Short Put Verticals | Barbara Armstrong | 9-11-19 |Trading Vertical Spreads
Well. Good afternoon and. Welcome to. Trading vertical, spreads my, name is Barbara Armstrong, today, is Wednesday. September 11th. And, today. We, are going to talk about short, put verticals, my friends, so if you are looking, for a trading, strategy, that. Requires. Less. Capital. Than, some other trading strategies, and that we can, be constrained. In a. More. Conservative. And. Income-generating. Way. Than, some other strategies. You're in absolutely. The right place so, stay tuned we're about, to get going and talk about short put verticals. All. Righty so, it looks like we have a lot of people in the class already, I know that there are a lot that love to join this class live, and it's. Fantastic. When, you can be live, on the call because, then you can engage in the chat so hello, to Edward, and Eric, and Melissa please. Feel free to type into the chat agreeing to one another and to me let, me know where you're tuning in from also, if this is the absolute, first time you've joined this class please let me know I have. The privilege of filling in for John McNichol, today so as you may have noticed I am NOT mr. McNichol he, is off. Working. On behalf of our country, with. The military so that's, what John is up to today. As you, can see and I put it in big bold letters here so I won't miss it neither will you all the, coaches, now have Twitter handles, and mine is B Armstrong. Underscore. TDA. Also. You can now access us, on YouTube and we have hundreds. And hundreds that tend to tune into these webcasts, on YouTube. Sophie. Please feel, free if, you like this to hit the like button below subscribe. To our trader Talks Channel and then share it if you love this share it with somebody who, you think would really benefit, and hey if you hated it share it with somebody who's maybe not at the top of your list but yeah, feel free to share so hello. To Ricardo, and Renato, also, thank you for typing. A greeting into the chat so let's get through our important, disclosures, and then, we're going to get right into the meat of our day our objective. Today and this is an intermediate, level class so we're going to do a very, quick overview of what a short put vertical is, and. Then we're going to review. When. You might want to get into a short put vertical trade, when, you might want to consider getting out and then, we're going to also discuss, some of the the, nuances.
Or Things that you might want to take into consideration when, trading this strategy, and we're, then most importantly, we're going to spend the majority of, our time on, the thinkorswim platform. And, placing. Example. Trades in our paper money account, so, that's what we have on. You. Know that's. What we have teed up for today, and the objective, is really to just increase. Your understanding. And comfort, level in trading, this short put vertical strategy. Okay. Know, that options are not suitable for all investors as. There are special risks inherent options. Trading that may expose investors, to potentially, wrap it in substantial, losses know. That with spread straddles, and other multi leg option strategies, which is what a short put vertical is they. Can entail more substantial. Transaction, costs and we've got to take that into account. Know, that if you are doing small, numbers of contracts. And you have trades involving, minimal. Potential, benefit, that, those will be hit heavier, by transaction, costs, in. Order to demonstrate the functionality of the platform, we need to use actual symbols, we, we, will, however. That is not to be construed as a recommendation on, the part of TD Ameritrade, or myself we cannot begin. To know what. Your goals are or what's already going on in your account any, investment. Decision you make in your self-directed, account, is solely, your responsibility and. While, this webcast, discusses, technical, analysis, other approaches, including fundamental, analysis, knowledge. Of world events, you know they can all provide a different viewpoint and paper. Money trading, this paper money application. It's how I learned how to trade, and for, those of you who may not know me I came to TD Ameritrade, in, 2011. Not. As a coach but as a student and I. Wanted, to figure this trading thing out and I knew that TD, Ameritrade, had world-class education. And so, I hopped on board and so I remember. Paul. Type did I thought you where the singer trust, me you, do not want, to hear me sing I don't even hum well. Yeah. But I wanted, to figure this out so I remember, what it's like to be new and if you're new to this all I can say is hang with it pick, one or two strategies. That you think will help you achieve your. Goals and then, trade them in paper money until. You become very very comfortable, with not, only the platform, but with your rules and guidelines and, and with what you're doing but know that in trading, on the paper money platform, just because you're successful during one time period doesn't, mean if you go to your live account in a different line period time, period you're going to get the same results, why, because, the market continues to change day, to day as we all have seen so. You don't have to know, learn. A new language but. Delta, Gamma Vega and theta are known, as the Greeks and these four things show us how price. Time, volatility. Impact, our trade. Our. Options, trading. Okay. So. What. We're