Directional Option Strategies | James Boyd | 9-11-19
You. To, the class on long. Synthetics. Today's date September 11th 2019. We, welcome, you here today, just. A quick heads-up you can also follow me on twitter jay boy to underscore, TBA and. We'll. Talk more about that as we go through today's session but. We welcome you here today obviously, it's an emotional, day September, 11th I, think. Everyone can remember where they were for sure and, hearts. Go out text you all those families. Firefighters. All the individuals, who had affected and. Support. All of those and we send our love out to those people just, real, quick as we're getting started here again. This class is on directional. Option strategies and, remember as we talk about options, so remember that options, are not suitable, for all investors special. Risk and to, trading options please, make sure that you have and you've read the, previously, provided copy of the characteristics. And risk, of standardized, options, and also, remember that in order to demonstrate the function of the platform we will use actual symbols t, v-- ameritrade though, does not make any recommendations. Or determine suitability of any security, or strategy, that, is up to you decide what you want to invest in hello Edward arturo bill. How. You doing bill Fred, and Edward, now. Today what we're going to be really covering, and also. Remember that as we cover options remember. The terms of Delta, Gamma. Theta Vega, know. How it applies to the, option, strategy, now, just real quick as we're getting started here, we're. Gonna really be talking about just, a real. Quick look at the index, and/or, the sector close we'll, take a look at where the market, did finish and man, it was a strong finish, especially for, the, Dow. Also. We, were going to talk about long synthetics, and if you say well what are long synthetics so let's just kind of beat you to that a little bit it's, really long calls, and. Short. Puts, and, we're, going to talk about why, an investor, might consider that strategy, and when in an investor, might consider that strategy the. Past example, management, that we will be looking at is I have. Two examples of past ones we've done at the bottom here on clack, and pepsin, we're going to talk about the management, okay. We're gonna talk about stop, adjustments, we're going to talk about targets, there so, I promise, to spend at least 15, minutes on, management. Of current, positions, and also. Your questions, now as we go through please. Please. Please. I'm crying I'm trying to, understand. Do not leave your questions for then go ahead and type in those questions. You have as fast you can let's see if we can't answer those as we go now, the. Learning objective, is learn how to leverage a trend, and/or, capital. Now, before we actually start hopping into the index my, mind has been really, in, deep thought here today really. About, you. Know wealth and and do people, really have enough, money, or, are they planning actually you have enough money or are they on track in other words to, have enough money for retirement now. Number one thing is when you think about wealthy, individuals, I think of a wealthy individual, of someone who has choices okay. And they. Choose, what, they want to do so, it's not necessarily, a certain number they. Get to make their decisions, they, get to choose what they want to do okay, now number one thing I'm gonna write down here is when, you look at a wealthy individual, we just defined that is, a wealthy, individual, someone that is consistent. And they're disciplined. Okay. The, discipline, did not come from just a click of a button okay, it, really came from because they actually took. On. Some of their weaknesses and, focused. On how to kill those or diminish. Them and focus, on building their strengths number two they, actually they actually they're writing, okay. Whoops. Excuse me writing a, trend. Okay, now, if you think about that anyone that's wealthy, they're. Writing some type of trend the question always comes back, what, trend, are you riding and then, really number three is they let time, okay. Work. For. Them, in, other words their, money. Works. Hard. For. Them. Okay, so, I think that's really important it's not just working hard for money but having the money work, hard for you now, the purpose, of this really class is to learn to trade the trend with options, and. I think this is also important to kind of say here is that how, many people do, you know, okay. That, became a millionaire. From. Just, saving their money and, collecting. The money off interests through. A savings, account. Anybody. Right. Now used to work in a bank okay. When I was in college. Saw. Lots of savings accounts pretty.
