Neutral Strategies | Technically Speaking: Trading the Trend

[Music] [Music] hello to you we welcome you as we talk about uh on this class trading the training weeks and months this is uh the section what we call technically speaking we mainly focus on technical analysis but we will talk about stocks we will talk about options as well but our focus is really trying to find dominant trends try to ride those trends for maybe for two to three weeks plus okay maybe even potentially months if that trend can keep going now just for quick i welcome everyone here um and i want to kind of make mention we have annette here juanita doug meddy uh dom john alfred kathy and many others now also remember that as i go through i'll see if there's any questions as we go uh as we uh go understand that you you probably are going to have some questions and this is being recorded you could go back and review it i also answer many of your questions on twitter i'll also answer your questions actually on uh youtube when you make the comments uh etc let's actually kind of take some spots along the way and kind of see if there's any questions and also i'm trying to attempt to answer those questions if that's maybe not what you were asking let me know about that and we'll see if we actually can't uh answer that question in full context just real quick as we're getting started remember with what we discussed today is for educational informational purposes only options not suitable for all investors special risk inherited trading options it's pamphlet called characteristics and risk of standardized options make sure you've read it okay there was an update a couple months back great update great examples in there of what if scenarios also trading features in future uh forex involve speculation not suitable for all investors futures and futures often trading involves substantial risk not suitable for all investors there's a separate risk disclosure statement private trading features as well different than the options one and also remember when we talk about using options we'll talk about option greeks we know those are sensitivity to direction change in delta change in uh sensitivity to volatility and sensitivity to time so just real quick as we're getting started here today i want to actually take a quick look at where the overall markets are are there any stocks that are actually showing any relative strength at all which ones are showing maybe relative weakness compared to the benchmark number two we'll take a quick look at where the portfolio stands for the week also we're going to talk about current positions we have expiration date tomorrow need to talk about that and then also bring up some new examples that are going to be bullish and bearish examples so let's go ahead and strap in so first off let me actually go ahead here and just let's take a look at not jp morgan yet but let's go ahead and just i'll take a look at the dow first dao sitting here about 28 points down we had the big leg down on what tuesday and what you'll really notice is we're kind of near that double bottom area so if someone was saying i think it's going to double bottom we'd say we're down near that area but it really not yet is really we're not really seeing any strong move off this area which is the prior low so there are probably going to be some stocks that we see that are doing worse in the overall market we're probably going to see a minority of stocks that are going up a minority probably the majority are going to be below their 10 38 moving averages now when you look at the let's say the s p okay what you're going to notice is there it's just back down to that prior same area you had a rally up a little bit yesterday today we tried to rally and then we're if we close here we'd be closing down near the low so everyone clearly is watching the 3900 but as someone else is watching the 3900 we're going to look and see if there can be some stocks that might be breaching support and we're going to look for some stocks that are actually maybe showing a stronger trend and we'll show you how we do that now i also said we want to kind of keep an eye on the t and x the t and x we know that uh you know if that actually continues to go higher and i said the steeper this trend is probably the more damage it could actually do to let's say the equity markets uh obviously that would be indexes in general sectors in general there might be some sectors like financials uh you know that might do better but the steeper this goes the borrowing cost for consumers and businesses goes up higher and higher and that might slow down economic decisions so if i said hey i'm looking to buy my wife wants to move and so you know if if i said hey the rates are now seven percent or whatever and maybe next month they're uh eight percent example given that my that might change my decision right well that's what's happening with a lot of uh consumers right now and businesses these borrowing costs have actually gone up and i don't think people are really talking about since in the last six weeks they went from 2.5 to literally almost 3.5 in six weeks now you go back to where we were just in march not that long ago we were down at 1.7 we've seen a hundred percent increase okay on the on the tnx just in six months so remember if you were asking some of us investors and said where do you think the tnx could actually go to well we would probably answer that question pretty probably pretty you know it doesn't mean it's going to do it but if we went back and actually said how high do you think the tnx can actually really go i'm going to need to actually go back farther let's go 15 years