Potential Short Term Reversals? | Technically Speaking: Trading the Trend
[Music] hello and welcome to technically speaking trading the trend weeks to months my name is james boyd we welcome you here today got my good friend michael fairborne actually with us in the chat a fellow instructor fellow investor and also you could find any instructor on twitter we do post educational content there daily take take a look at it now we'd like to welcome edward george grace jack louis fez annette carlos uh jc moon orlando and many others uh steve as well from new orleans my neighbor literally just got back from new orleans so probably should have went down with them so just real quick uh i'd like to welcome everyone and uh just for a quick it might look like we have connie hill here connie let me know if that's you uh fairborn might have had to step away all right just real quick as we're getting started want to give us a quick reminder that with what we discussed you should consider investment objectives risk and charges and expenses before investing options are not suitable for all investors special risk inherited trading options may expose investors to potentially rapid substantial losses especially in terms of uh spiking of the vix when you get uh well big market moves plus also widening of the bid ass spread as you get illiquidity maybe at that moment remember that also when we look at trades you should consider potential minimal benefit that can be significantly impacted by transaction costs we're going to demonstrate the function out of the platform we're going to use actual symbols remember that td ameritrade the broker they don't make any recommendations determine suitability of any security or strategy for individual traders that's up to you and as we talk about strategies you might consider some strategies for you and and uh it would be good to practice and pay money for educational purposes and see if that might be something you might consider for yourself also remember when we talk about investing review the transaction costs there are the option greeks here are agenda items here today now are those bulls coming out of hibernation we know that those bulls have actually kind of been a little well they haven't been completely at home on a broad basis right we know some stocks have actually gone up but not that stampede that we've become accustomed to for the last 10 years and yes it has been 10 years actually it's been 12. but who's counting we'll also talk about sectors maybe is there any sector that might be standing out from a trend perspective we'll talk about new stock option examples past trade management and we need to talk about those because well tomorrow's expiration so we don't talk about now those trades are gone so as we go through don't mind i i can multitask okay i know you're shocked by that but uh i can multitask where i can talk to you look at the charts got five screens here and i can read the chats all the same time and if i can't i got my good friend uh uh here to help me as well in the chat so let's go ahead and actually kind of take a look first chart i actually want to take a look at i made a comment yesterday on twitch uh we have a session on twitch with td ameritrading we kind of talked about the nasdaq if the market's going to go up you know historically it's really been maybe the nasdaq or the russell leading the market higher i want to ask you a question here if if i were to ask you has the nasdaq reversed okay what area are you watching is it a moving average is it a point value is it reversing and is it reversing up into a certain point where maybe the investor might consider maybe some bullish trades okay now let me know on that now what i'm going to do is i'm going to kind of strip this chart to where there's nothing but i want to hear from you okay remember remove those drawings has it reversed at what price level are you watching for the reversal now i'm going to go back to this chart that doesn't actually have those uh dots or at least you shouldn't but if we were to take a look at this you know kind of as we were working our way down we kind of always talk about the three different types of w's right slanted down okay here's a low we come back up here's another low that's slanted down the lower low is is hot is lower than the previous law recently slowly might add okay just being truthful okay nothing wrong with that tell them telling the truth okay sometimes people think telling the truth is bad it's it's actually good okay if you take a look at this we're gonna notice that price actually fell down too low run back up pull back that is not a lower low that's a higher low the middle the w if we're kind of talking about where's the middle of w the lower high area it's right about 15 000 okay so if someone wants to look at this and say are maybe some signs becoming a little bit better for a shorter term bounce in an intermediate and longer term trend some investors might have to say maybe yeah if we go back and look at that remember this class is really talking about looking at the charts on an intermediate basis weeks to months long term uh months to years and if we take a look at this this does not really look that much different okay i know every time now ask lisa okay ask lisa she'll tell you but every time we pull back it's always the million dollar question do you think this time is different do you think the market's gonna bounce right i mean that's always it always feels different okay but when we actually