Hard To become a millionaire just putting, money in a savings account and letting, that compound, not much compounding, these days in the savings account where, the interest rate is point zero zero zero, zero zero one. That's. If you're putting new money into the bank now here's the deal the reason I bring that up is we want to talk about how, do we use some of our capital, some of it and leverage, that trend and try to make that money compound. Now. I think. The last thing I want to say before we actually look at the indexes, is here, we are in September we. Know that each year if we have a 401 K we can put in a certain amount of money into a 401 K I think, the numbers 19,000. Maybe nineteen thousand five hundred now. Are you. On track, to. Hit that number that's very important, okay because that's the discipline. To. Actually increase. The likelihood of the becoming wealthy are you, on track to actually hit that now the, question is if we're. Not on track to hit that that actually means that we're lowering the. Future nest egg and also. We're lowering, our, future. Income potentially. Are you. Okay with that now. Two. Last questions I really have if, some. Question, number one if some. Would stole something, from you would, you call the police. Or, the cops depending, upon where you're from down. South they say the police would. You call the cops if someone. Stole, something, from you. Second. Question last, if. You stole, something, for your from if, you stole something from yourself. Would. You report it and would. You do something, to change. That's. Very important, because, as people some, and, I'm gonna speak to me I can. Steal for myself, every day of, opportunities. I'm not taking advantage of does that make sense now, the reason I'm at TD Ameritrade is, I hate, poverty. I hate, ignorance I cannot, stand, it and that's. Why I'm here at TD Ameritrade I want. To help us actually increase, the likelihood where we can be become consistent. Discipline. Learn, how to ride a trend, and also, with that is let, that time, and/or, the money work. For us now. With that said let's start. Going into the agenda item let's go ahead and start tearing this apart now. First thing is I'm going to take a look at the SPX, now. If we take a look at the SPX, you're gonna see that this is about let's see hmm let me see it's.
Really About though let's see one two three in, the last five days we've been seeing the SPX, actually hit the, 20-day, hide that's the Green Line we've hit the 28 high three. Out of skinny four out of five days and the, day that we actually did not actually touch that Green Line that was, really a hammer, candle, so, in the last little bit here it has been more boss as we, really broken out of resistance. Okay. Now, so, the SPX, now the one area if you look at the SPX, and then you compare it in this case let's say to, the Russell. Hmm. Okay, the, Russell that's the one that's more, of the bullish, stampede, okay. The, candle, today look like an Eiffel, Tower Candlestick, seem that the high but. It was a huge move we talked about yesterday on Twitter another. 32. Points to the upside again who's counting but, if you take a look at that that's kind of one that's kind of closer, to the horizontal resistance, than the SPX last. One I'm just going to bring up is the N DX and the, N DX like, the SPX, it's. Not up as much as let's say the raw so it's really the Russell, leading, then, probably, the S&P, and then, probably tied with that really, the Nasdaq now if. We, take a look at this so, when we're looking at long synthetics. Okay so, when we're looking at doing that strategy of quote, long. Synthetics. What, type of, regi or what type of trend, are, we really looking for well number one we're looking to see the price above. That blue line this. 10-day moving average line we're looking for it the price to. Really be above, that 10, day moving average looking. For the price to be above the 30 period moving average above the 10 momentum, above. The 30, would. Be trend. Okay, it's, the biggest thing in an upward trend above, support if. You can't remember that we'd like to see the stock above, both we'll look both, lines, where. There is a trend there's, some momentum, if the, indexes, are doing this it probably tells, us something, about. Other. Stocks, out there now. When we take a look at the synthetic let me kind of show you what they really are okay now.
