Directional Option Strategies | James Boyd | 9-4-19
Hello. And welcome to directional, option strategies my name is James Boyd today's date September. 4th we welcome you here today let's. Go ahead and get started and we welcome you Edward and many, others as well just. Real quick today's topic, is on cash secured, put so we're going to be talking about management. Of our existing. Positions, but, then we're going to be talking about new positions, on rolling. To, new positions, so, we're gonna talk about that and you're gonna actually have some in class participation. As you helped me manage this paper money portfolio. Now, remember as we talk about options remember that options, are not suitable, for all investors especially, risk in the air into trading options please, also remember that please read the previously, provided copy, of the characteristics. And risk of standardized. Options also when we talk about, realize. That when, we in order to demonstrate the functioning of the platform, we, will use actual symbols, remember. That TD Ameritrade does not make any recommendations, or determine any suitability, of any security or strategy, that is up to you decide what, you want to invest in and also. Remember. With that when. We talked about options, here today as we will when we talk about selling, puts remember. The terms Delta, Gamma, theta Vega know. How it applies to the, option. Position. And the strategy. That you're looking, to do now, today what we're going to do is we're, going to spend some probably, the bulk of the time really, on the management, of the current positions, as, you'll, see that we have an inventory. Inventory. Just means we have a couple of positions of short. Put so we're going to talk about these we're going to talk about good ones bad ones we're. Gonna talk about what. Is that we're looking at and then how do we how do we manage them so we, will we will take a look at the index, where do we close, second. We're going to take a look at this short put management, considerations. We'll. Talk about new, short, put examples, and there's a few of these we're going to talk about but. I'd like you to be able at the end of this 45 minute class I like you to be able to manage short foot positions, for profit. Or expiration. Or change, in trends, or rolling. Positions, so, it has to do with all of it what happens when we have prophets what, happens when they expire, or near. Expiration, or for, example let's say the trend breaks down or, let's. Say we want to roll we're. Going to talk about all four of those things and I want you to be very comfortable with. Identifying. Why you might, consider different. Things now. First off let's go ahead and take a look at where the SPX, closed for the day the, X the SPX. Closed. Okay, right. At the horizontal, resistance. Okay which, is not a bad place to close and what, you're going to notice is we did actually fall down mid-channel.
We Did and then. It bounced right back to the upside okay, and so, you're gonna see that we had a strong close, right into the resistance now say this if. The index was able to break out this, width right here this, is about 90. S dollars, or nice, and say excuse me 90, points, and if, that way if it was able to break out to the upside the, width could, be that it might be able to get back up to the top of the channel, there that's. The idea or if they're broke to the downside, we'd, be looking at a target. There of about 27. 35. Ish 36. Units if it, broke to the downside pretty, strong close here into the end of the day, semiconductors. Aerospace, and defense consumer, discretionary technology. Stocks leading. The way, Nasdaq. Just real quick when we look at this Nasdaq. Also you'd, probably say the SP was a little stronger but the, Nasdaq, right there still a strong day this, is the first time we've closed above, the. 30 period, moving average it's. Been awhile we haven't had to close above there we've traded, slightly, above it a couple days ago first. Time we've closed above that red 30 moving average line in a, little bit here now if, we go back and take a look at this remember. What we actually saw the market, drop again. We talked about that when. The market actually dropped I think it was August 7th, down, in here we started talking, really about doing short, put verticals, or, short. Puts and so anywhere, in here when you go back and look at our inventory, in that. Red. Circle that's where we started applying a lot, of, short puts or short. Put verticals, but then, we're going to also talk about maybe putting, some new ones on and if you take a look at what the trend has been it's, really, been more psy which which is more conducive towards. This. Strategy, of selling putts, now, let's, kind of so we talked about the index close strong. Index. Close here today and, as we go through now. Agenda, item number two let's, spend some time in this area we're. Going to talk really about short put management, considerations, and I, want to make sure that we're very comfortable. On, this and I'm, going to actually maximize, this, as much as much as possible so first, thing is let's go to the chart let's go to that. Why. Don't we look at this these. The. Strategy, of selling puts we're talking about selling, a put, or selling. A strike okay, where, we think the stock could stay up above. That strike, that's, what we're really doing now. In. Terms of what we get initially. Is we get a premium, but. The obligation we have is we could buy the stock gonna talk really about what we have here sold what. In, contract, we, have 16. Days left now. When people talk about that we have 16 days left they might say I got lots of time I don't, necessarily think of it like that you have, to understand you might have a large. Amount of profits already even, though we're not at expiration so be careful on that when. We also look at the position, we can see that the Delta is 43. That. Number, is immediately. Telling, you something, without, even looking at how, much of my up or down so when, we actually do a sole put position I like, to think of this like a Delta, scale when. An investor, sells a put that is out of the money out of the money they. Might sell it where that Delta's, let's say but let's say 30, and I'm just gonna say 35. Okay, that's 35, now, if, the, Delta, becomes. Bigger. Okay. If it does and, you change that to a blue color so, if that Delta becomes bigger and what you'll see is it. Will actually Bloods go black 43. We, know that the stock is really gone what direction. What, if now the Delta. Becomes 43. What is that really saying it's. Really saying in this in this case. Intro. Video. You. Think. About here's we were talking about the Delta scale.
