Leveraging Capital with Futures | Ken Rose | 1-21-21 | Trading Seasonality Corn Futures

hello investors so interesting looking at the market here today we had a nice strong move to the upside we're moving to the upside but right now the futures are showing a fade which is which is a critical aspect with regards to one of our example paper trades so hello investors and once again welcome to leveraging capital with futures as always it's great to be here to discuss investing in the stock market do you want to welcome everybody here today um thanks to michael fairborn over there in the chat window and everybody else uh babic aj terry and john and and whitaker and frank and sandy and everybody else ricardo as well i want to welcome everybody here today i just reminded you can follow me on twitter my twitter handle is at krosc underscore tda where i post things related to this area as well as other areas of investing i also encourage you to follow mike fairborne on twitter he's got some great stuff over there on twitter as well i'm sure he would be more than happy to send over his twitter handle in the chat window in wave disclosures here today just a reminder that in order to demonstrate the functionality of the platform we need to use actual symbols however td ameritrade does not make recommendations or determine the suitability of any security or strategy for individual traders any investment decision you make in your self-directed account is solely your responsibility we also use a paper money trading software here this is for educational purposes only successful virtual trading during one time period does not guarantee successful investing of actual funds during a later time period as market conditions do change continuously here's a review of the greeks in relationship to options trading so we want to keep those things in mind picture myself been here for about 16 years i specialize in blending both fundamental analysis with technical analysis i basically love what i do i love to learn new stuff and there's always opportunities to learn new things in this particular area also new ways to apply things new strategies i love to teach in this area i also love to trade in this area i'm a contributor on the td ameritrade network i'm also a charter mark tech market technician and i do some work with think scripting building indicators triggers as well as strategies in way of our in our agenda here today we'll start off by reviewing our existing positions and see how those positions are doing maybe look to see what some of the alternatives are or some of the choices we have with regards to potential adjustments to those positions or maybe just let maybe let time play its role to see to see how that could have an impact on those positions then we'll shift gears we'll do an overview of the market including looking at the s p 500 and then we'll take a look at some of the futures uh some of the futures choices that we have to do and i actually looked in the interest of time i was looking at some of the some of the futures contracts we have availability to and i found one that was a nice example what's called back ordation we'll talk a little bit about backwardations and and some potential strategies related to that and also and and also meshing meshing within that the use of seasonality charts and how seasonality charts can help kind of give us an idea of whether the backwardation is unusual or whether from historical standpoint the backwardation we're currently seeing with regards to an individual individual futures contract is just normal in in in the way that prices tend to go from a seasonal seasonal basis and then of course we'll always try to add a paper trade addition to our portfolio so with that let's go ahead and open up the thinkorswim platform here and let's come up here let's see we're in our leveraging capital with futures account i'm going to come up here to monitor and we've got a count statement opened up here so here we go we've got three three positions opened up here this one i believe we did last week this is this is a unbalanced butterfly something sometimes it's called unbound sometimes it's called skewed i think probably on balance maybe the more accurate definition of it because basically we have we have two short verticals to go with one long vertical so so so it's kind of unbalanced unbounce in that way what this did for us it gave us a profit loss diagram that looks something like this and we could have this right here as our breakeven line right here so we have this sweet spot right here which is basically at a resistance level that the s p 500 was at yesterday but i'm and i and i didn't mean to say yesterday what i meant to say was last week but what what has happened since then well the s p 500 has gone out here and right now we're actually out into this area right here where we're currently showing a loss let me just i'd say the current price is right here where we're currently showing a loss at the top i indicated that