If You take a look at a synthetic, and I'm just going to kind of put. My cursor right there a long. Synthetic. Is buying, a call now be honest with me how, many of you have ever, bought. A call before tell me if you have. Have. You bought, a call before okay. Let. Me know if you have. Okay. Buying, a call that's, where we have the right, to, buy the stock, at the. Strike price, okay. It's, a debit, in. Other words we pay for it if you've. Ever bought a house you. Bought a call, you, put earnest. Money down that. Earnest, money gave, you the right to buy the house and, an agreed upon strike. Price, okay. At a. Future date and time so, if you bought a house before don't, tell me you haven't bought a call, you bought a call okay. All right so, in this case same idea we bought a call we said look we'll buy that stock at 1:40 we want to have the right to buy it the. Price that was actually paid or the average price was ten, dollars and ninety cents now. It kind of goes back to that idea like jeez got. To pay ten dollars and ninety cents the value, or the risk of buying the call is the value, of that call can go all the way to zero we. Can completely, lose a hundred percent of it if the stock were to go down that's. The risk okay, that's. The most, you lose the. Debit, now. If we, take a look at this thank you for your in that question I'd like to see that the. Second, thing is now, when. We do a long call. The. Long call is what we call Delta positive, and that just means that it's a bullish position, long, call bullish. It is. What we call theta, let. Me bring this up here it's, theta. Negative. Meaning. Okay. Bring. That up what. We mean by that is. What. We actually say negative. Actually theta. Negative. Theta actually, means that we're paying, for, the time decay so. What I'm gonna do now is let me just bring this up so you're gonna see that we, keep. Or being a little slow so let's just go with that just real quick so, we actually look at Delta what you'll notice is Delta, right there, 68. Delta. Positive, but. When we buy a call its theta, negative every. Day that goes by we're. Paying a little bit more. Okay. For, theta because, the theta increases. Typically. As we. Come closer and closer to expiration so. That's a long call, good. Thing about that is unlimited, upside the bad thing about that is we can lose a hundred, percent of, the premium, and it's, negative. Time decay so, again like every strategy some pros and cons there now, when we actually look at selling, the put you're. Going to notice that when we sell the put that's not the right that's the obligation, and what. You're going to see is the delta tends, to be or initially. Is smaller. Than. A long, call and the. Theta is not. Negative. It's positive so. This. Is where we have not a debit, but, it's a credit, we. Actually also can collect potentially, some time decay and we, could also benefit. From implied. Volatility. Declining. So. If you buy a long call and you. Do a short put together. That's. A long synthetic, it's, mimicking. As if, we own all hundred, shares of stock. Directionally. But we don't hell on the shares we. Have the right and the obligation at. The. 140, now, the example, I thought weak actually take a look at and I'm going to start with, a smaller. Dollar. Example. The, one we will look at is a stock, called Amen okay. I'm gonna choose lower dollar now when I first learned about long, synthetics, you. Know you, can do them on bigger dollar stocks but I think when you're learning something big, to. Begin with not, a bad idea to maybe start with a lower dollar stock you. Can learn the same lessons, with a fifty dollar stock as you can to five hundred dollar stock now, if we take a look at this I'm gonna go to a mat now the nice thing about this, and we'll show I'm. Gonna go to the trade, page and I'm. Gonna look at for example to, begin with I'm gonna look at thirty, days, to expiration now one of the things that if you, ever talk to someone that does long calls. They'll. Always be really concerned, about time. And. They should because. They're actually negative, theta they're. So focused on time time time time well, the long synthetic, we don't really have that and you'll see that in just a sec well. If we, chose an option, that was in the, money meaning. We're picking, a strike. Below. The, current, stock. Price okay. So we're talking about below. Now. When we actually do that what I'm going to. Take. A look at that let me just grab a color if I can there we go see. If that comes up. Yeah. Not wanting to play it today you, just go back let me just check that one more time I. Think.
We're Maybe take. A look at it. Ya, know so, what, I'm gonna do is I'll just use the pointer so if we take a look at that that bid price let's say the 2:04. Okay. We've got a 204, bid, 219. Ask, now. If we. Take a look at that that's the in the money called that is the strike, that is, below. The. Current, stock. Price. So. As a 57, Delta now, to start with we're going to show an example of doing it like this and we'll show another way if we, chose let's say the same strike over to the right that has. A 43. Delta that. You're gonna see that the bid price there is 144. Ask 151. The. Bid ask spread is important, because we're buying a call and we're selling a put okay so, that liquidity, is important, here now when. We do a long synthetic, all we're going to do is just right click on the ask price and. We're gonna go to where it says buy and we're. Gonna go over here to where it says call, or, synthetic. Now. If, I, click on that so, we right clicked on the ask price we. Went to buy and then we went to call or synthetic now we, click on that here's. What it looks like now, the actual. Cost. Okay. That. It shows here is a debit. Of 64. Cents, or, 64. Dollars now. That does not include it the transaction, for you buying the call selling the put no that's just the that's just the options now. What you'll notice is if we, bring this to the analyze page analyze. The trade okay. What, you're now going to see on the chart is the risk, profile. Graph, looks. Exactly. Like and, let's just kind of start with the stock what. You'll notice is here the risk profile, graph, really. Is what you'd expect. What. Do you mean well. It goes diagonally, to, the right it. Goes to agonal e to the left that's. The stock now. If we actually had also, the option. Example, down below the long, synthetic. Let's. Select, that and let's we, did the. Graph, did, not change. So. The long synthetic, were you buying a long call and selling a put directionally. If the stock we're to move up or down it's mimicking. As if. You. Owned a hundred. Shares of the, stock now. Are there any questions, with that I just want to make sure are. There any questions with that now what you will notice is when, we do one contract. The, Delta, here, is nine. 975. So. By paying 64. Cents or $64, it's, mimicking, as if, we owned in this case. 99. Shares of stock now. If you own 99, shares of stock it'd be a lot more expensive than. $64. This. Is where the leverage. Comes in okay. Now, if, we take a look at this we're gonna go back to the trade page we're. Going to change it to single order, first triggers, seq, and before. We do that if we wanted, to kind of maybe hold this longer.
