Grain Futures Options and Seasonality Charts | John McNichol | 9-30-19 | Trading Futures
Good. Morning everyone john McNichol, here hope everyone had a great weekend, you're. Joining us for trading, futures, our, topic, is commodity. Futures, options so. Stick around. Okay. Well good morning everyone do appreciate you being with us here once, again for. Trading futures. I'm. Your host John McNichol and as you can see on the screen you can see my twitter handle jay, McNichol, underscore. TD, a please. Feel free to go ahead and join us there you. Go ahead and learn more about some of our education, as, well as some of the things that I may be looking at in reviewing. In some of our educational classes, each and every, week now, let's go and take care of our disclosures. Final. Presentation, is for educational purposes, only and not. A recommendation or, endorsement. Of any particular investment, or an investment strategy, in. Order to demonstrate the functionality the platform, we will be used in actual symbols keeping in mind TD, Ameritrade does not make recommendations, or determine, the suitability of, any security or strategy through the use of our tools any investment. Decision you make in your self-directed account, is solely. Your, responsibility. Now. While this webcast discusses, technical analysis, other approaches, include fundamental, analysis, may assert very different views and futures. And futures options trading, is speculative, and is not suitable for all investors please. Read the risk disclosure that's provided, for you here, also. Futures and futures options trading services, are provided. By TD Ameritrade, futures, and Forex LLC, those, trading privileges are, subject, to approval and not all clients, will qualify now. Options are also not suitable for all investors as, the special. Risks, inherent options. Trading may expose investors, potentially, wrap it in substantial, losses once again please, read the risk, disclosure, for. Stant. Risks of standardized, options, also, spread straddles, all the multi leg option strategies, can, entail substantial, transaction. Costs also, advanced option strategies, often involve greater, and more complex, risk than single leg option trades investors, may also wish to consider contacting, a tax advisor regarding. The tax treatment applicable, to spreads and other multi leg option, strategies. Transaction. Costs are certainly part, of each, and every trade and need to be considered, when placing a trade also, we're utilizing a, demo account to simulate an. Actual trade, how, however it is not it, is a demo account you, have the ability, to practice trades, as well utilize in paper-money, keep, in mind it's for educational, purposes and successful, virtual trading during, one time period does not translate, to, success. Of actual funds during a layer time period as those markets conditions. Change continuously. And, even. Though some of the various commodities. Represent. Different asset, classes which. Some investors, refer to as diversification. That, asset, allocation, and diversification, does not eliminate. The risk of loss. All. Right well there's, my picture you can see me here live as well a little bit of a background for me been around for about 15 years with TD Ameritrade education, and you. Can see some of our other topics, and you, can keep tracking me again once again on Twitter or look, at the webcast schedule, and see some of our other sessions, that we teach here, now.
What We're going to learn today if, you joined us last week we. Took, a look at some of the technicals, and pivot points we'll, go ahead and see what the SP is doing that first thing this morning here, but, we'll roll into, commodity. Options, we've, done some previous practice trades on crude. As well, as gold we're, going to talk about a couple other. Commodities. Here today, predominantly. Grain, futures we'll, take a look at soybeans wheat, and corn today and we'll. Look, at some of the technicals, some. Of the reports, that are associated with that and, apply. What we've learned by. Doing some, defined, risk option spreads and. Talk. About some of that potential entry. And exit our learning objective for today is once, being, through this class one. Should be able to take a basic understanding of. Grain. Futures, and be able to do a define. Risk, spread, that's, our objective for today. All. Right I. Don't. Say we can go ahead and clear this out here, it. Probably a good opportunity to, transition to our screen so we can actually go ahead and look, at the. Futures, this morning. And. See if we can fix our screen here. There. We go. I'm. Going to bring up the thinkorswim platform. And. You. Know certainly. Tweets. Abound and. Impeachment. Very. Important story, going. On along, with, ongoing. Issues on trade talks Middle. East all kinds of things happening in the world now, withstanding, that