currently the s p 500 is starting to fade somewhat that could actually be in our interest how many days do we have left here we only have one day so one thing we'd want to look at with regards to the fading that's currently going on this is just an intraday fade and we had a nice little pop to the upside we're moving to the upside but as the day has gone on we are starting to fade i think last time i looked at the chart we were just ticking a little bit down for the day and it looks like that's pretty close to where we're at right now but we'll go ahead and take a peek at that here in a moment looks like we're off just just to touch from where we were at with regards to the to the open here today if we continue to fade though the question want to ask ourselves the rest of today and the rest of tomorrow is that enough to get us back into this to get us back into this profitable area now down here this would be price okay this is price going up and this is price going down do we have enough time with regards to fade to move us from where we're at right here which is unprofitability and move us back over here we break above here possibly break even who knows is it possible to come up here and hit this peak so let's take a look at this one first and our key price level right here is 3820 but we also want to kind of get an idea of where our breakeven point is at but if we were sitting right on 38.20 tomorrow then would basically be at that peak we were talking about would basically be right here if we're somewhere in that range would basically be right there as far as the price going down the way this trade was built we were okay with the price going down as far as it wanted to because we did this as a credit and so that credit will will still result in profitability as far as the price moves down there but with what i'm going to do i'm going to go over to the analyze page to identify the break-even point that we would like to be at then we'll take a look at the chart so we're kind of going to come up here to analyze i've got notice on the analyze page a couple of things i've got chosen here i have risk profile okay i have the symbol for forward slash es now we only have one position on on forward slash yes okay i'm down here i've got a single symbol notice here i have height simulations you can come down here you can hide any simulate simulations you put in here if you do that then you just have your your trades that are in there in this in this case these are just paper trades anyway but here's a profit loss we were talking about notice right here is zero so that's basically break even so we're really not too concerned about the price going down right and go down and we still have this level of profitability where the price is at right now which is right here we're basically down here at our at our max loss we are fading if we were able to fade back in here then it would be fading into these different levels of profitability right here but what is our breakeven point it looks like our breakeven point there is about 38.40 i'm just going to jot that down so 38.40 would be break even and 38.20 would be a peak that would be great and then any anything below 38 38 20 would be okay so let's pull up a chart then kind of get a feel for what kind of a move we'd be looking at to see maybe maybe we want to make an adjustment here uh we can take a look at some considerations relationship you may say one day you know you can't do a lot you can't do a lot with one day well one thing you could do is is you could possibly roll part of this you could you could change the polarity on this trade and put yourself in a huge delta position to the upside but before we look at that let's let's take a look at the chart first of all say okay what part do we want to play for an investor do we want to hang on to this for tomorrow and look for the fade to benefit us or do are we looking at making a change here maybe we just want to get out of the trade and take take our losses there's there's nothing wrong with that because we calculated our max loss when we entered the trade and we played the part of the investor that was okay with that with that particular max loss well coming up here to the chart then for forward slash es right here you can see our little candle right here that's that's currently a red candle meaning that we're basically down from where down from where we open and we bake it looks looks like we pretty much picked off picked up from where we were at yesterday we ran up but now we're fading looks like we're sitting pretty close to where we were yesterday what is what line is this i'm just wondering what price point this line is at i'm going to grab a little pointer arrow here so that we can take a peek you know sometimes these guys get a little bit let's let's clear our drawing set we'll just draw some new ones how's that come down here and bring this line across i'm going to do right click oh there we go edit properties and so our breakeven point was at 38 40.