Term Potentially. We. Can actually go farther on time and what I'm going to do is I'm going to choose let's say the. January. 20 for example and if, we choose choose, the January, 20, and let's. Say we looked at the ones that they have maybe like the 50s what. You'll really notice is the, debit. Doesn't. Really change that, much so. If we went all the way out to January, in other words three more months the. Debit, went from about sixty-four. Cents to. About a dollar. 68, and that's. That's. Even a little high and it's, only I because, we move the strike down a dollar because, they don't have the fifty ones strikes. In January. Okay. So if you wanted to go further out it's, not gonna really change the. Debit, that much now, I would not fixate, on the debit okay, you, want to focus on getting the, direction. Right okay. Don't, focus on that all these are cheaper these are better the, name, of this game is did, you get the direction, right, now. If we, go back to what we were doing is we were looking at the eleven October's, and we, were looking at the 51 so I'm gonna put that back on here. We go fifty ones so, buying the long call in the money and we're, selling a put, at. The same strike there. It is there's the debit now this is pretty simple because if we have a right to actually buy the stock at 51, and we, paid a 64, send debit we know what the breakeven is just add them together, 51. Plus 64, is. Well. 51, 64, now, what, is the stock, and currently, well. The stock curly, is at. 51:56, so. The stock really needs to go up about eight cents. In the next. Month, to. Actually make. Money okay, you, get past that eight cents we, now start to move into some profits. Okay, now. Directionally. Can, anyone tell me this is the pop quiz what. Is the Delta on this position. What's. The Delta so, if we pick the exact, same strikes, what, would the Delta, be now. Think of direct Delta, as the, directional. Movement, or the, dollars. What. Would the Delta be if we pick the exact same strikes now. Is where I get the answer for that what. I'm gonna do is I'm going to actually down here below it, says first triggers seq, I'm gonna right click on, this line and now, create, an opposite, order what are we really doing well in this case we're, gonna set, the stop, work, in another way we got that is we right click on that green line we, say create opposite, order, and. What, it did is it created a. Red, line now. What you're going to notice is we're going to do what's called a conditional order. For exit we're, gonna say look if the stock were to drop down below a certain price level, exit. The position, okay. How do we do that limit. To a market, day. To a GTC there we go market, GTC. Now, we want to go over to the right, and, when, we do you're gonna see that there is a, gear. There we're gonna click on that gear and now. What you're going to notice is it comes up with that page where we can type in the. Price, so. Right on this page right below symbol. If I click, below. Symbol. It, automatically. Comes up and it says Amen if we. Actually click right here it automatically, defaults to mark and if. We actually say it automatically. Will say at or below and, I'm, going to type in the stop price now. What I'm going to do in this case is let's go back and look and see where that or, a. Support. Level is well. One of the reason, areas of support that we've seen, it. Ran, up at plateaued. Is right. Around the area of about 49, 81. Okay. So, if we took a stop, two. To three percent below. That forty, nine eighty one that's. Really gonna give us 48. Thirty-one. Okay. I'm, gonna go back to where we were bring. Up that click on it again and, let's. Kind of put that in now. What we're gonna see is symbol. A Matt. Method, mark trigger. And I'm just going to type in the price now watch, this very important we do. 48:31. Now. When we type in this number okay, we, want to make sure the number, that we get really here. 48, 31 matches. This. Down, here, and it does and, if. That's what we want to do let's go ahead and say say that order now here's. The quick now I want you to imagine that, we're, buying the stock at 40. Excuse me 51 dollars 51. 75. Or so and. We set a stop at 48. 31. Or so, what. Would the risk. Be per, share if we. Had and. I'm gonna write that down if we, own the shares okay. So let's.