as we. Look at the ESPY. Futures this morning we talked about some of the pivot points last week we. Have a daily pivot. At. Around this purple level and in. Gold the, weekly pivot, now. Notice throughout the, night. Overnight. Prices. Have pretty much bounce back and forth between that daily and weekly pivot. Implying, a little more neutral, there now. Prior. To the market open we did see a dip below that daily pivot which. Implies a little, more bearishness. And. Prices, went ahead and snapped right back above at the opening and we're, seeing that battle, going, back and forth once, again. Now. What some traders may look for looking. For a break down below the lows of the. Overnight notice, that there was a retest. Of that. And. Active. Traders may look for a break of that support, and possibly. Trade down to, the next pivot level or looking. At some previous lows, in the, price action. From. A bullish perspective, traders. Would be looking for more of a bounce and seeing, if prices are able to get back above, that, weekly, pivot. Now. Kind of transition. Into the daily chart. Will. Go and will maximize this this, is a one. Shot we'll be taking, a closer look at with. Our commodities, we'll be looking at some daily charts here today and this. Is the S&P futures. /es. We. Can see kind of that drift, and pull back over. The last week week and a half and, it. Is interesting with a lot, of the various, news, coming, up even. Talk about possibly. Cutting investment, in China which. Supposedly, has been debunked but, keeps going creeping. Into news, prices. Are still holding. Above some. Of the intermediate trends. I have an example of the 55 period, moving average here on the, chart and. We've. Seen a series of days of you know kind of indecision. Prices. Kind of selling off making some lows and then coming off of those lows, little. Indecision. Again. On Friday prices, that sold off kind of tested that support, came, back above and currently. We're in and inside day. I'm. Gonna go ahead and a right-click on the chart here. You. Right-click when in doubt on to think or some platform. I'm. Gonna right-click and, clear out those drawings, here. And. From, a daily perspective. What. Traders may be looking for is looking, for a strong. Bounce or essentially. More of a break, above. Out of this shorter, term downward, slope, an. Inside, day if that holds could be the first sign of that potential reversal no.
Guarantees, On that that's a bit of a pause. We'll. See how we go through the week here I, do. Tweet about this as well on some of the indices on how they round out each and every week a lot of investors, also looking at the Russell the. Small caps. Some. Traders look at the Russell, as a bit of a, leader or a, leading. Type. Indicator, it's 2,000, stocks US companies. Usually. As the economy, is weakening these are the ones that would get hurt the, most, we. Touched on Fibonacci, last. Week as well. Going. From the previous, swing on the russell which is very strong from the beginning of. September, to, its high. Prices. Have retraced, to, a 60 1.8 level, almost. Touching, that intraday. Some. Traders may refer to this as a make-or-break, point so. Keeping, an eye at around that 15, 15. Mark on the russell and. If that momentum, continues, to go on the downside, if there's, a break below there or, if we see a consolidation. And an, attempt to bounce off of this area. Hey. Clifton nice to see you there on the chat as well as everyone else if you do have any questions feel free to share would certainly love to hear from you now. Let's. Go ahead and talk a little more about. Our. Commodities. Here. Here's. Just a comparison, for those of you that are new to futures. Or futures options welcome. This. May be a little more intermediate to advanced so we do have Barbara Armstrong teach. A nice class called getting started with futures that, is every, Tuesday, morning at, 11:00 a.m. Eastern, Time, but. If you're, already trading. Options. On, equities. The. Leap in options, on futures is, not really necessarily, that huge. We. Can apply these same, strategies with. Options, on. Futures as, we do at equities all, we need understanding. Is a bit more of what they are there. Are different asset classes to be familiar with and that's what we attempt to do each and every week. There. Is a little, more efficiency. Since. These are leveraged instruments, as, far as the amount of capital, that. Is put up for them and that's going to vary. Trading. Hours beneficial, for a lot of active traders they trade virtually 24 hours a day six days a week that's. For the underlying futures, as well as the options. No. Pattern day trading rule. Not. That we would endorse day. Trading that, some traders do. Do. Very active, trading there the day trading rules do not apply to, futures, now. Also one. Thing to understand is when it comes to expiration, is.