you can see we're pretty close to break even right i mean we're we're we're currently showing a loss but we are we're real close to break even that just kind of shows you how how close we are and remove that little dot right there let's do another one at 3820 which is that sweet spot which is basically just down here to resistance these lines are going to be very close to each other and this one is 38 20. you can see you can see how you can see how close they are so if the fade continues today and maybe maybe we have a two-day fade or two-day pullback we're just we're just right on the brink of breaking even and or possibly hitting that peak so we'll do is we'll play the part of the investor that's okay letting this go the rest of today and we'll look at it tomorrow if it does start to bounce so and start to get some strength what are some things we could possibly look at doing well one is just take the maximum loss and there's nothing wrong with that the nice thing about taking the max loss is we had a loss defined when we entered the trade and we position sized around that loss or or at least we had a discussion about position sizing around that loss but we could if we wanted to be a little bit more aggressive if this ring reverses and starts to move move and starts to move against us again if we come back here to the monitor tab i just want to show you a couple things one possibility one thing we could come in here we could buy back our short call options we have three of them and buying that back would be looking at a loss here of 125 dollars if we buy this back though notice these are all negative deltas that gives us that puts in a position that has 40 positive deltas and 64 positive deltas so we have 100 and four positive deltas what that means is if the underlying moves up by one point that's going to equal a plus and by the way this is all theoretical plus 104 dollars of profitability if it moves up two points theoretically 208 dollars so if we buy this back and we're currently running a loss of 125 dollars we're talking about a very small move to recoup this loss and prof and possibly obtain some profitability we just want to keep in mind though that this delta right here that works both ways both to the upside and to the downside if we choose if we choose to do this the maximum loss that we had calculated when we entered the trade that would come off the table and we would be exposing ourselves to additional risk and if it moved against us we could be looking at two-point move against we can be looking at a possible loss of 208 dollars so those would be some considerations when we entered the trade we discussed the fact that we wanted to set this up with calls in an event we had some difficulty would give us a little bit of flexibility with regards to exit if the trade got in trouble right now the trade is the trade is troubling but from an intraday standpoint it's currently moving in our direction that is that's our butterfly we also have here this this one was put on a little bit longer ago this is a this is an iron condor that we did on on a on treasure on treasury bond futures and you can see right here we're challenged with this one with the 169 put is currently in the money okay hasn't totally blown through it through it yet though because the 168 put is still out of the money looks like we're at right now is 168.20 this one i think what we're still doing is we're basically walking the tightrope and i discussed this last week it's kind of a this this is an uncomfortable uh position to be in there are some things you can do about it one is you can just simply roll these we could go ahead and close out this put vertical right here and then open up a new put vertical going out an additional week that would give this that would give the underlying security here some time to figure out what it wants to do does it kind of want to continue to move in this sideways thing bumping from max gain to max loss to max gain to max officers are going to make it is is is going to make a decision to go one way or the other now because this trade that because this this tracks the price of the bond it's going to be it's going to be impacted by interest rates we kind of want to get an idea of what our potential forecast is with regards to interest rates if interest rates are going to be if interest rates move down what's that going to do to our bond that's going to push the price up and that will be beneficial to us because we want to we want to move from this 168 up to and above 169. if our forecast for interest rates is for is for interest rates to move up then that's going to move the price the bond down and that's going to cost some cost some additional difficulty again we could just choose to buy ourselves some more time we can also choose on this one just to just to take the maximum loss because we position sized around that maximum loss so there's there's nothing wrong with just saying okay i'm okay with the maximum losses let's let's let's just go with it and and and possibly look for another potential trade where do we need to be though would would like to be above 169 and on this one we also have what we have one day here as well boy we're kind of calling these things tight with regards to the number of days here we got one day up here we got one day down there so is is is it is there a possibility here that we could pop up to 169 in in one day well anything can happen right but looking at the chart that may give us a little bit of clarity as far as what we may want to do with this particular position so forward slash zb and 169 forward slash zb here we are right here and you can see if we if i if i roll over today's candle right here earlier today at the high we're 169 and an 11 and 11 30 seconds okay which was our max gain we went all the way down to the bottom which was which was at our max loss well i don't know let's see what was that at the bottom the low was at 168 so we still were not quite at our max loss