kind of take a look at this when we get these shorter term pullbacks in the intermediate to longer term trend it is not unusual this was about probably nine weeks of flagging this actually right there was probably about seven weeks of flagging this right here was about six weeks of flagging and this right here has been six weeks of flag nevertheless this upward trending 30 period moving average it's still bouncing off that line and then what you saw lately we're trying to get above we're trying to bounce off that the key is can the price really get above that blue line again and again do you understand this okay when the price is below the 10 period moving average it's it's a struggle right that's why we call it kind of uh you lose the momentum when you lose momentum it just feels like the bulls struggle to really push the price back up it really is okay now if we take a look at this okay uh i want to go now to the sectors i'll speak to the others in a moment but when we see the nasdaq actually bounce okay this is showing a risk appetite of investors they're not buying campbell's soup kroger okay johnson and johnson give me some band-aids they're buying those stocks that have a higher growth expectation a higher beta higher implied volatility okay if investors are buying those stocks that typically means that they're more comfortable or they're willing to take risk now if they're comfortable and they're willing to take risk they stocks might be bouncing off support or breaking out of resistance now i want to talk about sectors okay if we take a look at sectors you're going to see for that from the tech space you'll see that that looks just like what we actually saw with the nasdaq okay now if someone is trading the longer term trend that tells them there's probably a lot of stocks in that sector that are probably bouncing because if we see the sector wicking down to the upward trending 30 period moving average something's bouncing that's causing that sector to go up what stocks are they we're going to hit that in just a sec but if i were to ask you is maybe is there another sector here that can lead our discussion that might even be stronger than technology hand them over i kind of feel like demanding today just tell you tell me okay now vj says materials communications okay so if i pull up ixb you're going to notice if you take a little ixb you're going to kind of see that that's kind of like the classic flag run up and the pullback and it is somewhat of a divergence right now not necessarily breaking diagonal resistance but actually it's bouncing off support and moving strong back up to resistance if we actually take a look at let's say uh the socks and i sure hope i can bring that up let's see if i can okay no uh yeah so if i actually look at socks just s-o-x which we will talk about when investors are seeing let's say technology goes up the industry group of chips nvidia xilinx amd etc those might be starting to go up when we look at these in the shorter term what do we see kind of more of your classic double bottom pattern with a little division okay now the price has gone up above the middle not yet but the price least poking its head okay above the 10-day moving average when the price gets above 10 you start to make the higher highs potentially the higher lows now one other sector we have not mentioned if you actually looked on twitter today we kind of talked about maybe the sector of discretionaries now we're going to kind of mark that down as well okay so ixt ixy we want to kind of take a look at those what's driving those areas and the other thing you actually made mention of is you made mention of socks okay and the other one that jack is bringing up well what about the financials well so the financials if you take a look at it now remember they make money on service okay as far as checking accounts savings accounts you name it regular service but then they also have a trading department and they're pretty good at trading they trade fixed income they trade equities and a number of other different products okay and those that trading side of the business has done extremely well as they typically do and which has helped a lot of these financials so let's kind of mark this down right here okay now i'm going to ask you a question okay so let's first go to discretionaries if i were to say discretionaries have been pretty strong why don't you go ahead and actually give me the names of those okay now what i'm going to do is i'm going to make an assumption that maybe someone says i'm not very good at searching i don't know how to find them what is maybe kind of an easier way to kind of track some of those stocks in that sector well one of the most the first things you can do is write on the td ameritrade web page kind of sounds funny to say web web page okay because almost everything seems very software based these days or app-based but if we go for example right to where it says research and ideas i'm logged into the td ameritrade website we're going to go right to where it says research and ideas and go to right to where it says sectors and industries now if i click on sectors and industries right there on the far right hand side this should not be new but again knowing about it and doing it those are two different things okay now if we go over to where it says td market monitor we're just going to click on this the goal that we're doing is i want to know what stocks are moving that discretionary space so we're kind of saying together let's look