and if we were to actually take a look at this back in about 2007 2008 you know we were right around 4.5 4 things like that i don't think it's probably out of the question that we could probably go back up and kind of mean revert back up to those areas we know that the fed actually caused a lot of this to actually go down on the back uh longer longer durations right but now as the fed is actually trying to come out or telegraphing that they're actually trying to you know liquidate or i should say pull some of their investment what you're going to see is they might try to go back up to where it was now again you get the tnx to go up this probably means the 30-year rates 15-year rates things like that probably go higher okay so some of us are actually maybe looking for real estate to cool home depot lowe's might be under pressure etc as maybe some investors cool those buying decisions okay now just real quick uh i'll get to those questions in just a moment but i want to kind of take a look at uh i want to go just take a very quick look at crude okay and if we looked at crude oil would you tell me is this bullish or bearish what do you see now i'm gonna look at the three year weekly chart first take my lines off and if we look at this would you say is it bullish or bearish okay now we just try to answer that in terms of well are we above the moving averages or not we're not above the moving averages we're below and not only below the 30 the red line but we're also below the 10 period moving average as well so oil believe it or not is st still kind of in a little downside well it has downward momentum lower lows and lower highs now one of those stocks you know when markets kind of maybe look softer or maybe going down i've become a little bit more concerned about stock positions in the portfolio and one of those positions in the portfolio is this one right here okay now exxonmobil if we take a look at this what you're going to notice is has a hundred shares of stock and what you're going to notice is today let me kind of get off that you're going to see that it actually shows a number five okay now again what is number five well let me actually go see if i still have that from yesterday uh and i think we'll just kind of maybe try to use that as a quick cheat sheet do i have it i might not have it yeah there we go so let me actually we don't need any of that i'm just going to use this okay so if we looked at uh i'm just going to kind of take a look at the basic structure so i'm just going to kind of go back to this take that out and i'm going to take that out okay so all i want to really see is this the basics okay so now that we're seeing exomobile fall down below the 10-day moving average now is that a concern right think back to your own stocks in your pay money portfolio when your stocks fall down below the 10-day moving average is that good or bad i don't think it tends to be good we don't know how long it could go down for right or where the support level is but i want to actually take a look at this one first okay so exon mobile showing a trend five okay price below the 10 but not above but still above the 30. if you bring up the charts what i'm

now going to do is let's pull it up on the chart and what might we want to look at this and say what what are some options that we could do here okay and number one is i could just set a stop and then see what happens option number two might be well could i do like a covered call could i buy a protective put so the covered call places a cap on the stock the protected put places a floor on the stock and the collar actually does the ceiling and the floor okay we know the collar is actually more protective it actually has a higher negative delta to protect the shares of stock so on something like this what might you consider would you think about a cover call a protective put or would you actually think about a caller now sometimes what might happen is the investor might say well james let me actually go ahead and bring up let's say the 20 to 50 days expiration let me actually go take a look at what the implied volatility is that implied volatility is 39.57 i talked about a number the other day on tuesday and said if those puts are more than one and a half percent of the current stock price you know if we pick a if we pick a strike that has a delta of 30 to 40 and if i said hey this paper money account is gonna buy these options for 2.41 cents and that stock is 94. if that's greater than one and a half percent the investor might say i'm not really looking forward to actually buying those puts okay is there any way to maybe help finance that or pay for that okay and that might be through maybe the selling the call first we sell the call it turns it into a cover call got shares sell the call okay that's the obligation to sell the shares at and that stock's actually still at 94.86