What. Happens, when. That contract, is settled, in. Equities, typically. It's going to be settled in an underlying, stock, or. Settled. In cash on those equity options in, the case of futures. Options. On futures, on. The indices, they would typically settle in cash much, like the. Our index, options. However. On. Some, of the contracts we're talking about today. May result, in physical or result. In delivery, or, I should say. Results. In a position, in a, futures, contract. Which. May expose. You, to additional risk, and also. Those contracts, may end up having a physical delivery. Of the. Commodity. In question, now TD Ameritrade does not allow delivery. Of those. Contracts, or, delivery, of the commodities, for those contracts. Keeping. In mind one. Would have to close out that position. Prior, to expiration and, there's a calendar for that. Let's. Go ahead and break down a little bit more on some of our. Different. Commodities. Now. Again. We went ahead and reviewed on a crude, and gold last week so this is just kind of a a bit of a review and you can see the contrast when we go ahead and look at some of the grains. The. Premium, or the. Multiplier. Times, the premium, gives one an, understanding. On what. How. Much money one is putting up for that contract, each contract, is going to have their own multiplier, as well. As understanding, the tick size. Looking. At crude crude was $1,000 multiplier, we. Had a 10, cent or. A 10 dollar tick, size each penny is worth. $10. You. Can see the various trading hours now as we look at different commodities, make note that the, settlement. Of, that, contract, the daily settlement will. Vary, so. It's not necessarily, going to be you, know at the, equity, close you know at 4:00 p.m. Eastern Time for instance in the, case of crude the, settlement, is actually at around 2:30. Eastern Time or 1:30 p.m. central a lot of these times are in central since a lot of commodities, although, not all of them are have. A tendency of trading more in Chicago area or. Central Time end. Of trading. We. Need to understand when that contract ends trade as well. As what happens, in, that settlement there and then, also keeping, in mind you, know what types of reports, are coming out on them so. We have reviewed that on energy. There as. We. Go ahead and look at some of the other contracts, natural. Gas we, didn't do a practice, trail on natural gas but we did do one on crude and we, did one on gold now when we look at gold multiplier. Is. 100. Multiplier. You. Can see the settlement times again, how they are different. Even. Though they may continue trading, that's. There will be a settlement, at a particular.
Time. Each and every day, and. The. Various news that's associated with that now before we go ahead and move into our grains let's take a look to see how our to, practice, trades are doing on both, crude. And also. On the gold one. So. We're gonna go and bring up you think of some platform. It's attempting to there, we go. I'm. Gonna bring a /c. L for crude. And. You. Know a lot, of things been going on with crude we saw the spike earlier this month. With. The drone attacks. On. These Sally facilities, they're a but. Notice after that prices. Did. Basically. Scale, back and basically. Came back filled in the gap and came back to support. Now. What we did as far as with the trade, I'm. Gonna go to the monitor tab will. Bring up a count statement, and. I'm. Gonna go ahead and. Bring. A go. In the past here so we can see this. Particular practice. Trade /c, l. And. We did, this back on the 9th we. Did an iron Condor. We. Did an iron Condor, on, crude, which. Is simply a short. Put. Spread and a. Long, a correction, a short, put spread and a short call, spread a kind. Of a way of looking. At it was we. Were, bullish. At one level where, we expected, the price to stay above a certain price level and, so. We constructed a, short, put vertical but. Then we expected, prices to stay below another, level so we constructed a short call, vertical more. Of a neutral strategy it is a credit, spread we're expecting, prices to stay back, and forth in that range. When. You go ahead and look at this. Looking. At the short strike. So. We, had sold a 53-foot. And. We. Had sold a 62. And a half call so, the expectation, was prices, would stay in between, those. Two short strikes. Sell. By buying, a cheaper, option against. Each of them we, defined the risk on the trade now. We received, a credit. Of. 17. Cents. Now, is that really 17, cents well. We need to go ahead and look at the multiplier. It'd. Be 17, cents times the multiplier, of a thousand, so, we came over to the calculator. 0.1. Seven, times. 