Bring. That back up. Just. A sec there. We go. Sure. We got that there. We go let's, go back to where we were so, we said we when, we sell these puts we might do something out of the money something, a delta let's say 30 to 40 let's, say we sold it when the delta is 35 if, the Delta now is 43. That's. Actually, now telling, us that the stock has gone down. From. When we entered. The position. What. Does that tell us we, probably, are not profitable, so, if that Delta was 35, and now it's 43. We. Probably don't have any profits lo and behold when, we actually take a look at this we have some profits. It's about $75. On realized, profits, and when, we look at the percentage, of the maximum gain so far we have about 15, 16 percent, now. If. You take a look at that the. Way we're probably going to have bigger profits. Is not. If the Delta increases. So. If that Delta now we're become 60, or if. The Delta were let's say to become, 80 or so if. The Delta is becoming, bigger it tells us that the stock is really. Gone below. The strike price we sold so, when you're managing these positions, we, want to sell the, strike sell. That put strike we, want the Delta, the decline, the deltas saying what is the likelihood of the stock closing one penny and the money if, the, Delta increases. Stock. Going wrong direction. Technicians. Or an option investor, would like to see that, the. Delta, D. Creases. If that. Delta, were to drop let's say in half, from. 35. Excuse me 35, down. To 17, what. Percent, of the profits, do you probably have you. Probably have about 50 percent of the profits if you, went from 35, and let's. Say you went all the way to let's say a 10 Delta, now, it's saying there's only a 10% chance, of being, out of the money at expiration. What. Percent of the profits do you have you went from 35 Delta, down to 10 Delta well, that probably means you might have 7080, percent of the profits, so again. This is where you're selling them you're selling them out of the money typically, you, might sell them at the money if you want to be a more aggressive or sell them in the money if you want to be really aggressive but. The key is where we started let's say out of the money 30 30 to 40 if, the Delta were to decline that's. Where you have the biggest gains when. We take a look at this position the deltas 44, that, tells us we probably don't have a big chunk of the maximum game now I want you to vote right now I want you to vote if. The Delta now is 44, what. Do you think we're going to do with this position do, you think we're a going. To just let, it go it's. Still, trending, and it's. Not really made a large part of the maximum gain so a leave. It alone be. X. In the position, try to take that $75. Gain. Or C. Roll the position, tell. Me what you would do. As. I get some comments there I'm, going to go the charts I'm. Gonna actually bring up let's say the. Recent let's actually see if we can't bring up the position, let's, pull this up and you might be thinking well James you didn't show me the trend yet well, let's actually bring, up that trend and let's, just take a quick look at what we can see on that chart so. There. We go. Now. When, we actually take a look at the chart we zoom, in on this here's Apple so, what you'll notice is on the chart it's still really showing.