going to do today and I've already said, you know we put it right in the title we, are focusing, today my friends, on just. Let me move this over here we. Are focusing. On short, put verticals, and. We're. Going to look at when you might want to get in we're gonna look at you know the strikes and expiration, dates you may want to consider how. To calculate you, know max gain and max loss. Return. On risk, which. Some, investors, use as one of their parameters for, determining, whether or not they're going to take a trade and then, we'll, have a bit of a discussion on when you may want to get out and then, most importantly, we're. Going to get out there and practice and place some paper trades. Okay. So. When. Do. You want to get in and, is. There, anyone, here that is brand, new if you could type into the chat if you have never traded, a short, put vertical trade before and, thank. You to Melissa and Paul and, Remi and Ricardo. All for. Typing. Greetings into the chat if you have any questions, as we go along also, don't hesitate to. To. Type your to type your questions into the chat and I'll certainly answer those so. One. Potential. Entry, is anticipating. The bounce so we have something that has come down to a. Previous resistance. Level. And. This is not uncommon, to see and, we're, expecting. That that resistance, level will, hold, and become new support, and this. Is called anticipating. The bounce so if we, place the trade now, it.
You. Know support, might not hold but. When, we are, selling. Our. Short. Put verticals, so we're entering our sold. Strike, and then we're. Buying, you. Know a put below that to define our risk we're. Likely to get a higher premium because, we're, closer to, our, strikes, but. The risk is a little higher than if we wait for. A a close, above, the high of the load a. So. That's called anticipating. The bounce, now. Some. Traders, will take tout more, aggressive. Entry others. Will. Take. It when, the stock trades. Above the high of the load a. You. Know so if it trades above they would enter that trade. Some. Will you know put a time specific. Thing on their order and. Then. Others, might say you know what I want to wait. For. A close, above the high of the low day and. So. They want that, confirmed. And we'll often see, that, people. Will, call that a cold, and. That. Just, or you'll see it even in writing quite often, on, a slide, a. Close. Above, the high of the, low day and. Some. Will take that as a trade, above the high. Of the load a close above, the, high, of, the, low day and so. When you talk about a cold, entry, that's, what they're talking about and. Elias. Congratulations. On being here, so. This is, we. Have some people that are brand new to this trading strategy. And so, the idea, behind this, just, so that you're with us is that. What. This, trade, is made up of, is two. Putts, we, are going to sell. So. An investor, would sell a put below. Where they believe the stock is likely to trade and, then. They are going to buy another put. Below, that and. So. They've taken some of the money that they would get paid for selling, the put to. Buy a put and the difference, between the bought and the soul is the credit, that they receive, so you're paid when you get into the trade so. The most you can ever make on a short, put vertical is the credit you receive when you get in so. If the, stock goes, up. You. Have a profitable, trade if, the, stock goes. Sideways you, have a profitable, trade and, depending. On where you put your strike sometimes, it can even come down a little bit and you, can still have a profitable, trade and, this, is why, some. Investors. Like, this strategy, because. Even, if they think the stocks about to take off if it decides to just go sideways. They. Still have a profitable, trade so. It. It. Allows, some, time some more room for error now can you still lose on this trade absolutely. If it comes below both your strikes. And. Is. Approaching. Expiration. Then. You can end up, absolutely. Losing. On this on this, trade so. That's. What this is about and that's. What a short put vertical is made up of. Okay. So you, know and then as we can see here, you know we were looking, for an entry above, the high of the low day here was our high day if. We were entering, if it traded, above the high of the low day we may have gotten in on this day or this day. With. A close above the high of the low day we would have waited until this. Fourth, day here. And. Then. It continues, on up and had. An investor. Sold. A short, put vertical here, it. Would appear, that it's. Heading, for success. So. Where. Do we want to pick our strike. Price, and so. A lot of people, who are technicians, are what they call a technical, trader in other words they like to look at the charts, they, will often look for a strike, below, as many, support, levels, as they can while. Still getting an acceptable, premium, and. Some. Will select a strike price and an. Expiration, you know they're looking for a minimum return. On risk as a percentage. Or they won't take the trade and so. They're looking, for a strike, that. Is out of the money. And. The goal is, for. Your. Short, put vertical to expire, worthless now, having said that do. You want to wait for it to expire, worthless well. Some do but. There, are others, who would prefer to get out when they've got, 60. 80 90, % and we'll talk about that in a bit so.