1,000. That. Would be a hundred and seventy, dollars, now. Times. The number of contracts. We. Had nine contracts. Times. Nine. Our. Maximum. Gain. Or potential maximum gain minus commissions would, be fifteen, hundred. And thirty dollars now. What's happened since then. Well. When prices, went ahead and spiked on crude. The. Footside. Would. Have depreciated, greatly. And so, on to 16th, after crude. It's spiked. We. Went ahead and bought, back the, put, spread. For. Six, cents now. Be six cents times that multiplier. So. Kind of locking in part, of the gain on the trade. So. We're still law. We still have that short call, vertical, so. If we go back and look at this. Prices. Have went ahead and pulled back to, a support, area. Now. What we could potentially do is close out the call spread since, this is pulled back to support there's, a member of the 53, strike, I believe. Is where our short strike is so we want the price to stay above there some. Traders may look for it over next couple of days to see what, it does. May, wait for the price or correction. We. Already closed out to put one it's. The call side that, we pulled away from, so. As we're pulling away this, call side would get less. And less expensive. I mean, we'd be locking in more and more the, whereas, if the price bounces and, trades. Back, up towards, that strike. Then. We may be giving up some of our gains so, let's see where we're at on that position. If. We were to go ahead and. Look. To possibly close that out so. Here's our. Short. Call spread there's, our current P&L on that. If. I go ahead and right. Click onto position, I can, create a closed in order and, we. Can attempt to buy it back for 4 cents, times. The multiplier. Hit. Confirm and send. And. You. Can see, the. Commission's, transaction, fees this, is how much we're paying. To. Buy it back so essentially that's how much profit is left, on. This. Trade now, remember a maximum, gain was, upwards of close to about 1500, on both sides although we closed out the put side a little bit earlier if. I go ahead and close, this one out. We'll, attempt to close. That. And. It looks like we got that filled. So. When we go ahead and look at the, particular. Position here. On. That, account statement so we close it out so we had a 17, cent credit and we.
Basically Bought. Back nine. Cents. So that is a net. Of. If. My math is right that. Would be eight cents. Times. 1,000. Be $800. Correction. Leaves $80.00. 1000. Times. Point zero, eight. Times. Nine. So. We basically captured, about fifty percent of the maximum game, not. Too bad over a relatively. Short period, of time. These. Options, still had about another. Several. Weeks left I believe it was seventeen days. So. Being able to capture a, good. Chunk of. Those. Gains within a relatively, short period of time and. Also. Factoring, in that, we did not expect. Some. Of those events, such as the drone attack and, gave. Us the ability to lock in some of those gains and also, reduce the risk, now. When we look at gold. Look. At /gc. For, example, the gold trade. Was. A, short. Put, vertical, and. If. We look at the short. Strike, the one that we sold, we. Sold a 1485. And bought a fourteen, eighty so. The expectation, is that price should stay, above, that. 1485. Now. If we go back and look at the chart. Notice. 1485. Is. Just. At support. Kind. Of seeing that gold area kind of how we constructed, that now. Notice the price has pulled back and it's touching that so when we look at this trade it's probably showing up, you. Know as a, bit. Of a loss. 250. Now. There are 28, days left, in this trade, so. Really not much action, to take on this one as we're. Looking, to give it time for the, price to make that move come. In to support at around 55 period, moving average yes. Gold has made a, lower high so. There could still be some downward pressure if, price breaks down. Some. Traders refer to this as a. Head. And shoulders if. You look some of my tweets I've actually tweeted, a few examples, of head, and shoulders patterns they've been appearing in the market so. If gold was to break below, that support. The. Reason why we. May have been in to trade no longer apply some, traders may look to close out that position, and limit, their losses. Other. Traders, may just already define the risk and lit probabilities. Kind, of come in their way there's, a difference between prices, touching. That. Strike, versus, expiring, at that, strike. Or. Be it or expiring out of the money so. We'll continue to follow in gold, and we'll see where we go with that. All. Right let's go and talk about some of our grains here. Let's try it one more time so. You, know understanding. The. Contract. Makeup of some of these grains should be relatively simple as their. Specifications. Are. Going to be very similar in, fact if not the same, when. We look at grains soybeans. Very. Popular product around the world kind, of in the forefront of trade. With. China there and we, can see that when we look at the charts on how that may be reflective, there our multiplier. Is going, to be. 50. On all. These grains so when we look at a quote each. Of the grain quotes, would, be multiplied, by $50. Which. Equates out to a tick size of six, dollars and 25 cents or about an eighth of a cent I, each. Of those is worth again, about six dollars and 25 cents you can see your trading hours notice the settlement.