Support. That's actually holding the. Resistance, of about 213. Is still holding so. There's really if you take a look at this probably, about 205, and, really. A resistance, of let's say 213, you, don't really see any big dramatic change in terms of trend so. Stocks still holding the support time. Is still burning, we. Don't really have anything to do do we I mean. Don't. Have a large, part of the maximum, profits, we don't. Stock. Still above support, the. Second, thing when we go back to the position we, still have 16, days to go so, on that one, tell. Me how you voted right, so on this one we don't really have anything to, do. Think. Of this as it's still working, now. What. I want to do is I want to go back and I want to kind of see some of these comments, that, came, came. Out so. Now. If we take a look at this so. Let's kind of see so a lot of you said a kind. Of just like let it alone Fred. Actually says exit, well, why would you action if it's not breaking support, why would you exit, if it's. Not an expiration, why. Would you exit, if you don't have a certain, percentage. Of the. Maximum gain, why. Is it, that you're saying I want to exit so I can just make the $75. And maybe. That's, what your goal is, but. I want you to kind of think about this number one we're. Not inside the week of expiration number. Two it's. Not breaking support, number. Three we, don't have 50, 65. 80 percent. Of the gains we, don't have that yet so on, that one what what we would say is it's, just kind. Of think of this as cookies, or brownies in the oven the. Trade is still working, now. If we went down to this next one I'm going to show this example of. Microsoft. And let me kind of go back to this just real quick and I'm gonna bring up this example let's bring it up let's say right there and the one I'm going to look at here now let's go back to the chart so we can take a look at this we're, going to take a look at let's say Microsoft and, the one we're going to look at is okay. It's going to be this September. 134. Put now. What you'll notice on that 134, put we sold, that 134, put you're, going to notice that there's two days left to go to expiration, ah so. Now we're time with something different now now, we're inside, the week of expiration could. We exit. For potential. Profits. Let's look or. Are, we planning on maybe having, the likelihood, of buying. The stock at the strike price let's, take a quick look so, first off I want to see where's the stock price the, stock price is at. 137. 57. The, strike, that was sold and. I'll write that was. 134. Okay. So I was the strike that was sold the, stocks at. 137. So, here's the strike that was sold stock. Is above, that strike. So. There's zero, intrinsic. Value right now okay. Meaning, the stock is above if, we take a look at this what you're going to notice is the, mark, value, is at, 12 cents, 12, cents so, it was sold for. 425. And, now. That's dropped, down to the value of 12. Cents. So. The most you can make is 425, but. If you look at that and say well how much of that do we have we, have about four hundred and thirteen, dollars, of that 425. Right. Now, now. Tell me what you would do would. You consider and say well, I'm. Gonna wait two, more days and try to make 12. More sense. Good. Or. Two, would you actually say James I'm gonna take the four thirteen, okay. Or. How. Many of you would think about James, I would even consider rolling. The position, I think, actually Microsoft. Could stay above support and potentially. Even trend, higher, now. Type. In a. Stay. For the 12 cents, okay. B, take. Those profits, unreal. Eyes try to make them realize or C. Roll. The position, let's. Take a look at what you said so, first off when we actually go back and take a look at this so, um now. Let's let me bring up the charm when, we look at let's say Microsoft let's show what it looks like here it is a Microsoft and what, you'll see is it staying above support now, notice how why we teach, strategies. For different types of trends, sometimes. We don't really have higher highs and higher lows shorter. Term we really actually have equal, lows equal, hides it's really not trending, okay, now, a lot of you are saying Esther, Allen Jim Lynn Grace Clifton, Bobby you're, saying take those profits well hey okay. If we, said okay we're gonna take those profits, we're. Gonna right-click on, that line now last, week what we did is we realize. About fifteen hundred dollars of profits if I, closed down this position, we have fifteen hundred last week if we, take this one it would be about another four, hundred dollars. Okay, so that'd be about 1900. In about. A week and a half not. Like we're counting but, nineteen hundred now if we right-click on, that and say. Create a closing order if we buy it back we're, saying look we got the premium, in the hand when we got in I'm. Now willing, to give back thirteen, cents so I can realize.
