prices to continue. Going down. There may be a little more directional and consider a long put vertical to try and capture some of that price action. Ah we're going to go ahead and see if we can Put together a put spread. And since the Russell did Seem to. Ah. Tighten up a little bit, although a little bit wider ah than the S and P. Let's see what

comes out of this, So I'm gonna go ahead and look at A delta that's somewhere around. 30 to 40. And as we look at this, the 16 50 is kind of close to that 30 Delta. There's also one here knows that's at the price level of 16 45 16 50. Now if we go to the chart The idea here. Is that one's expecting that the price action would not be going much lower below 16 50. Now, If one

was bearish, you know they may be targeting that area as far as the barest trade. We can also see some previous fib levels kind of into the mix here. Looks like I also have a longer term support on the Russell around 1600. So you go out a little bit on this. If I would have going on. Yeah, it looks like it was

going back to a price level back here in early 2020 so notice how far we've gone, taken back most of those gains if not all of them from 2021. Some traders may look for a little more bullishness, obviously, which we're not seeing at the moment, such as a little bit of a tail inside day, a little more of a confirmation on that. We're gonna be a little more aggressive on this one. With the prices dipping down to that area. Something to go back. And let's say I go, uh. Let's go. We'll go with the 16 50. For

now. I'm gonna go ahead and right click. I'm gonna go ahead and do sell. Vertical. Now. Notice here. We're also seeing

some wild price and right here, and this could be kind of a Ah, turn off on doing this particular trade seeing these wild spreads and the ability of potentially getting that filled I'll see if I go ahead and change that up and look at the forward slash e s. See if there's anything different there. Keep in mind, folks. This is for illustrative. Purposes and not a recommendation of buy or sell any security. We're trying to learn here is on trading. These Attempt on

defined risk spreads here. And let's see, looking at the S and P, uh around 30 Delta range here about 30 days out. Nosy spreads are a bit tighter there. Other we can see that open up as we may create a vertical if we look at this one around the 36-35 range And go up to the charts. So the S and P futures, you know, still at that 61.8

retracement. You know if we do a spread, that's below that area. We're expecting that this potential Feb area may hold. At least over the nearer term. Obviously, a lot of things can change that. I'm going to go ahead and go back to the trade tab. Let's say attempt to do it

on this one. If I right click and do sell vertical. Now the market prices closer to 75 cents mid prices around a buck 50 bucks 25 Now keep in mind there is the multiplier $50, so it's going to be multiplied by that. So if I do it, confirm and send And we take a look at this. Here we can see. The defined risk that comes in with a vertical spread. Basically a difference

between those strikes. There's $5 wide times multiplier. Spend on how we get this filled. Credit would be $75 potential Maximum loss would be 1 75. Ah! That would be about what about 30% or more return on risk Typical for what we may look for on those short, vertical spread's can actually teaches this strategy in the short vertical class. Will point to

that resource there and there's a lot of red down here, too, as were experienced and have experienced in the past. Max Lawson profit does not reflect underlying strike Price moves below zero Now the probability of the market going to zero Ah is very low. Probably statistically, ah, very low, but other commodities have gone to zero such as Ah, oil. Back in. I believe April of last year, March or April, and so, you know, there can be those types of things, but so we have to make those disclosures are obviously and actual profits or losses may be greater than displayed. Also with futures typically being nonstandard. We've talked about liquidity. Ah

and usually weekly options as well. Being nonstandard is keeping that in mind as well again, pointing towards liquidity that we have addressed. Looking at those spread's but Based off of. The spread in closing out the position prior to expiration. Here would be the parameters for that potential. Define lost

their okay. Ah let's go ahead and see if we can get this practice trade filled. Let's say I wanted to risk about $500. I'll do this approximately three times. I think that will push us over there a little bit there.

We'll do confirm and send. So there's our Maximum loss. There is a potential maximum gain. That's if I get filled out The larger credit I'm going to send this one through. Your results

may vary on that. We'll see if that gets filled, knows in this example it did. Closer to the mark. Then what we'll do is

we'll continue managing that trade. So let's talk a little bit about managing. Ah, that trade. Ah so We've went ahead in position size that trade to a maximum loss. We define how much

we're willing to risk into trade . We did a little over $500 and we have a credit there to the tune I believe is around 1 50. We'll take a closer look, so we're trying to manage that credit and try and capture as much of that. Credit over time with the passage of time and certainly if there's a favorable move to the upside that trade could be profitable, possibly more sooner versus closer to expiration. So as we go ahead and go to the platform, we also have some or other practice trades in here. Ah and we'll take a look at that before we leave. So here's our put short put vertical, where we went ahead and sold. A 36-35 we

bought A 36 30. The ideal outcome is that the price stays above 36 35 at expiration. We're currently at 37 96 were about 60 points away, however, that 60 point gap. And feel pretty

quick, and we've seen that in this market. Okay Ah, if I go ahead and, uh, look at the trade price, we can right click view trades. Again. We went ahead and, uh Sold 74 50. Bought 73. So that's a dollar 50 credit multiplied by 50. Okay? So with

that. We got the three contracts in there. So if we go into the calculator here, let's bring that up. Switch calculator Switch gadget. So we had a dollar 50 credit. On the quote. Times 50, which is the multiplier At 75. Times three.