Say We buy a stock, at 51. 56. And, we set a stop at 48, 31. What. Is the risk. Per. Share. Well. If we just subtract, that it's gonna be a write right, around about three dollars and what, 25, cents, so in. This position, if our Delta, is. 100. Times. The. Stock. Movement. And if. That stock movement, is let's say. 325. You. Get, $325. And in this case if it were to go down it would, be a loss now. Think about this it's the same if you, had a hundred shares of stock and the stock movement. Was 325, down, you. Woulda lost 325. Same idea how, on earth could you not know what the profit loss is when, it's like us owning the shares, you'd. Have to know that okay. Now. Here's the deal do, we have the claim, for. The dividends, no. Because, we don't own the shares, we. Have a right. To buy the shares at 51. We. Have the obligation, from. Now to expiration, to, buy the shares at 51, we, just really have the control, we have that Delta of a hundred or trying to get the, direction. Right now are, there any questions here, now, Brent, B says Delta. Nearly, neutral ah. Let's. Bring this up so, when we take a look at this position the answer is, no. That's not true Delta. Is not. Not. Neutral. So. If we bring this up what you'll notice is the Delta, is about. A hundred, and we'll, see that right there I have. A check, mark in, the synthetic, that we just talked about down. Below in green the, Delta, is a hundred, the. Theta, is negative. Slightly. Negative, and the, Vega is neutral, because, we've really bought something and, and, we, sold something so, the Delta, is not neutral, it's, a hundred and it's, as if, we actually have a hundred, shares of stock okay, say. Yes if you understand, that you. Get it, so. The Delta is not neutral. Now. When we take a look at this position if we were to send this what, we have to remember is we have when. We take a look at what's the cost you. Can see as the debit is $64. 590. That's the transaction, for you for the buying of the call and the selling, of the put okay, and what. You're going to notice is that the stock goes down okay. We're, exiting, we. Know about what that loss would be and there, is a transaction, Fein you gotta remember we, have two options, and when, there's two options there's, two, transaction. Fees okay. Now James, I don't understand, the buying power of fact why is this show negative. 1,700. Remember. Whenever you sell a put they're gonna set some money aside, okay. Just, in case you're bi you have to buy those shares at the, strike, price that you sold so. The sole put that's the obligation. Okay. They, want to make sure if you have to buy those shares of the strike price from now to expiration, do. You have any money. To. Buy those shares at the strike price all. Right now, let's kind of talk about this. Okay. Yep. So. Let's kind of take now what I'm going to do is I'm going to put that right in, that, long, synthetic, section right there now. Let's kind of talk about this and now this is where I expect, to hear from you maybe, some questions, how. Do you mean it's a position like this right well, let's kind of talk about this so, I showed an example, of a mat and this right there okay we, know it hasn't failed yet because this is B for the buy order S for, the sell order but, I want to talk about this position let's first look at clack and let's. Really kind of talk about what we would call the, management. Considerations. So. The management, can. Really, be, like. Owning the, stock in. Other. Words is the, stock, staying. Up above support the. Moving average now if you don't mind what I'm going to do is let's kind of take a look at when this position, was entered well, it was entered, right on 8:23.