Time. For. Grains is going to be at 1:15. Central. That, settlement is basically, on when all contracts, are settled on a day, to day basis. Now. Trading is going to terminate on the last Friday which proceeds at least to business day the last business day of the month prior to contract, month now some of these explanations, may sound a little confusing but don't fret. Remember, on the thinkorswim, platform we, have the little days in brackets. So we can clearly, see, when. That, contract would, be coming up to expiration. Now. What happens, at expiration. On the various grains an, options. Exercise results, in a position in the, underlying futures, contract. Now. Those options, may, also have contrarian, instructions. So if one's do in a spread one, may be assigned, on one contract, and a banded, in the other so, it's pretty important for us to manage, these trades and understand. If there is an assignment one. May, have to go ahead and close out that underlying. Contract. Now. Some of the reports, that, one may, be, able to look at for. Various grains are provided by the government, as. Well as the, Commodity Futures Trading Commission. You. Have the WASD. Crop. Report, USDA. Has. Our Economic, Research Service and also. Their, statistic service and then. Every Friday, the. CFTC puts, out the commitment of traders report every, Friday at 2:30. Which shows the, breakdown of positions. From. Commercials. And speculators. Institutions. From. The previous week maybe. Sometimes I'll, see if I can actually bring, up an. Example of that report, there but you can go ahead and go to the. CFTC. Website, and bring, that up in fact let's go ahead and actually show you. For. Instance on the government reports. We'll. Go ahead and bring up website. Here you, can. Simply go ahead and do something like Google, for. USDA, and. Both. USDA. And, the. Economic. Research, are here, and we talked about Twitter earlier. A lot of these government. Agencies also. Have Twitter's so if you're you, know very heavily, involved in, some. Different commodities, you. Know one can possibly be alerted. Or be informed, on some. Of the reports that are coming out you can also go directly to, their website and, look, at. Their calendar, as well that's. Both for USDA, and also. For the. Economic. Research Service. All. Right, let's. Go ahead and continue on here. So. If we go ahead and take a look at some of the other contracts. Let's. Try go back here, so. We have wheat. Again. Same, multiplier. Same. Tick size same, trading hours same. Reports. That we can look at here that's, going to be /zw. So we have /z. S for. Soybeans. /z. W, for. Wheat and we. Have. /z. Go. Back one here. /z. C, for. Corn. Now. These are some of the more widely traded. There are other commodities. And grains that are out there we. Go ahead and try and illustrate some, of the more widely traded. Commodities. That are out there so. These are some of the things to consider here now some. Of the other things to consider when it comes to these commodity, options here is. If. You're already training options on equities. Taking. This leap into, doing spreads on futures. Is not that, big of a deal spreads onto futures options we're. Gonna do a couple examples here for you we. Can review the economic calendar. For. Government reports that are relative, to each of those groups and. Most. Commodity, options, are going to be american-style, which means they can be exercised, at any time if you're already trading options, on equities you're already familiar with that now. We try to provide you some of the latest and greatest on the. Commodity. Contract. Specifications. But, to keep up to date you can go to the CME Group comm, as well. As on the TD Ameritrade, comm slash. Futures. That's, also where you can go ahead and get. More information on opening, the futures account keep, in mind not. All clients. Will qualify for that alright, now let's go ahead and take, a look at some of our charts. And let's say when you do a define risk tray on some of these grains here. Alright. So I'm going to do is. As. Some of the comments there sorry bye mr. comment there Francisco. Its back at support with traders expect to retest the highs on, crude. So. Let's go bring that up. Now. Remember there's various factors, that. Will go into as we discussed. Last. Week. On. On, commodities. It's, not just supply and demand, which, a lot of that is relative, to economics. Or, the economic. Strength of various economies. Also. The value of the dollar can. Have an impact on. Commodities. In general since, lies commodities, are priced, in dollars. So. Bring up like for, instance dollar sign DX y you, know the dollar index has actually been trading higher. So. The impact as far as crude, being down could have impacts, to the based, off the dollar, impacts. Off the supply and demand, now, if the dollar was to drop and.