so if the investor says you know what what i want to do i want to sell that call use those proceeds to come over here on the right hand side and buy the put so when the investor actually does this they're actually really thinking that that trend might be a little bit more bullish sideways or maybe perhaps a little bit more neutral what are they thinking now i'm actually kind of put on the chart where's the short call at the 100 and the long put is at 90. okay so if you looked at this and said what has been the dominant trend as of lately for the most part it's kind of been more sideways as a long-term investor wonder if they want to hold on to the stock but they're kind of experiencing where the price is going down below the moving averages do they just have to sit there and take it no they might say you know what i'm going to do i'm going to sell that call okay i'm going to sell that call i'm going to right click on it i'm going to go sell and then now what you're going to see is caller synthetic now when i want you to take a look at this delta's 100 okay that might be a good delta if the stock was really trending up but if that stock is not trending up the investor might say i do not want to have 100 delta i want to lower that delta change it and by selling the call and buying the put you do change the overall delta of that position because when you sell the call you buy the put that's negative delta how much does it cost well if we're talking about explicit costs it's 11 cents or 11 dollars you gotta also pay the commission which is a dollar thirty now how many of you think that's probably not too out there someone could probably come up with 11 bucks plus a dollar 30 and it's grand total of probably pretty much what you could actually get a burger king for a double whopper medium fried a large diet coke for 12.30 cents why don't people protect well a lot of times they don't know what protection is right things like that but we talked about that yesterday pretty heavy we're going to go ahead and actually send that order and now what you're going to see is now that trade is protected now what you're now going to notice instead of having 100 delta the position has a delta 35. now riddle me this okay why might an investor want a lower delta why why might an investor want a lower delta well i'm going to go back to what kathy said right kathy says it looks like a neutral strategy so if kathy is actually saying james i'm thinking this stock might kind of go up down up down up down look the overall longer term trend up the shorter the intermediate is kind of a little bit more sideways and maybe the investor says you know what james excel mobile is a part of my portfolio i also want to try to grab that yield as well of 3.71 so we have the stock if it pays a dividend we actually have potential claim to the dividend okay or can get paid the dividend as long as we own the shares and these options are not options to eternity there is an expiration associated with those now if you not did not catch that caller class from yesterday we talked about the four scenarios of what happens when you put the caller on if you did not listen to that go back and listen to the caller class from yesterday okay now the one thing is kevin actually says that james showing the cl uh trend to see the trend of the energy sector yeah so when i so i look at two things okay so i mean you're asking me to directly okay so when we if someone said what is energy doing i think if someone asked me that question and said what is energy doing i don't think it's bad to say let's bring up the energy sector i think many investors would probably choose that as a starting point but we know energy is not just crude oil but if we said look what is the dominant chunk of energy we would probably bring up yes crude oil okay and crude oil is right there okay so and the other things we could actually look at is maybe like heating oil okay h0 and what you'll notice is it's down when you also kind of bring up four slash rb now we're talking about gasoline and the last one we're actually bringing up at forage slash ng is natural gas those are all different forms of energy heating oil gasoline natural gas crude oil itself so i don't think in terms of like pecking order you could actually say i'm gonna look at the ixe the energy sector and then look and see underneath that umbrella are there any type of maybe uh of those commodities that are maybe really driving their performance okay now uh yeah so let me go back to this question we're gonna go back to xom okay and i mentioned this yesterday but let's just kind of make sure we're a hundred percent crystal clear so how many of you and i want you to be completely honest with me okay how many of you have identified that your stocks were going down and then just kind of said yourself i don't really want to pay for the put how many of you have ever said that besides me okay and and now does the cost of the put enter your mind at all does the cost of it wonder if i said the puts were 10 cents i wonder if i said they were a dollar 10 but the problem is when you just look at the the put premium itself you kind of have to make it relative to something okay so when i talk about buying protective puts i'm talking about buying options maybe 20 to 50 days to expiration okay there and i'm talking about kind of looking at a kind of a range of a delta 30 to 40 and i'm talking about right here okay so i'm actually looking at what is the put premium so if i chose the 90 and it's 2.39 okay what i'm doing is i'm actually kind of and i'm just saying i'm doing this in terms of the math in my mind i'm saying i wonder how much that option premium is relative to the current stock price because if i brought up a stock like bank of america or then if i brought up a stock like uh berkshire hathaway b shares or a shears or whatever we're talking about something totally different so i i need to kind of compare what is the optimum premium relative to the current stock price and if we actually do that we can now see what the percentage is what is the percentage go ahead and type that in okay but when we actually do this what you're now going to see is if the stock does not go down okay it's gonna increase the average price average cost of the stock by how much buy whatever you bought the put for so if you bought the put for 239 that is going to add about two and a half percent theoretically to the average price of the stock