Max. Gain what, is the absolute, most we can make well we've already talked, about that briefly the. Most you can make is the credit, that you're paid when you get in what's. The most you can lose is. The. Difference, between the two strikes. Minus, the credit so. If you, you, know bought, something, for, $2, sorry, sold, something for $2, bought. A strike, below that you. Know for about 50. Then. The, most you can make on that trade is the 50 Cent's the, difference, between the, bought and the sold what's. The most you can lose if the strike prices are $2 apart it would be two dollars minus. The fifty cents or a dollar fifty. Per, contract. What. Is your return on risk that. Is. You're max gain, so, in our example, if. We. Said. We're. Selling, something here, and getting paid two dollars for. It and then, we're buying a put below, that and we're paying a buck 50. And. We. Have a $2, wide, strike, and weak. The most we can make is 50 Cent's. Then. Our, return, on risk is going to be that 50, Cent's, divided. By the dollar. 50, which is the most we can lose and. If. You do these often enough that's a 33%. Return, on your risk. Now. When it comes to position, sizing. If. You're, willing to lose, $500. In our example, here. That's. The max risk you're willing to take then you could do three contracts. If. Your. Risk. Per trade is, a thousand. Then, you could do six. So. What. You have to determine, is what, is your acceptable. Level of risk per, trade and, a, Scott Thompson like, to say. Pick. A number and then. Think, if, I, had. An unsuccessful. Trade. Not. Once but two. Three. Four. Five. Times, in a row and. I'd. Had to take a max loss would, I still, be comfortable. In that. Risk, per trade number. And. If. You're saying to yourself. No. No. It. Would, be eating at the lining of my stomach, if that happened I'd be waking, up in the middle of the night then then your numbers too high he. Calls it his Sleep Number and I I think that's a really a great way to look at it okay. So. Before. We go to exit, criteria let's, go and put. This into practice because. I know that. For. Me it really helps, to look, at a, real-life, example so. Lots. Of people were talking about Apple, yesterday, so why, stop, now. So. Apple, came. Out with a new iPhone, yesterday, do, any of you have it yet you. Know and I heard them talking about it on the radio on the way in today and they said you know people, aren't looking at as a thousand, dollar purchase, they're looking at it as a $30, a month you. Know charge, additional, charge on their phone bill or whatever they can almost consider, it to be a utility. So. I don't know how you look at it but you, know I'm. Just you. Know passing, that along, commentary. Or scuttlebutt. That I heard on the way in this morning but so Apple, has moved up today and you. Know this would be anticipatory. In that it broke, above its previous. Recent. High. It's. Hit, 220, 316 and if we said well if, if. An. Investor. We're feeling bullish, about Apple. And said well could. We sell something perhaps below. This, at this 215, or below, and. So. If we came out to the trade tab. And. We said okay, here's. Now. Timeframe. Wise some, investors, will say I want, to look somewhere, between, you. Know typically, 20. And. 50. Days out and. When. We're looking, at selling. Shorter. Timeframes, tend to be more appealing. Because. Time. Decay, chips, away at the value, of your. Of what. You've sold faster. And, remember.