and see which stocks are driving that now if we take a look at this it defaults to the performance now again what is your favorite color you decide for you but maybe green might be your favorite color okay now if i go look at for example change the time frame off to the right hand side i want to go back to about the last 30 days i want to kind of take a peek at kind of what's been happening so the last 30 days now i want to go down to for example the discretionaries where are they oh right in front of my face so one of those top ones that we're going to notice here is actually four okay now i'm going to kind of write that down another one we actually see right there is if i looked at that is mgm so those casinos now you might not necessarily go to casinos uh but obviously other people might have might uh we got gm as well this becomes an immediate watch list maybe look at the trends we got expedia oh yeah there goes that travel theme again and now if you actually take a look at let's say dollar tree okay dl dltr and then if we kind of go over maybe just a little bit to the right what's the difference between these skinny ones they're caesar caesar we talked about that okay same idea the mgm but the bigger square rectangle which is kind of hard to miss because it is a pretty big rectangle is tesla all right now of any of these do any of these stand out to maybe talk about any of them now i'm going to go over here to the the other big square which is again this bigger the square that's the market cap okay now i had someone recently asked me why do you look at the dow 30 stocks sp 100 nasdaq 100 stocks i asked the person i said what stocks do you typically look for they said i look for stocks over 40 dollars and i look for stocks that are larger market cap said back to the person well if they're higher price dollar stocks and larger market cap wouldn't those ones typically just be in the indexes of the dow 30 s p 100 and the nasdaq 100 and i asked the person do you trade options when you trade off and the person said yes when you trade options is liquidity a criteria in your cert yes wouldn't those potentially just be the ones on the indexes now we are not saying those are the only ones but when you go to the indexes it kind of seems like you're taking out those two additional steps where you understand why they're in the indexes to begin with okay you can pick what you want but if the investor kind of says i want a higher price dollar stocks at least 40 or greater higher volume greater chances of actually tight bid ask spread and maybe also the institutional interest be cut and then it's actually probably giving it the higher market cap those are the ones that are probably on the index okay so that's why we talk about the indexes now let's go back to this and so what i want to do here is i'm going to go back to uh okay good i just okay now let's take a look at this i want to go back to one of these i'm gonna make mention of the uh one of the stocks there let's kind of go back just real quick to the tesla example but we need to talk about netflix too okay and we'll talk about why now if we take a look at tesla you're going to see that it was one of the fewer stocks if we said think of the stocks in the last 30 days that was able to stay above the 30 period moving average tesla would be probably one of the fewer stocks that was able to stay above the 30-period moving average when a lot of other stocks went down especially ones that were nasdec related now this is a stock again on the 20th okay that has earnings now if you take a look at this chart and kind of back this off for just a sec we kind of had a major resistance about 755 then you kind of had like another area maybe right now about 8 11 if it gets above 8 11 the path of least resistance might try to be let's say 876. now if we were to drop this chart back so we could see that intermediate to longer term trend this is what it looks like boys and girls ladies and gentlemen what we're seeing on this chart is this kind of looks very like there's your flag and then really since here where where's here well about right on the the week of 8 16 that's the moving average crossover weekend since 8 16 about the last two months you ever missed it missed a trend you couldn't believe it okay you know about it but maybe didn't ride the trend it happens to us all okay now if we take a look at let's say the stock it's been using the 10-week moving average as a potential support we can zoom in and see a lot of wicks touching right off there touching right off there touching right off there that's showing really kind of pass demand now if we take a look at this tesla we go back down and we're going to show the example of going right back to the novembers okay if we go to the novembers and let's say the investor decides that they want to be a little bit more conservative conservative actually means if they said i want to do a selling strategy i want to sell a put spread that maybe doesn't have as high of delta just in case the stock were to let's say go down okay and so by selling a strike that has a lower delta there is also with that lower premium but there's a lesser chance not no chance lesser chance of the stock being below that strike at expiration if the investor were to pick the 745 and the 735 widen out the spread just a little bit that way where it's not doing twice the number of contracts and twice the number of actually commissions it's going to go down to 745 and the 735 okay now what you're going to