There. Is more demand or. Less supply then, we can see that pressure, possibly. Occur, on crew so. Remember there is a technical story but there's also a fundamental, story as well and, when it comes to commodities, both. Probably. Need to be taken in consideration. But. If the trader was looking for a bounce. They would, usually. Observe around the support area support is still rising and if. Prices. Were to bounce you know they may look to enter. And attempt, to trade, to a next level of resistance, or possibly. Those previous highs but. Let's go ahead and take a closer look at some of our grains here we'll, do. /zs. As. We. Go take a look at /zs. I'm. Gonna go ahead and I will bring this up on the big board as well. So. You know those, you that follow me in in the technically speaking which will be later on the day at 2:00 p.m. Eastern Time you may be recognized. In another, pattern, here. Look. At the transition. Of prices. That were making, lower, lows. So. If we see. This. Price action that was making lower, lows and. Transition. And potentially, making higher lows that's. What some traders will refer to as an inverse, head and shoulders. Looking. At resistance. Forming. More of that a neckline. A. Reversal. Would occur or potentially, when prices, are making those higher highs and break, in that neckline now we're seeing a bounce on. Soybeans. Today, as prices. Are trading. Above the, high of the, low day so. What, we may look at is an example, of maybe, a short. Put spread if the. Expectation, is over a period of time we. Expect prices to stay above, this support, and, possibly. Have at least a neutral, to an upward bias, now. Some. Traders may look historically, to, see on how this, may have played out and, we. Showed you this in the past on some of our other commodities, if we want to we, can go ahead and, change. The, style. Of this, chart. Allow. Me to, there's. A chart note when, you go ahead and right-click or you go to the settings and under, chart mode we, can change this to seasonality. A lot, of commodities have a tendency, of behaving on a seasonal, basis, so we click on seasonality. And, it. Did not seem to want to do that for us let's try that one more time. Chart. Mode. Seasonality. There, we go. If we're looking at this we're seeing two things one in, green. Is, what. Soybeans, are currently, doing, in. The. Other color, since. I'm slightly colorblind, I'm not sure if that is red or black. Sometimes. The, resolution, throws off. It's. A historical, five-year average of what, it's been doing over the five previous years now. As we look at this. We. Can see that, it is actually. Rising. In, the. Last quarter of the year now. That doesn't mean that it's a foregone conclusion that. It will happen this year again. There's a lot of events in with the news and therefore. But. Some, traders may look at those past, patterns. And make, some assumptions, possibly, going forward now, if you wanted to you can also break it down and show individual. Years, as well. By. Just. Go into the settings. Click. On the settings and. Within.