Those Games now. When I buy, that back for thirteen cents or try to we. Also get our buying power back that, was the obligation if, we had to buy those shares the, broker had set some money aside now. If we do that okay, single. By plus one the 134. That's the weekly option let's, say we push, that price about 12 cents that. 12 cents is really about rag cheer, okay, so, I'm moving the price it was thirteen, cents, I'm, gonna move it over and see if we can't get it for something just a little bit, better, okay. And that's. A limit, price that, price or less and this. Is gonna be I'm gonna change this from a day order to. A GTC, I don't know what it will fill see if it does fill okay, confirm. And send now, what I'm gonna do is I'm gonna go send that order now. Remember what it's doing is we're saying look I'm gonna buy that back for twelve cents for twelve bucks paying. The transaction, for you accent, and then, there's the total now. If that's we want to do we're, gonna send, that order and now. What you gonna see is it's gone now let's take one more we're gonna talk about some new ones I'm gonna look at the example, of. Ttwo. Now. If, we. Take a look at ttwo. Let me first show you the trend we look at this initially, because we had a lesson on. Relative. Strength, this. Had been one that had been really. Well. He was getting, up closer and closer to, the S&P, line okay. Was something underperforming. For a while that started to more. Mimic, what the market was doing and it, was a stock that really, when you look at the trend compared, to most stocks in the market, it was doing something different now I'm, gonna need your help again okay this is a pop quiz question, number three here so, let's go back to the chart let's, take a look at what we have now, again, it's one thing to put them on it's like the second thing that does, not tell, you that, you don't have a large percentage of the maximum gain do, not think that that's going to tell you the whole story it's not especially. If you had a direction, to move up in your favor now. We, have two contracts, if. You take a look at this you, have 38, that. 38. Is for two. Contracts. So, 38. Divided, by two is. 19. Let's, go back to that Delta scale when, you're dreaming tonight, I want, you to think about this scale you, think I'm kiddin I'm not, so if 35. Let's say between 30 and 40, is what we sold it for initially. That Delta, and now. That, number has dropped in, half and that, number, per, contract. Is let's. Say 19. That's. Saying we probably might have 50%. Of the profits could we have more yes. If we. Burn time. Now. If, we take a look at this position, now what you're gonna see is. The. Theta on this position, is, they. Changed something just real quick. Okay. There, we go so, one thing I want to bring up just real quick when we take a look at the theta, the theta on, this is $15. A day, approximately. That. Number could become, bigger, okay, the. Other thing is we're gonna see so that's positive, so we're Delta, positive that means a bullish trade theta. Positive, and if, you take a look at all these traits of short puts it's, a hundred, and seventeen. Dollars. Approximately. A day in time, decay can. You count on that can you Bank that not, necessarily, because volatility. Is what you'll notice is here that, volatility, is negative, that's, saying of volatility. Expands. It can, actually hurt the. Capturing. Of that. Theta that's very important to understand that now, in this position like see is we, have currently, unrealized. About. 73%. Of. The. Maximum, gain now remember let's say a, would. You, exit. Now remember. That was sold for about four, dollars the. Mark, was really it's 107, so. It was four, and now. It's dropped down to about 107. So, the most you could really make left, is the, dollar o7a. Take. The game now which is about 293, the. Difference there, hey. Would you take the game would. You be say James I'm gonna try to get that last dollar. Oh seven. Okay. In other, words you're gonna stay, in so Hayes take. The game about. 585. Dollars take. The game is a B. James. Don't touch the position, still, got 16 days still got a dollar seven premium don't touch B is don't, touch it C. Is, roll. The, position, in other words where you think, that. Trend, can keep going. Vote. Now well, if we take a look at the position let's kind of take a look at what we got here so. First thing when we look at this is I'm gonna bring this back up and let's look at and I, like to see some your comments on this so if we, say, roll, we're.
Really Saying I want to take in the game now and then. Set, up a, new, one that's. All we're saying now. Allen is actually saying see Reggie, says see Esther, says see so a lot of you are actually saying C so let's put this one in and we're gonna talk about some new positions, now, what we do this is we're gonna right click so, member we last, week was about 1500 the, the Microsoft, position was about 400, so that's 1900, if we, actually try to capture this game if we, do, 1900. Plus about 585. That's gonna be about twenty, four hundred and eighty, five ish dollars, let's just round down to 2400. So, in about ten days we're. Kind, of, harvesting. Really. Trades, that we said look, we wouldn't, mind to buy the shares, at the strike price we've. Missed, some of that opportunity, the. Gains were there and we're saying look if. We miss the chance to buy the stock we. Also have the potential gain so let's say make, some. Money from the premium, and capture. It okay. Now, what I'm gonna do is I'm gonna right-click on that line say create closing order we're. Gonna now do this as a calendar. Now we're, not really doing a count we're not we're, not trying to do a calendar it's, really saying we're gonna buy back the short puts that we have, step. Two we're gonna sell, new, ones now why would an investor, do that, well. If an investor, is actually, taking, the gains in what. They have now trying, to they're. Saying look I want to sell maybe. What, do you have to sell to no, could. You just sell one could, you sell three could you sell five absolutely. That's up to you and your position sizing but. If we said look we're just gonna keep the same number of contracts, okay. Let's kind of mark down here what we're doing we're buying back what we actually have we. Actually did the September, the 125. The putts right. There and the. Other thing is when you go back and say well what strike we sell well when an investor, sells puts they might be looking let's say 30 to 40 days or so well. If we go out let's say 30 to 40 days that is let's say for October. 30. Days. Or so right there now. What you're going to see is when. You take a look at this it's, if, we did 30 to 40 you got the 129. The. 130. And I'm just talking about the ones that are out of the. Money so. When we say out of the money we're typically, talking about strikes, that. Are in that 30, to 40, delta range now you. Might choose, a strike, that has a higher Delta, okay. You can't. It's. Up to you trade. Off if. You want a higher premium greater. Likelihood for, the stock to close in the money lower. Premium. Greater. Chance for the stock to close, above the strike price hence, a lower Delta now. If I if we do this and say James we're going to pick the let's say the, 128. Strike so. We're gonna change, the expiration, here, we're gonna change it right there, and what. We're gonna do in this case is we're, gonna also change, the strike. So. Let's do that we're gonna change this to the for October, okay. Number. Two we're going to change it really to the 128th. Strike, so. Notice, what we're doing is we're going farther, out in time we're.