notice in here is when someone sells this far out of the money now on tuesday we talked about doing strategies that are bullish and the title of that on tuesday was doing bullet strategies and having a clear understanding of low breakeven okay because of the volatility if we go to confirm and send now what you're going to notice is when we have a probability type trade per contract it's going to be 152 max profit max loss if this paper money account could really take probably about 1500 installers we could probably safely do one but we could maybe squeeze two it's gonna be a little bit above okay but probably not by a whole lot if we look at the break even at 7 43 48 that means the stock can go from about 820 all the way down to 743 now i'm going to kind of tell you what i've seen in 20 years every time okay that i've actually seen a pullback in the market every time there's always people that are very concerned i'm gonna be bullish but i'm gonna be careful okay what does that even mean what does that mean that you're gonna be bullish and you're gonna be careful what does that even mean okay so first off if someone says i'm gonna be careful they actually might say i'm going to do a defined risk tragedy okay this is i might do a strategy that's also maybe not as high up on the delta this isn't okay when someone does a short put spread you're gonna see that the delta is probably 10 to 20. this is probably closer to a delta 10 per contract so i think it's important to kind of say okay it's fine to say i'm going to be conservative i'm going to be careful but what does that mean in terms of strategy and delta when you start giving that context now you're starting to kind of apply a strategy now that the paper money account sells two of those and says okay that's what they're going to do there's the commission for the two contracts credit less the commission if that's what the investor wants to do the buying power of the collateral is 1600. send the order now i want to kind of also speak to something that i saw years ago that i think is actually applicable uh and i want to do this in two minutes or less okay so there was a question historically regarding why do some investors do better than others and i asked the class at that time i i kind of said and many of you might remember this okay this was kind of a graph of like the s p 500 over time okay and what happened was okay i asked the class could you draw on the s p where as an investor in your payment account you put on positions and someone sent a graph back and said hey in my paper money account this is where i practice doing some trades so they got in one trade right here they got in one trade right here and then what actually happened is they actually got in here here they put on another trade maybe it was microsoft apple then it was facebook and so what you'll notice is when the when the market was starting to go back up where were they really getting in where were they building their portfolio well they weren't building a portfolio when the vix okay was up when the vix is up prices are where now what you're going to see is on probably 80 percent or more of the comments that were given back to me this pattern kept playing itself out over and over again someone would get in one or maybe two or three positions early into the turn and then build a portfolio when the vix was what now again if this is the only thing you get out of this this is going to be like lights on okay the vix now is low when the vix is low where are the prices when the vix is low the prices are high if the bits is low prices are high you could be really up near resistance now it sure makes you wonder okay that if we talk to very successful investors if they don't flip what maybe a regular investor does maybe they actually said on the s p i got in a position here got in position here got in the position here on any individual stock it could be other product and maybe as the market went up as the market went up higher and higher they didn't typically add as much because they were already in why well because they understood the concept is when the vix is high those prices are low and this goes back to that guy that lives in omaha nebraska that says hey be greedy when other people are fearful and be fearful when other people are greedy i want you to think about this and think to yourself where do you put on positions are you kind of more like example number one where you you kind of put on a lot of positions when the market is kind of at the top and you kind of get in top heavy or are you invested that says when the market actually goes down i don't like volatility the investor says the investor says i love volatility come on down and when that volatility goes up those stocks are just at longer term support levels if you're a fundamentalist that probably means that they're closer to the intrinsic value and if you're a fundamentalist you're even saying things we talked about on monday which is called oh yeah that's right a higher earnings yield which by the way if you kind of went together you can kind of say that there's a fundamental case and maybe a technical case guys and guess this is so important if you ask someone maybe what's causing them to lose money maybe consistently over time we would submit that if we kind of drew a graph of when they got in on individual positions okay if we just had a graph of the spx plot every time you got in on an individual stock just put an x and we would probably submit that actually the individual