Now. What I'm gonna do is let's take a look at what we see here, okay so August. 23rd, that's the entry so. If we take a look at this the long call that was bought at. 1090. That, long call value is about sixteen ninety five so bought it at ten ninety it's, gone up some two 1695. It's. Up about fifty five percent the. Short, put, what. You're gonna notice is it was sold for, 1140. And it, is the climb in value to 610, now be careful, on this when. You're the buyer and, you've, bought it you. Want the price to go up the. Mark value, but. If you've sold, it. You, want the mark value, to decline, think, about your house you bought it what do you want the house do you want, it to go up okay, you're, the buyer if you. Sold, the. Rent or the lease you. Want the mark value or the time to, decline, or did your to decrease gate, so you clicks collect. More premium, or rent, or lease, so. Same idea now, the call has made 605, unrealized. And the, plaqued, has, actually, unrealized, made 530, here's the deal if the, call has made more money than the short point what. Does that tell, us about the direction. Well. I'll tell you what it says, the. Long call, it's actually, saying that the long call has actually, made that if this if the long call has actually made more money than the short put it's, saying, that the stock trend has been quite bullish okay. So. If the long call has made more money than the short put it's. Actually saying there's, been quite a strong trend here now, let's go back and take a look at let's say the stock the stock that we were actually looking at was clack we're, gonna go back to the data right. Here clack, and let's, go back and kind of bring this up to 823. And, let's just kind of evaluate, the entry, and then, see over time, how, the, trend, change so here it is okay so, on 823. That stock it hit, that 20, 55 d hi have. You heard me talk about that quite a bit lately okay, good now. What you're going to notice is that's the day in which it was purchased on the end of the day the stock was down but. It was still above the blue line that 10 day moving average so let's go forward here what. You're gonna notice is that that, blue line is, starting. To increase, if. That, blue line is starting, to increase. Increase. Increase. What. Could we do to the stop so. If we were looking at let's say that date August. 30th, and said geez that. 10, day moving average on that day. 1:43. 10, less. 2. To 3 percent. We could go into that order, and say. Look we like to exit. If the. Stock went to. 140. 23. We.
Could Just go in and put the stop on now. If we, went let's say couple, more days over to the right and said James the, blue line is actually increasing, and if, we go to right to where we are the blue line is currently, at. 148. 44. Well. If we said we're gonna set the stop underneath, support less two to three percent we, type that in, survey. Says, 1. 45. 47. Well. If we do that and we say ok 1. 45, 47. Let's do this together, now. What, I'm gonna do is I'm gonna hold this shift, key down on the computer, hold, the shift key down and then. Click, on both, of those lines making, this, you. Got two blue lines now. Now. Once we have that we're going to right-click we're. Gonna create a closing, order and we're gonna pick, the. Top line the. Top line is where we're selling, the call and. We're. Buying the putback so. This is like it this is just like a stock. If. That support, levels rising we're, saying we're trying to lock in some of those potential, games ok now, if we click on sell right there it's, gonna bring up this we're. Gonna make it what's called a conditional order when I say those words condition, order you, should be thinking, immediately. Limit. To a market, day. To a GTC, the. Conditional, order is you found by going over here to the right the gear if, we click on that gear right there what you're gonna see is if, I click on that gear it's, now gonna bring up, let's. Verify that it's now gonna bring up the gear and now. We could bring up this page where we're going to just type in right, below symbol, like we saw before clack. Method. Mark editor, below and then, we're gonna type in. 145. 