but pretty close to it we are off today's lows okay but it's all going to be about where where we finish tomorrow so again we could play the part of the investor says you know what i'm going to roll this thing out if we rolled it out we would probably be at a credit a small credit but a credit just the same the reason for that is would be would be buying this one back would be using the same strike prices and going forward and then going forward we're going to pick up some some time value so when closing out this one we don't have hardly any time value because we only have a day and then in opening up a new one where we go out a week we have some additional time value so that's likely to occur with a little bit of a credit which would give us a little bit of an additional cushion okay but let's i'm kind of i'm kind of interested to see what this looks like on an intraday chart you know are we you know did we go up move down and now we're moving down again or or are we moving up sometimes that can be beneficial to check out so let's just take a look at an intraday chart here for this one for just a second i'm going to go intraday and we'll use three minutes okay so we're looking at today so it looks like the it looks like the intraday trend is to the upside if i come right here looks like it's to the upside of course this is intraday notice we came up here we didn't come up here and get to these previous highs now we're moving down but but this this result maybe we come down here then we bounce and start heading up i'd say overall it looks like we are trending to the upside a little bit disappointing we didn't get back up here and create create another higher high we'll go ahead and play the part of the investor that's okay looking for this trend to continue throughout the day and hopefully have some movement to the upside tomorrow as well and we did talk about some of the other alternatives that we have in relationship to that well all is not to walk in the type right all all is not white white knuckling here with regards to our positions right here we do have a couple i'll just call them white white knuckles or our unbalanced butterfly or iron condor this one here is a trend trade this this this one was on platinum we we actually had a nice discussion with regards to platinum and some of the considerations when you're looking at at platinum this is basically a trend trade where we're trading the trend we have 68 days left looks like today was a pretty good day our position was up up about 825 dollars looks like overall our position is profitable how are we doing though with regards to the trend let's look take a look at forward slash pl here forward slash pl and let's go back out to a reasonable time frame we'll come back out here to a daily and i don't think we need a year so focusing on the trend let's go out about three months so actually you can see though you can see that we're actually down for the day we're up here we're not actually down for the day we opened here at the bottom of that green candlestick so we're still up for the day but earlier today we had broken above this resistance level now we've come back and we came back and we're sitting back on that resistance level so we'll be looking for that resistance level to hold this this position is is looking is looking like what's referred to from a technical analysis standpoint as a ascending triangle now if you look at this little low here and you look at this little low here notice those lows are getting higher so we come in here we connect those lows and come up here notice this high right here and this high right here is at about the same level so we can bring those across like there we have an ascending triangle when you break above that ascending triangle the target to the upside is the height of the back side of that triangle right here extrapolated to the upside right here now we can be a little bit more precise by using our thinker swim tools right here i'm going to come up here and bring that trendline right there and then let's bring a price level right across here i'm going to come across those highest closes right there you can see that we're sitting right we're sitting right on it okay so so part of it part of our decision here would be related where do where do we close the day here but to finish this drawing out and to establish our target we can take the back side of that triangle where we've had to hit to the top and the bottom that's going to be the the back side right here and then we can move that i'm going to duplicate the drawing and we're going to bring it up here like so that gives us our target let's let's give ourselves a little bit more room up here so we can see that target visually and to do that we'll come up here to style come over here to settings and we'll come up here to price axis on the downside let's move that to 10 on the upside let's move this to 20 and there we are right there and now we have a target that we can look at here over here and let's put our target in right there and we'll show that target on the left okay so our target here would be would be 1249.90 so right now we have a profitable trade on here we're looking to break out this ascending triangle if we break down below this trendline right here there'd be some justification just take our profits at that point and possibly look at some other trades possibly look for a break out of that resistance level and look at that as possibly a re-entry point we'll we'll see what happens with this one going forward okay so with that then we've we've we've taken a look at our positions let's shift gears here a little bit then and take a look at the market well to do that we'll come back here and take a look at forward slash es and we've had our discussion here what's happened well the market overall has been bullish right we've got some nice runs here higher highs higher lows a pullback here a nice bull flag bounce moving up here okay a little intraday fade right here