Actually Also going from the 125, strike to, the 128. Now. If we do that it, gives us a net credit, here of about, a dollar. 62. Now. Think about it yes your friends, and said hey friends, what, are your stocks 10 lately they've, gone sideways have. Your friends, been able to capture any money. Maybe. They got a dividend maybe, they did but. The dividends only come come around four times a year if they pay quarterly but. The premiums, if we did this potentially, to try to let's. Say we tried to every month sell maybe one, two, three, four five puts, we're. Trying to actually create some cash, inflow. But. You have to remember with that potential premium, or that cash inflow, you. Have to remember is we, are a we're, standing, by to, potentially, buy the stock at the strike from. Now until, expiration. Means, they can put. The shares to. Whoever, sells, the putt, now. If, we did that what I'm going to do is I'm gonna say ok let's do limit day GTC. Let's, see if that can fill tomorrow maybe it doesn't we'll keep it there and now, what I'm gonna do is gonna go confirm and send so. We, have a credit, there that's for the two contracts, the, transaction. Fee is because we're actually buying two back and, then. We're selling, two, new, ones now. Let's look at some examples, and I want to kind of start small now, what you kind of think about this. Let's. Say you actually made five hundred dollars every, month in the, market you had some better much he has some worth months but it, was on average 500 bucks and your, purpose of doing that was you just wanted to create some income maybe. There's a thousand, dollars what number is it okay what, are you looking for now, if we take a look at that if we go ahead and say send that order there, we go now, when we do this type of strategy, we're not going to maybe just do probably one. Realistically. We know that all the trades we do are not going to be equal, there's. Going to be some that do a little, some. That do a little bit more some, that are slightly, down and then, some of them actually really do a lot this is like baseball, you. Strike out sometimes, you get to buy the stock, you. Might get a base hit first second, third or you hit a home run or a grand slam same, type of idea we're, probably going to do maybe three or five of these a month, okay.
In The, paper money account so we can see a sampling. Now. When we take a look at this I'm going to bring up an example of a smaller dollar stock to start with I'm. Going to look at the example, of really. Micron. Now. When we text you take a look at micron, I'm choosing, this one on purpose because, when you first look at selling puts I don't want you to think about it that you have to sell some. 200. Our stock now that's nice to sell the $2 stock because, the premiums are bigger but, you have to also think about but. We are buying the stock at the strike price. Potentially. Now I'm going to start with the stock on micron and what you'll see is we see an upward trend, okay, we see upward we, see a really a pullback, pullback. And, then we see really a breakout of resistance, of really buy right here and a. Moving. Average, crossover. Okay. Now. So if we go to let's say micron, what we're going to do is gonna go a trade tip page and if, we go out let's say 30. To 40, days and if, we look to let's say the 11. October's. Okay. And. We are in that fall type of year hopefully. Nebraska. Lisa, can, be Illinois's this year. You. Never know, okay, the offense didn't show up on Saturday at all. Probability. Of winning it's, not high right now at, least for the Cornhuskers now, if we take a look at this is if. We looked at something that was out of the money like these strikes right there we're, really talking about the 44. To about the forty five and a half strike, now, what's interesting about these is it. Has higher. Implied, volatility. That's. Good and bad that means the stock could go up or it could go down that, number, is an annualized. Measure. They're. Saying the stock annualized. Could, go up or down 50, percent well. That would be stinking awesome if it went up but, wonder if it went down I don't want to think about that well that's what it's it's saying it's following the greater. The volatility, the bigger the premiums, this. Number over to the right is also saying, the, stock could go up or down. $6, from now until, the. Expiration Wow. $6, from now to expiration. And it's only 37, days, exactly. The, greater the forecast, and movement, okay. Great at the forecasting, movement the bigger the premiums, now the, bigger the premiums, the lower the break-even so. If we actually went down let's say let's say something in the middle let's say a 30 for Delta and we, said look what we're gonna do is we're gonna left click right.