investor puts on the predominantly the most number of positions when the vix is the lowest and when the vix is the lowest that's when it has a greater probability of pulling back i want you to rewire okay instead of being fearful of the volatility think of that as maybe a potential opportunity okay now the comment from fayez is where is the vix now that's a funny question because when you go back and say where's the mix now notice how the vix has kind of stayed uh well it stayed recently kind of up a little bit but if we kind of said on the vix maybe the vix was let's say at 24 or so okay and what you're going to notice is now where are those lows well if we kind of said the lows where we have been recently it's probably right about let's say 1560. okay now here's the deal the goal for some investors is to say as the volatility is up which could go higher they might be looking to buy some positions or sell some options or whatever they wanted okay when the volatility falls what does that mean from the trend perspective well from when vix falls that probably means stocks are bouncing off support up that also probably means stocks are breaking out of resistance okay now i got to move forward here but i i think that kind of needed to be kind of explained because i don't think maybe people kind of understand why is there such a difference between maybe an experienced investor and maybe one that's brand new the person that probably has been trading less than two years i would submit that they're probably example number one someone who maybe uh you know is more experienced they've kind of seen that and they've kind of probably learned how trend works they're kind of more confident to trade what they see it's not that they don't feel emotion but they're really trading what they probably see now other examples i want to go to okay uh one of the things we also made mention of when we take a look at let's say discretionary is i will also go back to ups okay now ups was actually kind of uh there was an analyst or probably one or two firms they kind of talked about maybe ups and i'm gonna piggyback on fedex okay that maybe ups has been beaten down to a point where maybe they could actually start to go up going into the holiday season now one of the first transport stocks that we actually saw start to go up it was yours truly the choo choo trains choo choo okay those are the ones down here that actually double bottom those are the ones actually doing right there on 10 4 that it really broke through resistance and so did its twin cousin you're going to see that those were the first that kind of really showed the reversal now ups we're kind of not talking about carrier fleet of airplanes trucks and stuff like that the difference here is when you look at let's say a stock like ump is this area tesla does phil ups move out of my way there we go and now what you're gonna see is when you look at ups it has been beaten down now here's the deal it's been beaten down price wise down to this longer term support area now there are some investors that when they see the price fall down to longer term horizontal support some ambassadors some investors might say that that's for them they like that now some investors that are momentum based those investors might say that's me that's okay some investors might say that okay now what you're gonna notice is it's gone down to the longer term horizontal support now i am not saying i'm either one of those i'm just kind of saying that those investors usually self-select themselves out right now now what you're going to see is the stock kind of bouncing a little tilt the w to the upside going into the earnings now remember we kind of see this over and over again there's kind of two types of situations a lot of banks when they're earning straight up and then when they announced earning the stocks kind of recalibrated a little bit sometimes meaning they went down they revert but sometimes you kind of see the opposite stocks go into earnings and they actually go down and maybe there's a lot of negative expectation but then sometimes even with maybe it doesn't blow or the earnings out of the water so to say the stock kind of reverts back maybe it wasn't as bad as what investors thought that's kind of the idea with that to ups and fedex now the example when we actually look at ups ups is not going to have the same amount of implied volatility like nvidia which we'll look at in just a sec because we talked about the semiconductors okay when we look at ups which is better now you guys probably remember when ups probably had implied volatility of 15 to 20 okay wasn't much better than utility stock okay now if the investor said you know what james i i want to consider maybe buying the shares wouldn't even mind owning those shares at what price let's say the investor says i wouldn't mind really owning those shares at 190 or maybe 185 now why would an investor maybe consider selling the pet right at 190 well if we take a look at this the 190 here okay when we take a look at this this has a delta 46 this is saying there's a greater chance to be below the strike and since there is a greater chance to be below the strike and potentially on the shares the premium is higher now like on tuesday i want to go back to it's not just about the premium think about the premium and the strike and what the break even is if we take a look at this stee right price 190.