we'll see what happens with that but overall we would say that the market as represented by the s p 500 would be bullish in nature with this little move to the downside we kind of get a gauge of what kind of an impact that could be having on investors by looking at the vix this is basically the implied volatility on the s p 500 cash options and you can see with with our little fade here today that implied volatility we're getting a green handle here so that does that is that that is it that is increasing indicating a little bit of an increase in fear for investors the vix is sometimes referred to as a measurement of fear for investors right here was relatively high it's come down here low here so if we're looking at this from a three-month basis it would be considered to be relatively low but usually on implied volatility investors want to look at this over a longer time frame so we'll come up here and shift gears on this and we'll go out rather than three months let's look at two years with weekly and kind of see we're at here so you can see if we're looking at it here so here we have the covet thing like once once once in a lifetime let's hope it's once in a generation okay doesn't happen very often then we've come down here purely if you look at more of a normal range we're still relatively high in relationship to what was normal below uh beef before covet hit so a little bit of a concern with regards to what's going on here today with the vix popping up this this is now a weekly candle so the net result here for for the week here is still is still implied volatility it is still implied volatility moving moving down just a touch with that having been said then we've kind of got a gauge to the overall market getting an idea of what's going on let's take one look at one additional area these would be our sectors here so we can see that communication services which was strong yesterday is also up nicely today information technology though is up is up is up just about three quarters of a percent as is consumer discretionary so if we're looking at sectors that are strong here these are actually good sectors good sectors to have strength in real estate looks looks like real estate's fading here somewhat real estate has been very strong looks like taking a little bit of a fade here today that could be in relationship to to concerns about increases in interest rates and those concerns about increase in interest rates that could be having an impact on our 30-year treasury bond future because if there's concerns about interest rates rising what does that do to bonds it decreases it decreases the decreases the it decreases the cost of those bonds that could be part of what's occurring with regards to our bond position health care getting drugged a little bit materials getting dropped a little bit energy you know if you look at if you look at these guys materials energy and real estate as the market's fading today we're seeing some of the strongest sectors take the strongest percentage intraday moves to the downside this is typical this has been typical of the market for for at least the last three years if you have something that's going up like this as far as the overall market and you and you look at the strongest sectors you come in here and you look at okay what are the strongest sectors during this move to the downside when the market starts to tip and move and move this way what i meant to say was what are the strongest sectors as part of this move to the upside when the market starts to tip and start to head down like this they tend to be the weakest sectors for at least the first few days it doesn't always bear out for the entire move to the downside before we recover but usually those first few days they do 10 of the week so we're seeing that once again here well let's come over here and look at our choices here with regards to futures and likes so here we got a lot of choices in the interest of time and and thinking about our discussion here today and what i thought we'd do here today is look at coin at corn futures because earlier corn was up and it looks like corn is up here and corn is still up now i'm going to shift the time frame on our chart here we'll go back to a time frame of daily and rather than two years let's go back to three months rather than weekly candles you choose daily candles we'll say okay here and let's come down here and look at corn futures right here we'll pop in right there so there's corn futures so one of the reasons i was looking at corn futures here today is because earlier today we had a really nice pullback and a bounce now you can see that as the day's gone on this this corn future posit this potential where corn future position here has deteriorated somewhat because corn has been pulling down and fading with the overall market so if we decide to go long a futures contract here we may use a conditional order that is that is set to that is set to go off um at the end of trading today hey you know if this thing recovers and gets and is closing above the high right here of this low day right here sometimes referred to as a k hold we'll go ahead and we'll go along the contract here so we'll look at that well so so right now we're looking at this corn futures contract purely as a technical trade look at the nice move here if we want to look under the hood a little bit further with regards to a potential long position here on our on our on our futures corn contract one of the things we can start off by looking to see whether or not we have contango or what's called backwardation if we have backwardation let's let's come up here to the trade tab right here and let's collapse this guy right here we'll take this off of here and we've got our corn future so here here we have our different contracts here right here we have our expiration 35 days 98 days 159 21 and 312. here we have the prices if we if we come out here and we look at the last prices we have 524 526 522 473 449. so right in here what do we have