On The, bid. It's, gonna left click right there if we. Left click right on that one 84 left. Click we. Have now just set up an obligation. To buy the stock at the strike price, okay. We're, saying single. Sell, minus. 1 and. We're saying the 44 put now if, we said we can position, size okay. $20,000. Assume that we're gonna buy a stock. For. $20,000. Well. That's. Our position size now. Someone, recently told me I don't really like position sizing I said when you went into a bank to get a loan for a house or a car did. You tell them what, are you willing to give me I'll take whatever you're willing to give me no. You probably had a certain amount you said I'm willing to borrow 300 I'm gonna buy a borrow car for. $25,000. You did, not take, what the bank can typically, give you if, you are loaning, the money excuse me borrowing, the money there's, a certain amount of what you're saying I'm ok to borrow, are willing, to own. Person. Said yeah, that's what I did exactly, now, if you take a look at this if we. Went in and said ok we're gonna move that mid we're. Gonna move that price to about the mid, and if, we did this this would really give us about four, contracts, four contracts. Of about forty four hundred ish, dollars, apiece I don't. Know what is it $18,000. Somewhere in that ballpark so. If we did four contracts, what. Are we gonna do in this case is we're going to go confirm and send and now. What you're gonna see is there's the max profit maximum. Loss is given, the assumption, the stock falls all the way to zero. The. Buying power what you're going to see in this case is they're gonna want to say does, this people any account have the money to. Buy those shares if they were put to us and you need to realize that these. Shares could be put to us at any time from now into expiration but, if that, were to happen that. Means we still get all of the premium, so, if the paper money account tomorrow had, to buy 400 shares at the strike price there. Is no, certain. Amount of time that we actually have to hold on to the shares we could just sell the shares, immediately. Okay, now, but, we need to realize that now. If we do that we. Also want to kind of keep in mind is we're trying to sell puts on stocks, that we would not mind to own. Given. Proper. Position. Sizing, now. If, you take a look at that, now. The comment from Lisa is why not sell more time, well. We're I'm in. This example we're about 40, days out okay. But. Can, we go further, yes, that's kind of making it where you're not as active, if, we. Go 30 to 40 days you're kind of saying look I want to be more active and try to harvest. More. The. Risk is if you go less, okay. You, might run out of time sooner, so. You have to kind of say do I want to be less active or more. Active now, if we go ahead and say send that order right there there. It is and remember, is we have the premium, and then, also the, transaction. Fee for. Each of, those. Contracts. So. Now we actually look at that when we go back to the position, micron. Is going to be sitting right there it says, zero, because, we don't have the position yet so we see zero, we, also see zero right there position, is gonna, try to fill tomorrow. Okay. Now, second. Stock we're actually going to take a look at here, okay. Second. Stock we'll look at is the. Following. Now. When we actually take a look at this. I'm. Going to bring up the example, if you don't mind I'm gonna bring up the example, of the stock visa. Now, there's two stocks today now on Twitter. Okay. So if you go to Twitter, let's. See if I can't bring this up try. To bring it up quick there. It is so, if you actually go to let's say Twitter and you, can actually search, you could. Type. In J, Boyd. Underscore. TBA. Okay. Now, today what. You'll notice is when you scroll down the.