the premium which is this is 635 for november and now what you're going to see is the breakeven stock prices 183.65 what does that mean well the stock's at 191 the stock could still go down about eight dollars and still be above break even now if expiration the stock was at 181.65 the position would be down two hundred dollars okay just do the basic math so but what what happens if the stock is at one eighty one eighty five oh one on expiration and it closed there that means the investor gets all of the premium now remember when the investor shorts the put and anytime from now on to expiration the put can be assigned that means the short put morphs into shares of stock how many shares a hundred of them at 190. if the investor
has to buy those shares at the 190 they could sell those shares immediately some all none it's up to the investor they're their shares at that point the big money account is going to sell one contract 65 cents send the order now if this market and i'm not even making the comment that i think the market is going to break out because i'm not making a comment i think what could be more likely or maybe more investors are kind of more apt to say this maybe the market just kind of creates a sideways trading range well in a sideways trading range does that mean everything is sideways no does that actually mean that the investor might not do selling strategies and try to maybe capture time decay possibility right can there be trading opportunities in that sideways trend on the indexes could be so this is where the investors are using their full arsenal of strategies and saying what type of market condition you're going to give me and it's okay to consider not just strategies that are only so bullish like stocks now when you take a look at the question from roy regarding what does the break even look like on the chart let's go take a peek so when we actually take a look at the break even okay that break even is really right about there now when i would say there it's kind of sitting below the 30 period moving average and the break even is right at the 10 period moving average right near it so this is the idea if the stock makes a higher high in the short term can the stock make a higher low and these higher lows can sometimes really right be right at the 30 period moving average they can bounce right off the temporary moving average that's not the first time at the rodeo that the investor's seen that right now when you take a look at this chart and say where's the diagonal line the diagonal line is really kind of at this downward slant you could almost say james isn't it just the 10-day moving average i would agree with that but remember if you make the higher high if you make the higher high the highest likelihood is a higher low okay you make it breaks resistance price makes a higher high the higher it's likely to make a higher higher low where is it likely you're going to make that the moving averages can act like a support now i want to go back to one example we need to discuss just a couple positions that are in this account now first off one of the stocks probably not going to be able to talk about all these that expire tomorrow but if we take a look at let's say a stock now how many of you have been kind of noticing a stock called crm anybody been watching that at all now this is a stock this is a vertical let's take a look at two of these okay when you take over the stock like crm you're gonna notice that the stock the short strike is at 270. the only thing that matters about the 260 that's the protection don't necessarily want the protection to be worth anything because that means the position has gone down now when you take a little where the stock price is now if the investor said james i want to grab that 98 and just not have to hold the expiration the short strike on the 270 is less than or the mark is at 5 cents why does that matter well if you can buy the that short strike back for five cents or less it's commission less okay so if the investment says look i want to buy that back so there's not the risk of that in this case the stock going down and giving the profit back okay now be very careful when you say well there's only a day left okay nebraska football knows that there's only a minute left and they habitually habitually find a way to lose in just the last minute so don't even go down that path of saying there's only a day left there's only a week left if there's a time left on the clock there's a chance to give it all back i just i felt like my blood pressure goes up when i even think about that okay i'm the husker fan it's been tough okay good game but i want to see some wins not some losses now if we go to let's say buy the three back it's trying to buy those back for three cents or bet now it's gonna send the order okay note that commission it's gonna send it now the other one i kind of want to make mention of just really quick okay is i want to go down to this one this does anybody want know what type of strategy this is a long call and a short put now i'm just going to highlight those two what is that now by the way crm did fill so if i take a look at this it's long the 600 and it's short the 585 that was the now by the way why are you even bringing that up what does that have to do with the conversation on the seconds well netflix is in that section okay just discretionary now what you're going to notice is the trade was put on at 9.29 10 contracts no a contract so if we take a look at this what you're going to see is this has 36 days remaining we see that this position is what's called a long synthetic