The Goal is we've sold something, that we would you, know like to see expire, worthless, so. If we look at about this 23. Day mark this is a weekly, and we look at this, 215. Strike, do we have volume here's. Our open interest oh. Let. Me make that up box, it'll be a little tidier. Volume. And open interest yep, it, looks like even though this is a weekly almost, thousand, contracts, traded today. 700. On the books, and. Then we've got volume on the 212 50s, as well, so. And we're looking at October. 4th which is 23, days out now we could come out and look at the monthlies also. And. We're looking at significantly. More. Time another two weeks worth of time and you. Know we'd likely get a higher premium on that right. But. Time. Decay, will start kicking in a little. Further down the road so if we just tee, this up say we'd like to sell a vertical, the. 215. And, it'll. Give us the next closest, strike the two 1250, which is two dollars and fifty. Cents below the. Credit would be 55 cents, so, if we say well what would our return, on risk be well our max gain is 55, cents, our, max. Loss is 250. Minus. That 55, so we divide that by a dollar, 95, which. Is 250, minus the 55, cents, so. Our return on risk. Where. We to get our max gain would be. 28.2%. And. So. When. It comes to, return. On risk, so. Some, will say well I want, to look for something often. Depending. On where. Volatility. Is in general in the market. Then. They, might say somewhere. Between, 20. And, 30. Plus percent. And. So. You know what 28%, we're kind of skewing, towards the, high end of that now. Some, investors, might say. I'm. Going to be in this for 23, days, so. I'd like to get at least a 23. Percent return. And, you. Know that's kind of 1%, a day now does that imply, that they, think they're making 1%, today no. It's, just a way of trying to create an apples-to-apples, scenario. And. I know we're looking at Apple as a stock but let. Me give you a for, example so if we came and looked at. Instead. The. October. 18th. The monthly, well. We'd have to go to a $5. Widespread. Here, so, we you know it's it's not going to be quite the same because there isn't a. 252. Dollar and fifty cent option, but, it's a dollar sixteen. And we have a $5. Wide. Strike, so. If we wanted, to figure. Out our return on risk there, it would be. 116. Divided. By five. Dollars, minus that 116. Which. I think is 384. Let. Me just see five. Minus. 116. Make sure you get my yeah 384. Divided, by. 384. So. That's a 26%. Return. So. Let me just make sure I got that right. 117. /. 383. That's. About a 30%, return, sorry, let me do that again. So. 117. /. 383. So, now we have a 30%. Return which. Is a little bit higher and so you say okay, this. Is great. This. Is actually, a better return, but. You, have to keep in mind that. We have to be in this trade. Two. Weeks longer and so. If we look at the last one it was a 28 percent return, on, something. We were going to be in for 23, days. Versus. A 30 percent, return. For. Something that we're going to be in a potential. 30 percent return for. Something we were going to be in for 37. So, an investor. Who has this, rule, you, know, it's, just a way of them trying to create a more apples-to-apples. Type, comparison, so, let's go with the October, 4th for this one. Just. In our paper money account. So. We're going to come back up here, and. We. Can see now sometimes, on weeklies you'll have they're not as heavily traded so you'll have a wider bid-ask spread but with Apple, so. Many contracts, are traded you can see that we've got like a three cent spread, here so that's. We called a tight, bit outspread, if you're new to some, of this lingo. So. We, are taking almost. $2. Worth of risk I don't know what John does, typically, in this class but let's assume for the purposes of this class, that. As an, example, we're willing to take, $1,000, worth of risk on a trade if we, had a $200,000. Account, that would be about half of 1% of, our. Account, value so. We're. Going to tee this up make this five contracts. We're. Going to come down to advanced. Order now but when we talk about exits. Some. Will just watch, it and say you, know what one when. I've got. The. Majority of my profit, I'd like, to exit. The trade I don't necessarily, want to wait for it to expire worthless. Right when they come in they'll say I want, to tee this up when. I've got 80% of my profit. I'd, like to shut. It down so we're gonna create an opposite, order. Multiplied. By 0.2, and. Say. You know when I've got 80% I could, be out golfing, huh, we're getting snow where. I live today up in, the mountains so we could be snowshoeing, I guess. Sometime. Soon so. We're gonna make that a limit order good till cancelled so when I've got the majority of my profit, I'd like to close it down now. Having, said that you can put this order in and let's say in the next four days, Apple. Continues, to really go up and then you see a big, hanging. Man or another.