well geez that's that's only 36 days and it added two and a half percent well so that's why investors are mindful how much they're paying for the put relative to what the current stock price is and some investments say james i don't mind to buy the put maybe if that cost was in between maybe like one to one and a half percent because that way if that put value becomes nothing which a lot of them don't become worth anything that way they're not actually pushing up the average price of stock that much so if we had an option where we bought the option let's say for a buck and that premium was about a percent now if that option expires worthless the theoretical average price of the stock theoretically goes up one percent and that's more doable or more likely that the stock could actually try to go back up and get above that so that's why we're mindful of like how much we're paying for the put okay does that make sense so the reason why we're kind of talking about a lower option percentage is because if the investor loses that premium theoretically that adds to the price of the stock that the investor paid for now it's not going to change the cost basis of the stock cost based on the stock cost basis of the stock but if you add that loss to the stock theoretically you could actually say now the stock needs to go up to help me pay for that put okay so if that actually is greater than one and a half percent like we said yesterday we we we would probably err on the side of doing a covered call and or a caller okay all right good looks like we're we're making some headway there i like that now i want to actually go back to one we talked about on tuesday doing some uh trades uh maybe over earnings did anybody remember what that was what was the name it started with an a and then it went a d and then b for boy and then e for echo and boy there was a little stock here okay that really kind of got hammer smashed if you want to say that and we kind of talked about maybe this one and this one is actually an example of really a stock where it had you know had an upcoming earnings and we were kind of wondering could the stock breach the support area and i think we answered that question okay so what you're going to notice is going into this earnings this had been the trend it kind of looked like a little water slide with maybe a little kind of cup at the end and then it just plunked down even lower this is not every day that you see the stock down 17 now just real quick on this okay real quick so if we go back to the trade tab on the margin the trade was what type of trade was this now this was only done two days ago so it shorted two calls the 385 call it wanted the stock to stay below that strike that's the side where there was premium the premium was 17 whenever you sell something you like to buy it back as cheaply as possible think like a store you like to sell it for as high as possible and then buy it as low as possible so you can sell it again and so what you're going to notice is that's up about 3 200 and the purpose of that 395 call was in this case well that was the protection wonder if the stock actually gapped to the upside so if we look at this trade and say well how much more is there really now what if i made a comment to you like well we don't need to do anything because there's 36 days remaining to expiration is that a true comment we don't need to do anything would you push back and say james don't be that foolish you know better than that okay so first off what you're going to notice is if we said well what's the difference between these uh it's about 27 cents okay so if we said okay there's about 27 cents left remaining and there's two contracts so the most these trades could make more is about 54 ish dollars let's just say 50 bucks okay now right now if we said we're going to get out we could actually take the 764 and say yeah i know i could make that last 50 bucks but that reward to risk ratio i mean would you risk the 774 and more to try to get the last 50 bucks now there's been some people that have actually told me no i'd never do that and they did do that so be careful what you say here because i will remember okay now some investors might say james i'm not going to actually try to get the last 50 cents squeeze that rag okay i kind of think about that premium okay if i would have kind of put this in water right and wring it out the first 35 percent's the easiest 50 percent kind of have to ring it a little bit more but if i didn't get squeezed at 80 you got gotta probably have a move in your favor which it did now to get that 100 percent i mean you're going to have to work on it and probably get this to come closer to expiration so be very careful about being too greedy okay and trying to get it all because if you are trying to get it all like 100 you probably are not really looking at the rewards ratio left which is absolutely horrible so what we're going to do is we're just going to right click on this now how do we get out of both okay what we're going to do is we're going to actually hold the shift key down and when you hold the shift key down you can click on those two lines we're going to take the 800 box we're going to right click and we're going to say create the closing order and we're going to buy that back for 15 cents okay now what you're going to see is if i if i do this i'm going to go ahead and actually click on buy plus two click on that now what you're going to see is we're going to go it's at 15 cents debit now we don't know if that trade is going to fill immediately okay we're going to actually see confirm and send it's buying two of those back there's the commission 260.