Examples, That I'm showing you here today, really. Have to do with looking for, stocks, that are making, break. Outs, I'm going to talk about two of these you're, gonna see it right there and I gave you a picture of what it looked like that's those, are updated as of today. Second. When you go down and look at this if you want to see the breakout, of what you're seeing on the chart you're seeing today. You're, gonna notice that there's, the, scripts right there. There's. The script, right there okay, so when you say follow me on Twitter I want. You to realize like. We're talking about content, here we're talking about things that investors, might be looking at and we, also talked about the gold example, I talked about an intraday, chart on the micro future Forex. Lots mgc so, if you have not follow me on twitter check it out try to post on a daily basis, and also keep you a breath, of what's, going on out there now also, quick reminder the reason why I'm pulling this actually up is you might be thinking well what is this chart showing if. You checked out Twitter you actually know I talked about that today you're, gonna see that that's pretty close to it that green line that green, line is a 20-day, high and the. Black line right there that's the 55. Day high now, I'm going to look at doing a larger. Priced on stock now, we saw its cousin, okay. And, it's cousin mastercard, here today did. Let's. Take a look ticker ma we, saw a MasterCard. In a continuation, pattern and it, was poking. Above. The 20-day high and the 55-day high now what's the correlation of MasterCard and Visa are. They uncorrelated, the. Correlate of it then they move together do they move opposite, what do they do well. If MasterCard, is breaking to the upside could could, maybe. Visa trying, to move up in line with, it so. Let's say we said hey the. Position, size and the paid money portfolio is $20,000. If we. Actually looked at this and said I'm gonna go back to the trade tab let's say I want to try to generate, income.
Hey. I want to try to collect some premiums see if I can't capture some of that the investor might be thinking number, two it might. Become a stock, position. Alright. Let's take a look now when we take a look at the implied volatility, the. Implied volatility on the annualized. Number, you're, gonna see that's 22 that is way less than what we saw in micron, this. Number, plus or minus 10 is showing. Us the the, nominal. Amount that, the stock could go up or down from, now until, expiration. So. Some numbers here now. The. First number is the annualized, number the, second, number is a nominal. Number of how much the forecast, is let's not to go up or down from. Now into expiration, and that, expiration, is in the next thirty, seven. Days. All. Right now. If we click on this so we go over here and if we sell something out of the money I need. You to understand, we, don't have to sell the 30 to 40 if you want to maybe, go a little bit higher higher. Delta bigger. Premium. But, a greater chance, of owning, the stock maybe. You don't mind on the stock okay, if you, said James I wanted, to have a greater chance to let's say collect. The income and maybe not, own the stock I didn't say have no chance on the stock but. A less, problem. A lower probability. Well, you might pick something like 175. Okay. Now. If you said hey look my name is Lisa, and my favorite baseball, team is the. Chicago. White. Sox. Just. Waiting for that to kind of echo out there now. Now I'm gonna catch some heat for sure now. If we take a look at this. I'm. Gonna go look at let's say farther, out in time. 15. November. Farther, out okay, yeah. The. 175. S okay, 175. There it is and if. The premium is for six for sixty bad for 80 we're done of the Cubs i I haven't, forgotten okay, now, for, 60 bid for 80 ass okay so pretty liquid now, when you take a look at this if, we left click on that 175, of. Course, the premium is higher it should be we're, going far round time now. What's the white why would someone actually maybe choose that, one that far out well maybe.