The. Appearance. Of the, charts this is where you can go ahead and change things to, candles. And. Construct. Different color backgrounds. Things, like that it defaults to the average, but, we can bring up a yearly, and average. If you want to compare two different years. I'll. Go and apply that and click OK, so. You can go ahead and look at different years you have the legend up at top. Once. Again if we want to go back to the regular charts, we, can go ahead and go to style and. Bring. Up that, chart mode and change. It back to your. Standard, chart. All. Right so there's you know a technical. Setup there looking. At some of the history there so let's go do a practice, tray and say we can do with this all right. So. We're going to do is we'll go to the trade, tab and. We'll. Look at different explorations. Now. Make a note notice, that as, you. Can see oh well here's a contract. For. November. And you're. Thinking okay. November's. Contract. Plenty. Of time but. Keep in mind look. At the date in the brackets that's 25, days, this, November contract actually, expires. In October it, does not expire, in. November. So keep that in mind. But. There is 25 days let's say we'll use this as an example. And. We're. Going to apply the same principles that we teach in our, trading, options course which is accessible, under your education, tab. If. I go to education and. Under. Options. If you're unfamiliar, with this strategy, you. Can go to. Courses. Options. And select. The trading, options, course. The. Vertical. Strategy. That I'm going over with right now as, well as what I do Wednesdays. At. 3. P.m. Eastern Time on, equities. You. Can learn that right here, so. I'm going to go back to the trade tab and. We're. Going to look at strikes. On the put side that, are a bit, out of the money. Some. Traders may be looking at those deltas, in the 30 to, 40 range here. So. Let's say we look at the.
Let's. Say we go ahead and look at the 880, strike, here. So. 880. That's. A 31 Delta so. The expectation, if we, were to do this is that price would stay above 880. Let's, go in and look at the chart and can clarify that. So. Notice 880, is right, at support. It's. A lot of times when traders may be doing, a selling. Strategy, for. A spread in case, of a short. Put spread it, probably would like to see that, level to be at, or. Below. Support. So. It's kind of right at support, some traders might like to have a little more room on that we can maybe make some comparisons, there on the. Strikes. If. I go ahead and. Say. We right-click, on. That 880, and. Select. Sell. Verdict. This. Is a 10-point. Wide notice, and say dollars said ten points, since, there is a multiplier, here and. The. Credit is two dollars and seventy five cents now. Remember that two dollars and seventy five cents, is multiplied. By the multiplier, notice, in the quotes here there's at fifty, multiplier. Via. Confirm and send. We. Can learn a little more about, the. Potential. Maximum game. Trying. To work it here. Confirm. And said. This. Is going to be our maximum profit one. Hundred thirty seven dollars and fifty cents that's, taking that to 75, times 50, times. One. And. The. Maximum loss is going, to be three hundred sixty two fifty as, well. As our transaction. Fees now. By dividing. Maximum. Profit divided by maximum loss we can determine our return. On risk, so. 137, fifty divided by three sixty two. Let's. Click on edit here. We'll. Do 137 50. /. Lee. That's three. 368. Looks. Like you've changed up a little bit here let's try one more time here. Just. Do one 31. /. 368. That'd. Be a return on risk of about 35%, a, lot, of times on short verticals. Some traders may be looking for somewhere around you. Know a, 30%. Return on risk kind, of balancing, out the, return. With the probabilities. With. This being a 30 Delta, that's, considered, to be a higher probable, that, the, price. Would expire, or the option would expire out, of the money that would be a desired outcome, if the price stays above 880. Now. We can also position size this to a maximum, loss. Taking. That 375. Let's. Say I'm willing to risk about a half percent, of this account. Which. In this example would be about 1750. I'll. Take seventeen hundred and fifty. Dollars, and we'll, divide that by. The. Maximum loss of 368. I'll, just do 369. Around, that there that'd, be four point seven four contracts, so, if we go ahead and do four contracts. Hit. Confirm and send, we. Can see there is our maximum loss. 1475. Defined. Risk define. Game and. We'll. Go ahead and we'll, click. Send. It. Looks like we got that filled so we'll go and continue following that one let's. Take a