we're giving back about forty dollars of the initial credit i'm gonna go ahead and actually send that order let's actually see if it fills okay now jzv says i would have thought anything costing two percent uh of something or lower is pretty darn cheap well that can kind of depend upon volatility right if we actually look to let's say when the vix was let's say down at let's say 15 what do you think that put protection was on many stocks oh you could probably buy buy a lot of puts or buy eight put probably for about one percent if you actually probably get that vix probably about 20 you're probably seeing more okay options put options where they're probably about one and a half to two percent if we probably get that vix 20 to 25 what are we probably seeing we're probably seeing a lot of puts between about two percent and two and a half percent given the criteria that we've been using which is 20 50 days expiration look at the delta 30 to 40. so if we're in a lower fixed environment lower implied volatility on many stocks investors might just buy puts because they're really well they're pretty cheap relative the current stock price but the higher the volatility goes that investor might air more on the side of callers because those puts are not inexpensive okay now i want to kind of make mention one of the trades that we had historically was unp and we look for this to be something where and i'm going to kind of ask for your kind of comments here and i'm gonna say what should i do and we said hey maybe ump could start to go up now the problem was in the last two weeks the railway railroad workers they've actually kind of threatened to go on strike now i don't know all the details of who did this or what but you're gonna see in the last three days they were at least planning on maybe going on potential strike and it caused the stock to go down now the sad part of this is in the paper money account there was a short put now that's kind of where some investors say james you might want to pay attention to the news so if you look at the short put what you're going to notice is the short put there's one day remaining to expiration now how many of you have ever said to yourself you know i said historically that i don't mind to own the shares but i do mine now well why might the investor have second thoughts i mean before we were like duh duh duh we were ready to get married maybe to that xyz stock and all of a sudden now we're walking down the aisle here comes expiration and then all of a sudden i don't really know if i want those shares but what's kind of causing that can the investor get out well now let's go take a look at the charts and if you look at this the investor might say james i'm concerned that maybe that stock might even go down worse and that stock isn't really upward trending or did it go up and then now could maybe retest that prior low now how many of you are now starting to have second thoughts about owning a hundred shares of stock how many of you are having second thoughts and you're thinking i'm not sure if i want that waiting ring of the hundred shares of stock now if you said you know james i think i'm gonna back out of this what could the investor do assuming it was not assigned yet that means the investor had to buy the shares the strike price they could they sold the option for 420 they could buy that option back for how much well they could try to buy it back for 8.20 now that does mean if they buy it back they realize that loss of about 400 but that investor said well that's a lot better than actually putting in 23 000 worth of stock so you tell me what you want to do a do you want to actually go through the marriage and buy the shares of stock come what may for for better or worse or b james run okay buy the put back and and not have the risk of the ships okay now a couple you were actually saying okay stocks going down close the position now here's sometimes what happens a lot of us say yeah but i don't want to lose so here's the thing i think a lot of investors say i don't mind to lose i just don't want to be a loser having losses happen if people are telling you the truth if people are telling you the truth but when you start having multiple just because someone has a loss doesn't mean that their overall portfolio is losing it just means that one of the trades that they had lost okay you need to understand there's a difference there just because this big money account is going to take a loss doesn't mean it's quite a loser uh portfolio so now what we're going to do is create a closing order buy it back now what you're going to notice is if we're talking about if we're at expiration we want to make sure that this does get filled if we confirm and send that order buying it back for 830 plus 65 cents send the order we want to make sure does this trade actually get filled since we're so close to expiration i'm not thinking that the open interest is extremely high we we want to make sure that that gets filled today now first and last says how about rolling okay so you might roll if you think the stock is still in the upward trend do you think it's in the upward trend okay now sometimes what