what you're going to notice is two pieces the long call bullish and we see that the short put has downside protection at the 500 that's so the stock can't just go down to zero and that's also for buying power purposes okay collateral now what you're going to notice is does anyone see anything that kind of might be saying james you might want to consider managing this position anything you would consider mo arif carol bj lisa uh david uh roy you see anything on this that might kind of say might want to pay attention now as i actually go back and take a look at the chart this is a very bullish whoop very bullish position it's like owning those fears and stock now if we go back and say when are the earnings here we are on the 14th tomorrow's the 15th those earnings are going to be on monday probably tuesday the first thing that the investor might think is james i don't want to risk maybe that 2500 that unrealized gain and give it all back if netflix were to gap down is anyone thinking that that maybe not risking the 2500 on one contract because maybe that stock might have gapped down risk now if we kind of said what side of the trade is more sensitive to that to that directional movement what side of the trade would it be give it to me well the side of the trade that would be really more directional ding ding ding at least initially would be that long call now that long call has a delta 72 so for every dollar that stock price goes down that call is going to be more sensitive to directional movement the short put is still has risk of directional movement and the delta could get bigger but what you're going to notice is here as we finish the paper money account is going to sell the long call profit take on it and get out of the position where it doesn't have that direct as much directional risk but also the time decay now remember when is the implied volatility of the highest right before the earnings or after the earnings when is the volatility in the heights okay the volatile is the highest right before earnings and that called benefit from an act so the investor tries to sell right into those earnings they're really trying to sell when that call might be inflated from the volatility okay now gonna right click create a closing order sell and when it goes to sell the investor doesn't have to wait to expiration they could say look i'm gonna sell and i'm gonna try to grab the investor says that sixteen hundred dollars now confirm and send now the other thing that you're bringing up which i i'm reading okay i can talk look at the charts and see your comments at the same time with one eye but if we go to where it says confirm and send it's going to also pay the commission of 65 cents if that's okay send the order but what i i'm actually sitting there you're saying james roll the short put roll the short book well let's go take a look the november expiration has a short put of 5.85 the premium there is 59 of the premium is gone okay now sometimes when that is greater than 50 65 80 the investor might say james i'm going to consider in profit taking in rolling the position now how do you do that right click on that line we're going to actually go to where it says create a rolling order when we do that it's going to buy back the option that has now and then sell another one we'll like which one the pink one account is still going to stay in the november expiration okay but now it's going to say okay well which ste rake really kind of has that delta that that which strike has a delta 30 to 40. the current strike is actually 21 but if we kind of move up here to maybe a strike with let's say 30 to 40 the first one in that bracket it's really going to be the 605 so it's buying back the 585 the current and now the expiration there is that 19th of november in this case it's the 605 not member could the investor go high or low sure but if they're kind of saying james i know there's earnings up coming i kind of want to be at the lower end of that threshold okay and i don't want to kind of run a risk where i'm where the investor is selling a put where that strike is so close to the stock price this is still giving about 30 to really go from the current stock price down to the 605. now jade why are you
kind of speaking with the southern draw here well my family is in kentucky and i just got off the phone with my dad earlier and my wife and kids are in louisville okay and uh so that little southern slang coming back in there now a little uh boy i love the people in the south good people now confirm and send now what you're going to see is it's just rolling the option dollar 30 because buying the option back selling if that's okay sending the order now the other place that you mentioned okay so we kind of talked about number one technology we talked about discretionaries for mgm okay gia exp dollar tree caesar entertainment tesla home depot just briefly on the home on the well the place where you go spend a lot of money to actually fix your house that is an asset at least on paper cash flow in the meantime maybe not it's not an asset okay it usually sucks more money out than than you uh that you get in return now if we take actually look now by the way the peter says well what about the long put well here's the deal don't need to roll the long put because the long put is still providing the protection of the downside does that make sense don't need to roll it okay now what it did is that this the spread width is a little wider but it's still giving downside protection