Technical, Indicator that says this might be pulling back you, might well say hey I'm only in this five days out of 23, and, I've already got 65 percent of my gain you could go in and cancel, this. Closing. Order that you put in or change it and and. Exit, with 65, percent. You. Know or if it looks like it's breaking down and going below 215, and it looks like it may continue, on down you might say I know I have a small loss but this isn't looking like it's going the way we expected. And. So some investors, might choose to shut it down so this is just a guideline. So. You, know what have we got here, we want to sell five. Verticals. To, 15 we're selling, buying the two 1250. We're, being paid 54, cents, we'd like to exit this one it's worth 11, how, much, can. We make max, profit, two. Hundred and seventy dollars our potential. Max loss nine, hundred and eighty and if you have a bucket, set up for verticals, you. Can put it in your vertical bucket, and then you'll know when you get there. Let, me just look there's a lot going on in the chat and I very. Much appreciate that, I don't want to miss it if there's a question. Keith. Is saying he's never traded a short put vertical so applaud, you for being here also. For Keith, and, others. Who have never traded, short put verticals, before you, can go to. Getting. Started with options. And then. Go, to archives. And then sort, by my name because, I typically teach that class and then. Look. For, the. Class, on short put verticals. Because. We spend a half an hour just talking about short, put verticals, so, that's a great spot to go if you're newer also, and technical, analysis, is new check. Out Cameron. Mays intro. To trading. Getting. Started with charting. Essentials, and technical, analysis, on Mondays, at 11, o'clock Eastern. If you're, already pretty. Fluent, with the technicals, one. Of our most watched webcast is Pat Mullaly on Fridays. And that's, advanced, charting, and I'd highly recommend that, and. That, is at 2:00 o'clock Eastern, on Fridays. And again, you can always watch the archives, so, Tim is saying I'm, unable, to stay live can, you discuss different ways of seeing a credit appear sooner rather than later. My. Trades, tend to go down to, almost expiration. Before, getting a profit, so, I Tim. I'd want, to look at when, you're getting in on those, because, that might, have something to do with it so. So. Look at your entries, if, one. Buys. Yeah. Yeah. So somebody's saying if you buy the new iPhone you, get a year, free of their. Their, their, Apple, TV, streaming. Service, and an arcade, for those that play games I think, life offers, me enough of a game I don't tend to play those video type games. And. Yeah, we can also look at the width of our strike so there's a comment about that and, you, know so, the wider the strike the fewer the contracts, you. Can trade, for your thousand, dollars, you know whatever your, parameter. Is or an investor's, parameter, is, and. And that's something we can talk about also. Implied. Volatility. So should we evaluate. Implied. Volatility. As a question, asked. With. By. Allen and implied volatility, is is, a good thing to look at them we'll do that, so and then, can I can, I show you how to set up an exit, at. The same time so, I've shown you how to put an exit, in and I, hope that's. Helpful. A question. By Keith what's the single most used, strategy. Used. By TD Ameritrade, clients, I'm just guessing I'm guessing it would be purchasing. Stock. But. I really, don't know but, I like that question. Somebody. Else typed in I think it's buying stocks, of birds of a feather yeah. So, and and, Paul, is asking are we looking for a stock, with. High, volatility. That's. Coming down so. And. That's an interesting question too because often, we see high volatility. So. Guys lots, of great questions here often we will see high volatility, rate, before a big event like, earnings. Like, a big product announcement, like Apple had yesterday and then we see this they call it volatility.