look at. Two. Other charts. See. What they're looking like. If. You have any questions feel free to ask as we'll go ahead and we'll get ready to wrap up here. Here's. Corn. And. We. May see similar, patterns as, we. Look at these different charts. Once, again kind of that transition. Lower. Lows, to, potentially, higher lows, there's. A, neckline. Corns. Bouncing, a little bit today some. Traders may go ahead and look for a breakout. First more. Of a confirmation, to that. And. If. We go ahead and look at, /z. W a. Little. Bit kind, of similar, pattern. It looks like we'd had gone down a little bit stronger previously. But. We can apply the same. Types. Of tools. Just. Kind of connect in off of. The highs they're a. Little. More of a slanted, inverse, head and shoulders. With. That potential bounce. All. Right. Let's. Say I don't see any questions there let's take a quick look at the. SPC. If there's anything new there. Mo. Grande will wrap things up for the day. All. Right so as we go ahead and take a look at on, the SP futures. We, can see that you know we're, up on the, day you know after kind of being a little, dancing. Around that, daily. Pivot. Got. A bit, of a bounce of trade above it and looks. Like trying, to retest. Up. That's not that's ZW, let's try that one more time. That. Looked a little odd as. We. Switch in our charts here let's. Go ahead and click on the drop down here. We'll. Go ahead and bring up /zs. Fortunately. It's doing the same thing as we're. Trying to zoom in and see what we can bring up here there, we go. So. After kind of dip in, below. That. Daily pivot and. Let's. Go back to the screen since that doesn't seem to want to work.
Bring. That back up. Zoom. In. So. As we're looking at this one. On. The SP futures we, were kind of down below, that daily pivot price. Went. Ahead and broke, above the daily and now, we're back up there testing. That, weekly. So. Looks, like the markets trying to write itself on the week still. Kind of going back and forth in that range but. Not a bad move between. That daily, to the. Weekly. That's, about a. Six-point. Move there, alright. Let's go ahead and wrap, things up folks. So. This is what we had learned today. It. Allow me to there we go so today we learned some about some of the characteristics. Of various. Options, and commodity, futures, we. Looked at some of the impact. On. Some, of those reports and where we can look at those reports and we. Applied the defined, risk, option, trade today by. Doing a, short, put, spread on. Soybeans. Now, what, encourage you to do is practice, what, you learned here today, was. It something like soybeans. Grains. Like. Corn or wheat as you're seeing some of those patterns maybe, look for a breakout or maybe, go back to some of the other commodities, that we've reviewed today, such, as crude or gold. And do, a, practice. Define, risk trait go, ahead and take a look at the charts for, support bounces, or, maybe resistance. Bounces. If you're looking for a bearish trade. Go. Ahead and look at the seasonality, chart, as a lot of these commodities. May have different seasons no guarantee, that that, same outcome would, result. And. Talked. About some of the potential, entry, points as, well as exit, points as we manage some of our exits on our crude trade today so. If you learn something new today folks, and. Remember. In order to demonstrate the functionality platform. We had to use actual symbols keeping, in mind TD Ameritrade does not make recommendations. Or determine. The suitability of any, dirtier strategies, through the use of our tools any, investment, decision you make in your self-directed, account, is solely. Your. Responsibility I, was. Just looking at one final question there Ron, says I know you can trade bid ass 24/7. However this applies to options, it does, apply as well to. Futures. Options, keep. In mind liquidity, liquidity, liquidity, look, at the spreads the difference between the bid and the ask is. Something to consider as well. As your transaction, fees -, all. Right folks well. Hopefully you enjoyed your time together. Remember. Feel free to go ahead and follow me on Twitter there, would. Certainly love to see you there as. Well. As you can go ahead and sign. Up for Twitter if you want to see some, of those economic reports. From. Some of those various government entities, as well coming. Up next a, good. Friend Cameron May with. Getting started with technical, analysis, that'll be at the top of the hour so John McNichol signing off folks have a wonderful, day and a wonderful week and looking, forward to talking with you again real soon bye, now. You.
2019-10-15 12:27