people do is they say could i roll and they don't really kind of put into context do you still want to own the shares do you think the stock is above support if i look okay it fills so that realized the loss of about 405 or so but if we actually look at ump and said is this an upward trend is it trending up and i'd have to really say i don't think it really is okay so that's why in our example we wouldn't show an example of a roll we would say we're going to close the position okay and try to actually kind of cut bait and go look for something else that was in a stronger trend jimmy t says why would you sell put in the company you don't want well it's not that we didn't want it okay it just there became some news about the company like a strike different type of uh company risk that became known after the trade was put on have you ever kind of put on a trade and then you kind of found out that maybe there's some underlying issues that might not be solved by tomorrow right and that's why the investor might say i don't like what's happening i don't have the time i'm at expiration i'm having to make a decision okay now emj atkins says what would be the outcome in expiration well if if the investor let the stock close below the strike and expiration that's your question the investor would be the buyer of a hundred shares of stock at that strike price okay that's what happened now here's the other thing is do some investors do they like to buy shares below both moving averages well for many investors what you're going to notice is some investors might say james that's not really what i'm trying to do okay i'm not really trying to for example buy shares of stock below moving averages maybe if that's not someone's setup they might say look what i'm going to do is i'm just going to go ahead and actually uh close close that option position just one moment i got a visitor all right so there's actually a couple lightning storm uh strikes in my area and my dog jax is a little nervous here okay so we got a little busier today with us but he couldn't he gets a little scared but i think he should be good all right now what i'm gonna go back to let's kind of talk about some examples bullish and bearish okay i want to kind of just take a look at uh some of these individual questions i think i got many of them okay and i'm going to go back to those in just a moment but i'm going to kind of go back to a stock like tesla okay now one of the stocks okay so when we talk about trading the trend weeks to months the goal is we're trying to trade the 10 weeks a month but sometimes the trend breaks down below support like we saw in union pacific and there are exits to these positions even though they might be trying to be longer term holdings example given tesla now what i'm going to do is i'm going to draw the support level here and i'm going to draw like a kind of a support level maybe in this vicinity here okay we have a resistance about right here now i'm not going to tell you that this is broken out of resistance i'm not going to tell you that now how many of you like to try to get in prior to other people being in how many how many of you like that okay how many of you like to maybe get in before the breakout or you like to maybe get in a portion of the position prior to it breaking out so you like dollar cost average now this is we're talking about 305 stock this recently had a three for one split this has been a stock if you actually take a look at this as of lately and if you look at let's say the five days it's actually up near a five-day high why is this up near a five-day high this is one that's been showing some relative strength lately now the nice thing about if the investors said hey i want to do a cash secured put if i wanted to maybe do like say uh short put vertical et cetera they can choose where they're willing to be the buyer of the stock and have protection if they want to do a vertical now if they actually said you know james i want to do a vertical because i want in i want a built-in maximum loss given a vertical and i also wanted to actually have less buying power reduction so what i'm going to do here in this case is i'm going to go strikes all and i'm actually going to bring this up and we're going to go look at that delta probably let's start out about 35 okay now what you're going to notice is if the investor said you know i'm going to sell the 290 where's the 290 on the chart well we go look about the 290 the 290 is right about where this last higher low was right near the moving average okay so now so if the investment says i think the stock can stay above 290 they could also buy the put below to provide protection that whatever strike they sell that's where they're willing to be a buyer from now until expiration okay at least they have that obligation from now to expiration could they get out of the next could they get out of that obligation yeah we just talked about on ump by buying the put below that just gives them the right to sell so whatever strike they actually sell they sell the put the buyer at that whatever put that they buy they can be a seller at that price buy sell buy sell buy sell okay now let's