47. Now, James, when we do a conditional. Order is it. I'm, do we get out right, at one 45 47, this. Is like a stop if. The price, opens. Up below, that number one day for whatever reason, there. Can, be a bigger. Give, back of those unrealized, profits. Understand. That so. You're gonna see that there's this the exit. Point and it's, saying sell, the call and. Buy. The put now. I'm going to go back to save right there confirm. And said now. How many of you actually think you could actually do that look. And see what the support, level is, raise. Up your stop based off that support level okay, I think, you could probably say I got, that covered the, other way you can kind of look at that is what we talked, about is, if. We go back to let's say my memory if the stock were to go down to that price okay, we talked about we. Have a transaction, fee that we're selling, the call and. Buying. The pub back okay, now, if we say okay that's what we want to do we're going to send that order and now. What you're going to notice is another way we can do this let's see if we can bring this up and how different, it is I'm. Gonna go back yeah it's not gonna let me do that I don't think I have lets Sisk. Yep. I do. So. We're in business now look out let. Me just take a look at this just real quick now, what. I'm gonna do is on this chart, I want, to show, you something. Just. Fattening, the line this. Is actually looking at let's say a 10 day. Low. So. I want to go look and see how different our, stop is so I'm clack, what. It is really doing is it's going back 1, 2, 3. 4, 5 6, 7. 8 9. 10. Now, you don't have to count like that at the house okay it, goes back 10, days ago okay. Identifies. What, was the low of, that. Day, in. All the last 10 days that's. The lowest spot the. Gray line right there is really, showing, that, exit, if to set a stop based upon the, stock hitting a low that, would really be at 140. 10, so. The stuff that we set is a lot closer, than just, setting. A stop and a 10 or over. Talking about historically, a 20, and a low it's a lot tighter the, stop we actually put in there was one 45. 47. Okay. Now, the question. Was on aim at what. Is the target now, I would like to kind of open up that to you of, what. Is, the target here and so. If we take a look at that I'm gonna take that off so. Let me take a look at this what, would the target be now. If I only gave. You this, picture. What. Type of price, pattern, do you see on the chart, when. You take a look at this you might say James, I kind of see that we have a high we. Have a base, and. If. You take a look at this on the right hand side we almost went, up to the high again it's gonna hidden behind that order and on, the right hand side we're kind of seeing more like a flag, type, set up, called. A cup and handle right, so. When you actually look at this where was resistance. Well it's about 52, where's. The base of the support. 45. 52. Minus. 45. 7. That. Width, so. If we take $7, and add that. On top of 52. That. Potential, price target, could be let's say 59. Okay. Now, we. Got to move here let's, do another example I'm going to bring up a stock and one, of the stocks are gonna bring up and I'm gonna kind of focus, on maybe a stock that is also at a pretty, violent.
Move. To the upside the. Stocks that I'm talking about is per car and if. You take a look at the car what you'll actually notice is I'm going. Up the ladder here of price and if. We go back to the car what, you'll notice is this, area, right, around 72, we've, seen a lot of resistance, up at that area okay, and it, matter if you don't mind I'm going to go back to a three-year weekly chart and this is what we see a very. Violent. Move, back to the upside now. If, we take a look a this is the stronger the move back to the upside are we, increasing. The, likelihood that, the, stock might, torque, maybe could, break, resistance. Okay. That's. The idea now. What I'm gonna do in this case is I think when we look at the timing we, might look at this and say James if we're. Up at resistance, that candle, right there could be viewed as a hanging, man bearish. Okay. Because. Maybe that stock, maybe pull back a little bit. How. Many of you were thinking it might pull back some okay, now. What I'm gonna do in this example is, I'm. Gonna put a buy limit order, or a conditional. Order to. Buy the options. Or to do a long synthetic, if it, were to pull back a little bit maybe. Today's, lows to the yesterday's, trading. Range, thinking. That the idea that this looks like a hanging man and. Hanging man is a hammer, candlestick, off near resistance, can signal, maybe. That the stock might be setting up for a potential pullback now. What I'm going to do is the price that I'm going to focus on is right about, 70. 60 I'm gonna look for the stock to come, back down a little bit try, to get this as it pulls back now. If we said 70. 60, well. What would be the. First in, money. Calls. Now I'm gonna go look out if I can I'm. Gonna go look out to November's, see, time isn't as much as an issue now so, if we go look at let's say November's, and we take a look at this we look at the 70s, the. Options. Currently, those. Are the prices but. We're saying in this case we want the stock to come down then the way we're going to do that is we're, gonna right-click now, we're choosing the 70s, because. That's the in the, money, contract.