going on as we as we go further out the price the futures contract goes down that's referred to as that's referred to as backwardation in other words the the futures contract as you go further out in time the cost reflecting those futures contract is less than the current contract now this can be caused by different things okay now in in you know when you're when you're when you're when you're looking at when you're looking at backwardation like this backwardation can be caused by different things one of the things that can cause backwardation is this there is a shortage with regards to the underlying commodity a temporary shortage and that temporary shortage is pushing up is pushing up the cost of those near-term futures contracts causing backwardation in other words we have a current shortage but the expectation is when that shortage is over things will return to normal that's one of the possibilities another possibility is just the seasonality of the underlying uh of the underlying contract you know if we're looking at gold if we're looking at corn some of these things they have a history of trading at different prices from a seasonal standpoint if you have a seasonality situation then you could look at things historically and you could say okay if we're if we're looking at futures contract that goes out to july or goes out to september goes out to december historically the prices the prices of the underlying commodity has been lower during those during those seasonal times than they are currently one of the nice tools we have available to us on the thinkorswim platform is called seasonality charts so let's take a look at this i'm just i'm just going to note some notes some things here so we basically want to get an idea of our what's going on here with regards to our backwardation is it is it being caused because of a short-term shortage or the possibility of short-term shortage or is it tied more to historical things or is it a combination of both well it very well could be a combination of both but let's just take a look here so what we've got here is when we go out to july and september and december we have our contracts getting cheaper right from 526 to 522 to 473 so on and so forth if we look at march from march to may we have things getting we have things getting more expensive going from 524 to 526. so so on these two contracts right here rather than looking at backwardation we're looking at contango meaning that the future meaning that the next contract is more expensive than the current contract but overall if we're looking at here we've overall i would say we have a situation more along the lines of of of backwardation so let's look at things from a historical perspective and let's look at how seasonality charts can help us in relationship to this so i'm going to come up here to our charts right here and we want to look at forward slash zc right here so i'm going to change our chart here we're going to go into seasonality mode and to do that first of all i want to get all of our studies off here i want to make i want to have a clean slate so i'm going to come up here to studies edit studies and let's take atr off here and let's take open interest off here because in looking at the seasonality chart it's usually a good idea just to make it a blank chart to begin with like so and then to switch to seasonality we'll come up here to style we'll come down here to chart mode and under chart mode we're going to come down here and choose seasonality right here okay and notice now what do we got well we've got we have this guy right here this is the this is this is the chart for the futures contract and this is from a seasonal standpoint this is how these contracts tend to go what kind of a time frame we're looking at right now we're looking at a five year one day right here okay let's let's let's move that out to about 10 years you know typically an economic cycle goes over about five years but let's let's take a look at 10 years and to do that i'm going to come up here to where it says day i'm going to come down here and choose time frame and i'm going to use 10 years now some investors will just go out and get the largest amount of time they can and there and there's nothing wrong with that okay but if you want to be a little bit more if you want to be a little bit more current with regards to economic cycles and maybe five five years maybe 10 years we'll go out 10 years right here i'm going to click on ok and to highlight to kind of get an idea of what's going on here because we're primarily interested in the seasonality nature of this to highlight this and make this the basis of our chart we can come up right here where we could this little guy right here can change us from auto to manual mode on our price axis we'll click on that i'm going to go here to manual once i've gone into manual i can highlight our seasonality part right here so i can come over here and maybe go right here and oops you know what to do that i need the pointer so let's grab our pointer here's our pointer come up here i just want to highlight seasonality right here so right there does that do it yeah that does it okay so this is looking at this what this is looking at this is looking at the last 10 years and over the last 10 years what typically happens from january to march it looks like let me just grab it right here it tends to go up january february and march okay so from a historical standpoint it tends to go up from january to the first part of march that's where we are we're currently the at the end of march first part of january so we may you know based on what happens from a seasonal standpoint we may want to go with a shorter term a lot with a shorter term long contract rather than a longer term long contract and typically what happens from march coming over here to may it looks like we have a fair amount of volatility but looks like we stay in somewhat of a range and we're here and we're coming across here let's