They Don't want to be as active, maybe. They want to start out a bigger premium, where they might have not have to access quickly, or roll, as quickly to. Take the time to do it but, also from a transaction, fee perspective, okay. The. Other one is which, options, are most, sensitive the. Ones that are thirty days to expiration or the, ones that are let's say seventy to a hundred days to expiration the, ones that are closer to the expiration, date. Those, are the ones from a price, sensitivity. Percentage-wise. Those. Are the ones that are more volatile. It's. Not the one thousand seventy two hundred days won't move okay. It's, a percentage. Wise they don't move as much, they, still move though now. If we, went ahead and say look we're gonna do the 175, puts sell. Those for 470, we, can audit, we can say. Look we want to try to buy these back and maybe we want to set an automatic. And say look create an opposite. Order here let's. Say I'm, not, always gonna be around the computer and. I'm not ok, but, if we take a look at this, 470. Let's say that that's what we sold it for 470, let's, say we wanted to make a goal of buying it back for 80%. Less. Well. If you try to take 80%. What's left that would be 20%. What's, 20%. Of 470. Well, 20%, of 470, is gonna be about 90. Well. Let's take a calculator, was that 94 cents double. Check and I, think that should be correct yep 94 cents so, 94. Cents we're saying trying to sell high and then. Buy it back potentially, lower and if, at any time from, now into expiration it can be bought for. 94. Cents or lower. That's. What it's trying to do okay, now, from, now to expiration, we have the obligation to buy the stock at the strike price, we're. Getting the 470, premium to commit, to be the buyer at the strike price from now into expiration if. We go look at that trade we'd be doing one contract, because one contract, would be about, 17,500. Dollars of stock, this. Right here is gonna be the credit the transaction. Fee and if. We exit, for 94, cents or less there's. That transaction. Feed to exit, we, have a transaction fee to cross. The bridge, if. I go from Illinois, back over to Iowa across, the bridge again, transaction. Fees same type of idea here now, you're gonna notice that there's a buying power effect they. Want to make sure that this paper money portfolio, has some money set aside to be the buyer of the stock at the strike price okay. That's backed by some capital, that's why they call cash. Secured. Puts, now. If we want to do that let's go ahead and actually put that right in that section of cash. Secured. Pets. Now. If, we take a look at that, let's. Go back and put that right there short puts, send. That order now. What we've actually done so wonder, if maybe the market, in this case. Channel. Sideways, for the next 2-3 weeks, could. You benefit from that what, type of strategies you're using for it you might be using short vertical puts, short, put vertical so I should say as well or short. Puts are also known as cash secured, plots so, yet to realize what we're trying to do is saying hey if the markets not giving us as directionless. Type of strategies. Can, we try to capture some. Direction. From and we. See that it is directional, total but. We also want to say if maybe another month or so were to go buy a month. Of about a hundred, and sixteen, ish theta on a, couple positions that. Could actually add up over time so last week is about 1,500 today, what we actually did is about five, I think about 900, more I think right around about $2,400. In about last nine or 10 days or so we're. Just saying hey look we'll buy the stocks at the strike price if, we can, great, if we, can't we'll manage to those profits, if they. Expire, there in that week of expiration like we saw on that teach, that Microsoft, example, as we, are nearing the expiration, we, recognize, that we, said look do you want to buy that stock at the strike price we said rather, take potentially, the gain at least that's what you said in the chat that's. What we did on, ttwo, you, said, James show the example, of rolling, and we, did so. Our goal here today was learning. How to manage. The, position. Okay, some, of the things we could consider number one exit. The position you've. Made the percentage, you're looking for number two we, talked about maybe you're nearing the expiration, okay. Number, three we talked about rolling. And why an investor, might do that and we also did put on some two new ones we did the example micron, and, then we also did the example visa and, we saw that MasterCard. Was actually pushing to the upside we, said hey maybe. Could visa maybe tag along and maybe, break to the upside as, well now. I'm out of my time here I want, to make just a quick reference that, I'd, like you to go out and practice this, strategy, of doing, short puts make.
Sure That you go out and again create, an inventory of really, at least I would say 2, to 3 positions. That, are let's say in short. Putts, okay, I'd like you to practice that you. Cannot, get good at something. Just. Doing it once ok just I'm going to practice two of these a month you're. Gonna need more practice than that ok I would say realistically. At all times in the paper money I'm time up paper money three, to five positions, in the inventory that. Way you can see examples of good ones ones. That are more neutral, ones. Where the stock closable, the strike price and you, can learn the ins and outs of the strategy I want, you to do that okay. Now, I also want to give you a quick reminder that in order to demonstrate the function of the platform we did use actual symbols, remember, that TD Ameritrade does not make any recommendations, or determine. Suitability of any security or strategy, also. Remember that the class that is designated, for. Cash. Secured, puts is on, Monday, at 3 p.m. Eastern with the. Ben, Watson ok, and that's, on Monday so check that out coming, up also at the top of the hour my good friend Brent Morris will be doing a class on a Q&A. Session, excuse. Me he'll be doing a class on getting, started with mobile training. Ok getting, started mobile training right at the top of the hour so, I want to thank you for so much for your participation I, noticed, that you, guys voted very well ask you three questions you, guys voted. On that's a good job on that also, again. Stay tuned for Brent Morris at the top of the hour learn about mobile training a very, learn, about the technology. We. Have some great technology especially as you're out and about how, can you track your portfolio. Manager. Positions, with the use of mobile devices with. That said thank you so much for your comments and your participation. Stay, tuned for Brent Morris take care bye bye.
2019-09-09 00:15