Crush But. Many. Or at least some people that trade, this short put vertical trad, of strategy. Tragedy. Strategy. They're trying to stack the deck in their favor and trade, conservatively. So. One, of the things they might have on a checklist, is is. Earnings. Coming up in between, now. And the. Expiration, date I'm considering. And if, the answer, is yes some. Investors, will not place that trade, why. Because, as we, approach, the earnings event, volatility. Tends to continue, to rise and. What. What, happens when volatility, Rises is option, prices, rise and what do we you want to have happen we. Want the value of this option to go down not up and. If. We. Use. This strategy rate before earnings, and the trade goes against, us boom. You can be in mass loss territory. Very. Quickly, and, you, don't have much time to recover, so. Some. Investors, one, of their, their. Rules or their guidelines is, don't. Trade this strategy, over, earnings. Because, as we have seen many. Many times stocks. Will often gap, on earnings, and if it gaps for, you you're doing the happy dance if it gaps against, you. Yeah. It's not a happy scenario so. You. Know in trying to be conservative. They're. Looking, to avoid. That. When. We come and we look at the VIX the VIX is now falling. Which. Is interesting given that a lot, of stocks pulled back but this is the VIX on on, you, know the market in general, and. What. Some investors, will do when we see a spike, in in. The. VEX or in volatility, in general, that's, when they really look to sell because. Prices, tend to be inflated and then when the VIX continues. To come down and we've seen the VIX quite a bit lower recently. You. Know it was down here around 12, you. Know at the beginning end of July beginning of, August this, was end of July and right, now it's at you know fourteen, six, but. You know it was only what five or six trading days ago it hit 20 so we've, seen a, lot of range. And volatility. Okay. Let's look at another example, so, we've looked at Apple, let's. Look, at a mat and see what. So. A mat, you, know has, been, up trending, for the last few months we saw a bit of a pullback here it's. Come, back up. Consolidated. For a few, days and, moving. To the upside again, today. And so. You, know at what some, investors. Interested, in trading this strategy, might do is look at this and say you, know if, if. They, believe that this fifty line is going to hold could. We sell something maybe at below, fifty. So let's come out to the trade tab and. If. We were to come out here to October. We can see that we have dollar increments, and, we. Can see you know we haven't talked about Delta yet today, but. If we look, at Delta. Delta. Gives, us an idea. Of, what. The current, expectation. Is so if we look at the 49, Delta. You. Can see that we've the Delta, being 29, that, would indicate that, we've, got about a seventy, one percent chance. Currently. Now this could change in, the next half hour it can change in the next two days but currently. The the expectation. Is only twenty nine percent that a, map might close at forty, nine dollars or below so you've got a 71, percent chance, that it would be above, that, so. If we look at this and say okay could. We get enough premium. For. This to be worth our while so we're going to sell a vertical it, will always give us the smallest, distance. If we, said we would be willing to do a two dollar wide strike, the, credit, would be forty, two and so, if we came up here to my. Nemesis. The calculator. On toss and. We, said 42. Divided. By. 158. Which. Is two dollars the difference between our two strikes less, our credit, that's. A 26. Percent return. Now. Some. Might say hey as long as it's over twenty, percent or 25 percent they're, fine if your, rule is, you. Know if you're in it for thirty seven days you'd want 37, percent this wouldn't meet that rule. But. Not everybody, has that rule in particular that's, just a guideline so if you're saying you, know. I think. That this looks, solid we're going to place this as an example trade, and our paper money account first. Triggers, sequence, and not. To say that this is the only condition, under which you would exit. But, we want to create an opposite, order and, say. You. Know when this is worth 8 cents, close. It down now some might say I'd, rather wait, and if I can buy back the, sold strike, for a nickel, then I don't have to pay any Commission, and I'll, just let the bot strike, expire, your risk is really in the sold strike, and why do I say that because. If you buy something, you have the right to walk away from it if you, sell, something you, are obligated, you. Are obligating. Yourself, to buy this stock, at any time, between, now and expiration. For $49. A share if the, buyer on the other side would like you to buy it that's. What it means when you are selling and so, even though we're doing this as a spread strategy, there always is the risk of assignment, ok, so with, this we're, risking.