We have three contracts. That's a $225 credit. If we're able to capture about 70 to 80% of that . Ah so let's say, I'll times at by Point. 75 A little bit higher than that. So if we were able to

get a profit, what well above 150, let's say closer to 170. We may consider close it out that position by simply right clicking on That route symbol or actually, right, clicking on the position. Try that again. Right? Click on the root symbol, created clothes in order and buy back that spread. If you want to calculate on how much that spread would be worth if we're capturing that profit, another way of doing it is taken the Buck 50. And multiply that by let's say 0.25. That would be about 37 cents, so a part of a daily routine You know if we're able to close this closer to around 37 35 cents to buy it back, we would go ahead and lock in that potential gain. All

right. And so that's how we go ahead and also manage some of our existing trade. So let's take a quick look at those and we'll finish off for today. Other trades that we've done and I believe we had closed it during class that some of you were following us on the corn trade. Forward slash zc. We were looking on trade in corn to the downside, utilizing the spread.

We did actually trade down to that level and then when we got a bounce ah, on Monday, we had closed that out. This is the importance of Profit management because if we didn't close it out, a lot of those gains would have been taken back. If we go to the trade tab actually monitor Go to account statement . There's forward slashes EC. This is an example of that profit management that we talked about. With our example today.

This was also a credit spread where we had a credit of a buck. 37 times multiplier. We were able to go ahead and buy a back for a 25 cent debit. So we caught about I believe it was around 80% of that maximum game , So that's where we're gonna attempt to do with our S and P Ah bull put spread. This example

was actually a short call spread . So if one was bearish, sold a call spread for a credit, went ahead and bought it back for that debit. The other trades that we have going on natural gas. Which has been very volatile. We have a short call

spread on this one as well. This one doing little positive today, but pretty flat. Ah we're looking for our example of natural gas to remain below $10.

So basically below that level, and as we go ahead and look forward slash and G. We did close did get close to that $10 level but did back off still in a range, But that's okay if we stay in this range ah, this trade would be profitable, whether stays in that range or drops. So the other trade management is time we are going to run out of time. So there's 14 days left. Ah as we get into that last week, 10 to 7 days. Remember the liquidity we talked about? Ah as you get very close to expiration, Things can get a little more difficult, But if we have not reached our profit goal in that last week, we're looking to close it out. So stay tuned

for that one. On the practice trade and the other one was on the euro. Not a good start to that one that was speculating that we'd have Ah, a little bit of a better summer to start things off. Ah we looked at the

euro as more of a risk on example, that the equity market would continue for him in the base, possibly rise. Notice It's following similar to what we saw with the market. Now as we go ahead and look at that, from a matter of time we still have 25 days. Ah some traders may look to close out the position and preserve some capital. We did do

a defined risk on this trade. So we're we are going to let this one hold. See if we at least get a base foreman and see if that price trades higher. What may do if the price does rally up on a countermove, possibly close it out from there. Alright let's go and double check. Make sure we don't have any additional questions there. Hopefully you

found this informative today, folks. And starting off the week, albeit not the best of times to start off the week here at Tdameritrade education, But there's updates and down days in the market and we are definitely dealing with more of the bearish case. Ah as of late, let's go ahead and make sure we don't have additional questions. Looks

like Ken has got that taken care of. I do not see a survey. But if you enjoyed which you learned here today, Consider click and like, if you go ahead and you take a look right at the bottom of the screen, Ah, well, actually, at the bottom of the screen, you will see a subscribe button. If you're new to this session, or you haven't subscribed to trader talks would encourage you to do that. That

way. You can stay tuned for our next session coming up, so just getting started with tentacle analysis. And other great classes such as Ken Rose teaching the long or correction , the short vertical class, and I believe he does that every Wednesday, so stay tuned for that and keep an eye open. And remember, folks go ahead and click like if you enjoyed what you learned And in order to demonstrate the function of the platform, we did have to use actual symbols. Keeping in mind . Tdameritrade does not make recommendations or determine suitability of any security or strategy through the use of our tools. Any investment decision

you make in your self directed to count is solely your responsibility, so we should have a great day. Folks consider practicing that trade on those trades on your paperMoney account. Look forward to reviewing them with you again.

Two weeks from now take care enough by.

2022-06-15 10:23

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