just let's just let's just leave it right here okay so typically if we come down here to about june a lot of volatility in here right but pretty much we're running we're running somewhat sideways then from june going forward for again this is from a historical seasonality standpoint from june coming all the way out here to october i'm just going to come to this low point right here to the september october time frame things tend to move to the downside then it looks like we start to move sideways here again okay let's just look at the whole year january february march to december so this is where this is where seasonality so looking at our seasonality chart i'm thinking about the backwardation and kind of looking at this move to the upside a little bit of a pause here and then move to the downside looks to me like the backwardation could be heavily attributed to just the nate just the seasonality nature of corn futures so with that in our back pocket then let's come back over here to the chart and let's make it more of a normalized chart we'll come off of this thing that's looking more normal and we'll come over here let's go ahead and let's look at a let's look at a contingent order we'll just go long one contract here what is our high here you know i'm also going to bring up the average true range down here at the bottom just so that we can stay you know it's always beneficial if we can stay consistent and when i say stay consistent i mean you know when you're when you're entering in an order based on a bull flag bounds and you say to yourself okay well how how where do i need to be in relationship and we say we say a close above the high the low day well how far above is that is it a point is it is it half a point is it two points well what we can do in order to maintain some consistency we can make it a percentage of the average true range then whether we're doing futures whether doing stocks or anything else we just say you know what when i'm looking at entering on a bull flag bounce i want to be a certain percentage of the atr above the high of that low day on that bounce for purposes of our discussion here today let's just go with one percent of the atr well let's see an atr is giving you the average range on a day-by-day basis so it's giving you the average trading range on a day-by-day basis it's it's it's basically the range of a single day okay and it does take into consideration gaps so if this is 100 percent of that range right up here and this is zero percent of that range how much of that range do we want to be above the high the previous day um let's go with uh for purpose our discussion here today let's let's go with 10 percent okay now what is a good percentage for that the answer to that is always going to be in your what let me just let me throw that question out there folks if we're going to say for you where what what what would be the what would be the best percentage what would be the best percentage here for the average true range if you look at it generally speaking i'm just i'm just going to throw the question out here i'm going to look over there in the chat window i know there's a little bit of a delay there in the chat window but if you're looking at this you're thinking okay and just feel free to send in any percentage you want or make any statement you want what would what would be the best percentage in your mind and feel free to throw anything out there you like with regards to establishing a trigger here on a bull flag bounds any thoughts on that i'll give you a second here there's a little bit of a delay here so i'll keep watching over there in the chat window for for any thoughts for any thoughts and considerations we'll go ahead and use ten percent but do feel free to chat in anything you like all right okay so we'll go ahead i'm going to bring it up i'm going to bring it up here and i want to make that i didn't want to make it disappear i'm going to make this atr so that we can see a little bit better on our chart to make that i'm going to do a three here i'm going to come down here and go gold right here choose apply right here and we'll choose apply there and i'll say okay so we got phillips saying five percent uh but i have no idea well thanks thanks phillip for taking a stab in the dark that is greatly appreciated and the reality is um uh the you know they're they're there really isn't a best one okay but but to kind of narrow it down to somewhat of a sweet spot for each individual trader the answer to that is going to be in your trading journal that's that's why i always say this i and and and i don't mind saying it again you know it it it is amazing to me when i when i when i talk to investors the the amount of time they spend and the amount and sometimes the amount of funds they spend seeking uh seeking um seeking ways to get to get an edge with regards to their investing now i'm not saying that i'm not saying that buying books and and and buying newsletters and all this kind of stuff is not beneficial i'm not saying that i'm and and i think it's very beneficial to and i think it's great that you're currently in this webcast but do do keep in mind if you're not keeping a trading journal you're perhaps missing one of the strongest and one of the most effective resources that you have at that you have available to you by keeping a trading journal you can answer questions like this that is specific to your trading style to what you're currently doing so definitely encourage you to keep a trading journal so you're able to stay to you so you're able to narrow these things down for purpose of our discussion here today though i got five percent from philip i was i was thinking 10 percent why don't we go ahead we'll go with phillips five percent and see and see and and see how that works okay we may we may or may we may or may not get filled on the trade but here's our average true range right here and our average true range is currently 12. i'm just going to round that up to 13.