Okay. 70s. And we're, saying in this case if we're gonna go limit. To. The market day. To the GTC, gonna. Go back over here to the gear and once. We go back to the gear we're gonna say look do not get, in until. The stock gets. They're below, 70. Dollars and 60 cents if. That stock gets at or below 70, 60 then, by the call then. Sell, the put at those times at their. Market, prices, now. If that's, stock, and I'm just gonna kind of point this out I need to address one other thing if. We're, taking a look at maybe where the support, might be and I'm just going to write this on here if we, said the support, an investor, might use that 10 day moving average, as a, spot. Where. They might set a stop. Maybe. That stop and I'm gonna kind of write that right on the chart maybe that stop could be set underneath there about. 67. 13 that. Might be a stop area. Now. If we take a look at this and said look if the stock broke out the resistance. 72. The. Base. 64. Same. Idea, seeing. A lot of these if, we're seeing a lot of company handles that means there's probably more. Continuation. Patterns, now, if you take a look at this and then probably means that the indexes, could break out potentially. Eight. Our width from support, to resistance, add that, on top of 72 the, potential. Price target, will come, right, that the potential. Target. Okay, we don't know if it's going to go there's eight dollars plus. 72. Which. Would give us a potential price target, of 80 okay, now. So those are cut that's kind of the idea behind that, trade, example, it's, a potential, target, stop. Could be underneath let's say that. 10 day moving average, 67. 13 now. I want to bring up something just real quick I want to bring up the Pepsi, example, just real quick so. We talked about Clack but. One of the things we want to bring out is we have on Pepsi, the. 135. Call the calls come from 3 355. To 402, and, the. Call has really made about 13%, own realize or, $47. Here's, the pop quiz, the. Call has made less, than the. Short put, what. Does that tell, us about the. Trend. The. Short put has. Made more than the long call is, the. Trend strongly. Up is, the. Trend probably, slightly. Up, or is. The trend, down, if. The, short point has actually made more money than the call this. Is telling us James, the, stock has had a slightly, upward, trend not strong not like lack slightly. Up and it's. Actually gained more money from time, decay, now. When we actually take a look at let's say the stock of Pepsi, what. You'll notice is it's now starting to. Get, down, below that support, level again, let's, think like a stock investor what, is support, well. An investor, might say James I see the support, level let's, say right around 130, for 35. Or so. Could. We go in like a stock investor, and could we actually update, our stop like we did before sure. It's. Got, down below the 10 day moving average it's. Not gone down below the horizontal but, just like a stock investor we're saying look if you go down below that 134. And change, by. 2 to 3% it's, now triggering. Us out instead. Of selling, the stock.
That's. Just selling, the call and. Exiting. The put, so. The entries. In the exits, if, you. Trade stocks. It's. Identical the. Difference, is you're not doing it with the stock the. Difference, is you don't have the dividend the difference is there, is an expiration. On this okay, and there. It can also be differences. Of does, the call do better or does, the short put do better short put does better means, the stock is slightly up if both. The call and the, short put are losing, both it. Tells. Us, that the, stock, has gone down okay. All, right I'm, out of my time there the. Two examples, that we actually did put. Car and. We also did a map we, also talked, about clack, and Pepsi. The, management. Considerations. In terms of X. If, we were to let's say break support, we just talked about the Pepsi example, and, the biggest actually thing to remember as we said earlier today, is when, you talk about wealthy individuals, they're consistent, in their discipline, in, other words they do the same things over and over again second. Thing is they learn they've learned to ride in trend, or they're riding, a trend the. Third thing that we actually talked about is letting that time, work. For, you letting your money work for you by, using the long synthetics, we're not using as much capital. But. With that less capital, we, still have the directional exposure as if, we own the shares of the stock, okay. So, with that said I'm out of my time here so. First off one thing I want to make mention is coming up right at the top of the hour Brent more to be doing a class on really. Odd platform. Demonstration, on with mobile training make, sure you check that out so, much on mobile trading these days it's incredible, some, of the technology, you have right in your hands I also, want to give you a quick reminder that, with what we discussed today in order to demonstrate the function of, we need to use actual symbols we did remember. To go out and practice, this.
Strategy. In your, paper money account see, how it works what, are some of the questions you actually have okay, we talked about it you could go shorter or longer term. That's, not, as much of an issue and think. Like a stock investor is it still above support can. You raise up your stock etc. Okay, nice thing about this is you can still have a target, and the, stop like, we talked about on a mat so with that said remember that in order to demonstrate the function of the platform we, actually use symbols, remember, that TD Ameritrade, though did not does, not make any recommendations. Or. Make. Any recommendations. In terms of any suitability. Of any security. Or strategy. That. Is up to you to decide what, type of strategies, or stocks you, want to pick with, that said thank you so much for your comments your questions and your participation, have, a great day and stay tuned for Brent Morse coming up just shortly take care bye bye.
2019-09-19 13:19