take a look at this let's do the 295 excuse me 290 and then buy now by the way 10 cents wider than the bid asked spread not bad right here 15 cents not bad 4 500 contracts 86 861. so what we're going to do is we're going to right click on that we're actually going to go to where it says cell we're going to go right to where it says vertical and what i'm going to do is we're going to actually change this that uh that long put to the 285 dollar 67 credit 5 wide spread 333 max loss now what i'm going to try to do sometimes it doesn't work in my paper money account here i'm gonna actually change this and say you know what we're gonna go to confirm and send this is what the risk is given a vertical per contract okay what i'm gonna do is gonna go single account and i'm gonna go multiple accounts and we're gonna do in the margin account probably about two contracts so we will do two contracts and in the ira we're gonna try to get filled on about seven the buying power effect is really what the max loss is given a vertical we said at the beginning of the year 750 bucks 800. that's we're below that we sit on the ira 2500 and you're going to see that we're just going to send both those orders off for some reason my ira has just been odd in terms of actually kind of getting filled now if i do this and send this it's now just the max profit max loss it's also adjusted the commission as well if that's okay send it and we'll see if that order actually gets filled okay now oma omkar actually says it would be a good candidate for a call spread okay so remember the biggest actually reason why someone would choose a call spread over a short put vertical is they want what what is it they actually want what's the goal of what they really want well the goal of what they really want is they want a higher potential upside now your comment was you said the 3 310 the 315 well when we actually go look at the 310 there's the 310 which is out of the money and the 315. now remember if you buy real estate on the outside of town there's maybe nothing wrong with that but the problem is if you don't give it a long enough time to develop other developments to come out to where your property is it might not really appreciate that much so by buying something out of the money fine but it do you give it enough time the reason why we actually choose kind of more at the money to end the money is it already has intrinsic value already okay there's a greater chance for the stock to actually be above the strike at expiration now so i i'm with you in terms of the call call spread kind of comment you're actually mentioning the 310 the 315 but you know if we're kind of showing the example and let's do this let's do an example we actually look at uh by the way i can't i got i got a 305 315 already so i can't do that uh if i work now how come it's not showing the position i got to go total all accounts let me go the margin let me actually look and see what position if we look at the 305 we already have a call spread there and it's i it's sitting right there so i can't touch that okay now now in terms of yeah so peter actually says hey you know when you do a call spread doesn't have a lower probability i would say yes okay yes because the stock has a higher break even if you look at let's say doing let's say the put spread it actually has well the stock could even go down some and actually still be above the strike at expiration there's a little bit more forgiveness on the put side if we're talking about a delta 30 to 40 on the put side now let me show you a couple stocks that i think kind of stood out here a little bit today now number one number two stock was all we know that if interest rates go up all state they take premiums and then what they do is they see what happens and as they're sitting on mounds of cash that cash from premiums can be invested for short durations of time for higher rates of return okay so the second example what i'm going to look at is maybe looking for a stock that might be kind of in this case perhaps in a downward channel and i think there's probably this downward channel most of the touches is right here now on the bottom what you're going to notice is we see in this case uh tesla does fill and now what you're going to see in this case is kind of a like a symmetrical triangle okay so if we look at all what i want you to kind of look at is is could this be something where you had lower highs and could this be the second time where it's now starting to break resistance now sometimes when people say here but the first time didn't hold what does that have to do with the second time nothing okay now sometimes you do get to break out and it doesn't hold but it still makes higher lows which the stock did do and now it's breaking up again so what we're going to show on this because we just had a question on this is what about doing like a long call vertical now one of the things i think why that's probably not a bad strategy is if we're in a market that might be more choppy buying long calls by itself can be riskier because of that negative theta but what if you buy the long call have that upside and you say can i actually maybe sell a