so our average true range is 13. if we take five percent of that we'll grab a little calculator here we'll take 13 times .05 looking at 0.65 we want to look at today's high if i come over here and roll over this candle i'm going to get today's high today's high is 5 26 50. so i'm going to add that to today's high 5 26.50 plus 526.5

equals so we want to go it at 5 27.15 that's where we want to be we want to be greater than that we want to be greater than that in order to take this trade at the end of today's trading towards the end of the towards the end of the day as we're going into the close so how can we construct an order like this i'm just looking at our time boy we're a little we're getting a little bit tight on time here okay we'll come up here to the trade page i don't think we need to go out more than 35 days looking at looking at the seasonality chart we basically wanted to get to the we basically wanted to get to the end of february and this takes us out to march and i think we're pretty good at that why yeah why don't we go ahead and stay with just this 35 contract right here okay so i'm going to come over here i'm going to do a right click on the ask price and i'm going to choose buy custom with stop okay yeah let's go ahead we'll do by custom with stop now this order to enter the trade i'm going to leave it as a day order but i'm going to change it here to a stop limit order actually let's just let's just go with a s with a stop buy order okay so what what we have here is we have a day order but we're going to have a stop by item basically we're going to put a price in here that says this is where the price the security needs to be in order for us to take the trade i'm okay leaving this as a market order because we're just going to do one contract okay so let's put in our price here where do we want to be we want to be at we were talking about 527.15 we've got that and let's see oh you know what these come in 25 cent increments so let's move that up to 25 right here like each tick is 25 and i believe i believe that these corn futures are 50 a point just just like forward slash yes okay um so we have this trade i'm going to come over here where it says day and i'm going to click on day right here i'm going to choose um well let's i don't want to go good till canceled i want to leave that as day i'm going to come over here and click on the gear i'd like to put i'd like to submit this at a certain time today here it is right here okay so how did i get to this screen right here right here on my order my entry order i'm going to come over here i have a little gear right here i'm going to click on that gear i'm going to say submit at i want to submit it today but i want to submit it close to the close now my computer is on mountain time okay so i'm going to choose so mountain time the market closes at 1400 hours so i'm going to put this on 13 57 56 so basically about about two minutes before they close the market now of course futures they trade you know there's a little bit of a pause after the market closes and they trade in the evening and everything we're looking at this primarily from a market hours perspective so that's when we're going to submit our order and we're all set up in here we've got our stop link and we're good here let's go ahead and say save this so we're good to go here now if we wanted to we could put a stop loss in here that's going to be that would be a good till cancel and why don't we go ahead and do that where do we want to set a stop loss well let's stay consistent with our atr let's set a stop loss at one and a half to give it to you know future futures tend to be rather volatile we'll put in a stop loss uh one and a half atrs to the downside if indeed we come into this contract so our atr was 13 right so if we want to put a stop loss in at one and a half of those we've got 13 here times 1.5 so we're going to be 1950 below this entry point so let's find the difference between our potential entry point minus 527.25

equals 507.75 that's going to be 507.75 and we'll have that good till canceled now we don't know where we'll get filled we could get filled at a price that's higher than this so we just want to keep that in mind going in if we get filled around this point though we can we can somewhat gauge our risk in here and that would be doing this would come over here and say okay if we enter in around here let's just let let's just say we let's let's say we enter in a we enter in at 529.

if we enter in at 529 and we get taken out at say 507 looking at 22 points times 50 bucks a point risk on the trade is is about is approximately and i stress approximately eleven hundred dollars we're also not including transaction cost here so with that um let's go ahead and send this in 27 25 we got our stop loss right here we'll do a confirm we'll send this into leveraging and it's off and it's good to see that it wasn't filled that just helps know our contingencies in place okay investors well looks like we are about out of time here so let's go ahead and wrap things up here so what did we talk about here today well um we reviewed our existing positions we kind of looked at them looked looked at some look looked at some different considerations we decided to play the part of the investor that because of where they're at kind of in this nail-biting mode walking the tightrope whatever you want to call we decided to give another day we didn't overview the overall market we talked about backwardation and some of the some of the things that caused backwardation some of the causal stuff and included in that we had to discuss with seasonality and we use the seasonality charts and we did and we did a potential paper trade with a contingent corn future order in there okay hey again want to thank everybody for being here great to have you here great to discuss these things just a reminder i'd love to see on twitter there's my twitter handle at krosc underscore tda also thanks to michael fairborne being over there in the chat window and i'd encourage you to follow michael as well in wave disclosures again just remember that in order to demonstrate the functionality platform we do need to use actual symbols however td ameritrade does not make recommendations or determine the suitability of any security or strategy for individual traders any investment decision you make in your software account is solely responsibility also keep in mind that options are leveraged vehicle and entails certain risk and options trading is not for everyone so you also want to keep that in mind as well well investors thanks again for joining us here today for leveraging capital with futures i hope you have a fantastic rest of your day best of success in your investing and just reminder you know be safe and be cautious out there we got the vaccine i think we're getting pretty close to getting over the hump on the whole culvert thing let's do that as happy and healthy investors bye everybody thanks again and hope to see you next time we'll see you [Music] you

2021-01-29 04:48

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