and it's in the same expiration month as what was just sold okay now when we take a look at home depot this really looks like what type of price pattern what do you what do you see now as i'm getting the answer you kind of see like there's the daily chart there's the three year weekly chart and if we were to look at this we would say oh my goodness this kind of looks like a bear flat no okay this would kind of look like kind of you more of your classic ascending triangle right probably two different ways we can kind of draw this i think we're going to get to the end the same spot higher lows equal highs there's home depot and there's lows so when we take a look at this you're going to see that when you take a look at let's say lows itself lows doink up above now remember when you think about how much is lowe's a part of the the scratch marks how much of home depot is a part of discretion the answer is probably quite a bit how much is actually netflix a part of the scratching areas those three stocks probably make up a pretty good chunk of the pack of that discretionary sector okay now i want to go to the other area just briefly and we talked about the socks the semiconductors not the socks on our feet okay we're talking about the sox which is the index okay and a lot of times if we're seeing let's say tech stocks whoops tech stocks move to the upside it's usually driven by maybe the semiconductors performing quite strongly let's take a look at this last trade now when we think of semiconductors we might think about maybe xilinx we might think of maybe uh amd micron intel you name it if we take a look at this it's kind of like our classic little pattern now remember sometimes people just try to keep investing simple when the prices go down be prepared to actually see w patterns okay so what you're now going to kind of notice is that was kind of like you're slanted down then followed by it tilted up then we actually see it kind of goes down up down and then what you're going to kind of see is it breaks the upper line and i want i want to kind of draw this out so you can kind of just see this over and over and over whether it's 22 20 21 whether it's 2011 2005 he just kind of keeps seeing those same patterns if we take a look at this kind of low okay here notice it runs up pulls back doesn't pull back as far and then doing and what you're gonna notice is in the last couple of days the mac d staying above zero if the macd can really stay above zero there's really kind of greater odds of the stock trying to break resistance okay now what do the three lines have to do with the w's well first off below the yellow line that those are your w's the basin patterns when you get the w you probably also have a divergence on the macd when you see the price as you go above the yellow line that's that diagonal resistance okay and lastly if we look at this last trade if the investor said you know what james i want to maybe consider being bullish and maybe just doing a short put by itself now remember there's a lot of people that know about a lot of strategies that's not the question the question is really what one or two strategies do you want to specialize in you do not have to be the master of all strategies you just might pick a strategy for you that might be something that you really like to focus on if this paper account said that it likes to maybe sell puts or cash secured puts the paypoint account is going to sell the 210 the premium there about seven dollars and now what you're going to see is that breakeven is going to be the 210 minus seven dollars and the break even not today and expiration 203 that means the stock could really go down from about 216 down to about 203 that's about 13 down and you're gonna see max profit and max loss now remember you don't have to be a master of all strategies what one or two strategies do you want to focus on is it stocks is it stocks and cover calls is it stocks it may be cash secured puts because cash secured puts are really when you think about it a stock buying strategy at the strike price potentially in the meantime maybe the investor might get some or all the premium but remember it's a stop buying strategy and the stock price could be lower paid money account is going to send that and it gets filled i'm out of my time here today i want to tell you that i've thoroughly enjoyed having the this uh not a riff sense is a short put uh you know it whether it's in a margin account or an ira right it's a stock buying strategy okay now when you typically think about an ira account you think about a retirement and when you think about retirement you usually think about an income or you think about something that might kind of potentially be longer lasting okay this might be a little bit of a hybrid of both okay i'm out of my time here today if you enjoyed today's session reach out and just yeah that's right smash that like button you can also know that this session has been recorded you can go back and review it at your own leisure and also remember that the things that we discussed they were used for examples used for illustrative purposes only also remember that coming up right at the top of the hour we'll have our new webcast remember when you look at investing where there is a reward potential there's always a risk you should always know what the risk is and what the break-even is and what are those probabilities thank you so much for your comments and your participation have a great day i will be posting on
2021-10-17 04:46