call against that to try to decrease some of that theta decay well let's do this let's do the 125 the f in the money strike okay well actually it's in the money by four dollars plus we're going to right click on the 760 we're going to buy we're going to go right to where it says uh vertical now we could do the 125 or the 130 we're actually going to open this up a little bit we're going to go to the 135 okay now the whole point of opening it up is you just don't do as many contacts and have a higher commission if we actually look at this and said well how much risk is it given the vertical for on one contract basis 533 dollars okay so if we said well we could risk 750 bucks in the margin to be one contract if we said well we could do 2500 risk in the ira well before contracts so we're going to go back to single count multiple accounts we got one in the margin the ira we're going to push it to four okay there you go now we got to break even max profit match loss cost of the trade which is pretty much the max loss notice the commissions will change as well now this is what the investor wants to do they could send this order and this again like tesla is a bullish trade tesla this is where the invest tesla was where they were looking for the stock to break up through resistance all state you could even argue and say didn't already break through resistance the investors just kind of thinking that this stock might continue to go now let me actually fast fire a couple stocks that i thought was interesting today las vegas uh you actually see kind of maybe a horizontal resistance maybe trying to breach on las vegas sands when is another stock that is kind of in that same camp maybe trying to get a reversal here i thought royal caribbean when you take a look at kind of that stock which had been absolutely destroyed okay uh i mean it was up here at 87 went down to 31.

that's a pretty good sell-off some of these royal caribbean uh stops are actually trying to move back to the upside microsoft keep in mind on that that's maybe a stock that might be challenged as well going into earnings as well and that stock is not too far off of actually hitting a fresh 52 week low now the one thing i do want to make mention to you if you said hey do you have a kind of a webcast that really kind of explains uh these different types of strategies when you're using them uh for let's say consideration uh to doing bullish trades the answer is yes and what i'm going to do is you can actually bring this up and let me kind of slide this over this is a class that we actually did a couple weeks ago and it was called the option golfback when you play golf you don't go out there with one club okay i've never seen anyone go out there with one club so just like in the world of investing like golf some investors might have different strategies like value strategies or income strategy like dividends or maybe a growth strategy right those are all different strategies there's reasons for those uh where the investor might consider them in different type of situations if we have more neutral markets we might say hey i'm going to cover calls if we have more neutral markets we might say we might do more short put verticals this class that i just sent you in the chat okay what your note what you're going to notice is here is this will actually take you to that session okay option golf bag make sure you're aware of that emj says can the max loss be more than the cost of the trade when we're talking about the the vertical given the vertical the max loss should be given the vertical what the debit is now if there was the uh if the stock was assigned to buy or i should say this if you had a long call vertical and the stock closes above the strike and the investor then owns the shares is that a vertical anymore the answer is no it's not okay so you got gotta you gotta know that that if it's not a vertical anymore can the max loss be bigger than what the debit is and the answer is yes because it's not a vertical anymore okay you love how we answer that own question okay is it a vertical if it's a vertical it's what the debit is on that long call vertical if the investor let the stock close above the strike they now own the shares what is the max risk of owning shares the stock could go down to zero see we answer our own question okay good now what i'm going to do in this case is let's kind of bring it to a wrap we did a number of trades here today we talked about tesla being bullish on on our example we also did the example of uh xom protecting it we talked about exiting the short put of ump and also we did the example of uh talking about adobe x in that position we didn't know that it was going to drop like that but sometimes you just you're right and the investor has that uh opportunity to take those potential profits remember with what we discussed here today it was done for example illustrated purposes only and kathy says i don't know how to golf don't worry about it uh you don't have to it's just an analogy okay there you go so with that said thank you so much for your comments and participation

2022-09-18 08:48

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