One. Hundred and fifty, dollars. A contract. Or thereabout, so, if we said a thousand. Oops. I made that ten what's. A zero. Between. Friends, right. Yeah. It's. A big deal we, could do six contracts, so we're gonna come up here. Make. That six. God. I should, have done that first. There, we go six and six. So. What's the most we can make on this strategy two hundred and fifty eight dollars what's the most we can lose nine hundred and forty two notice. This tends to be about a three to one ratio or. Often. In that neighborhood, which, means if you have to take a max loss my friends, you can wipe out the gains from several profitable, trades so. That can. Be. A little nerve-racking. And so you've got to really watch, these, just, because we've put an exit, in doesn't. Mean that you don't want to watch it and if if you, you know let's say in the next two days. Came, back and broke through this 50, level because you still have a lot of time, value, you, know you might, only. Take a very, small loss, and you might say oh this, isn't going in the right direction I would, rather cut. It here, and and, walk, away with a small loss when, it turns back around I can always get, in again and you've got transaction. Costs with that as. We had transaction, costs when we just place this trade so, you. Know we have to take that into account. But, you, know don't, these aren't set it and forget it, you do want to manage these. Okay. So there, are a couple of others that you may want to look at. And. Walmart, this morning, was trending up and now looks like it's pulling back, a bit but I mean it's still tracking off the 10 day moving average. It's. Come back kind, of it's, interesting the technicals, right, here. Was a previous, high it's. Hanging right in that neighborhood so, again some might wait, and look for, this, being our current, load a a close, or, a trade, above, the high of the low day so. They'd be looking to get in if this went back above, 116. 70, and where. Might they put their strike maybe 114. Or below. Starbucks. Let's see how it ended the day so the last time I looked it was just this tiny, little red doji. And now. It looks like this support, may be holding. But. If you're waiting for a high above, you, know a trade above the. High of the low day it would have to come all the way back up here to this 94, range but, if this moves to the upside again tomorrow, some. Might say a you know, some. Investors, might look at a short put vertical below. This, 90. So. Your. Challenge my, friends, and I can't really assign homework, but if you really want to master this strategy. Go. Over to the trade tab on Starbucks, or Walmart, or if. You were following along may have put the train on Apple, or a mat in your paper money and count so I encourage, you to do that and then. Position. Size according, to how much you would risk and then, track, it as if it were in your live account and. You'll. Learn a ton, from doing. That set. Up on your monitor, tab something, saying you know these, are short put verticals, so. Set, up a short put vertical tab, so. I have one here so. Set up a short put vertical tab and and. Go. In and monitor that and then. Continue, to place trades look. For a set up place. A trade a short, put vertical trade, every day for the next week and then come back next week and I. Don't, know if John will be talking short put verticals, again but. You. Know then when he starts talking trade, management, it will make that much more sense to you because you'll have been actively. Doing that okay. So when. Do you want to get out well, we can let the options, expire, and let.
Them Expire worthless but. Know that you always have that assignment risk and I. Mean there have been people you know it would have cost them a nickel to close out the trade and they thought they'd let it expire worthless and then, the, entire market, had a big down day and all your profit in the trade got. Wiped out and you ended up in a losing position that, can happen, I'm. Not just trying to scare, people it can happen. I mean look at how many stocks had a big pullback yesterday. Starbucks, was one of them. Some. Will say you know when it gets, within four days of expiration, no, matter where the trade is I'm going to close it out so. Some will have a guideline around, that some. Will look at at you. Know when I've got 80% of my max gain or 90% they'll, take the risk off the table or if it really shoots, up over a few days and then looks like it's going to start pulling back and they've got 60. Or 70% they. May well. Decide. To close it back if, you buy this short strike, back for five cents or less there's. No Commission with that and then. If the trade is going against, you you may want to use a technical, exit. Like I said you know if Starbucks you put that trade on and then it it came below the 90. They, would look at exiting. The trade. So. That is. A wrap my guys my. Friends, I hope that you have found this helpful I love being here with you. Just. Quickly, know. That you, know a max loss is possible regardless. Of what the Delta says know. That transaction. Fees can take a bite out of your profit, know that assignment, risks, exists, from the moment you open the trade. So, we've covered a lot you, know the basics on what a short vertical is, when, you might want to get in we've placed a couple of example, trades we've, talked about volatility, when, you might want to get out. And. We've. Teed, up some, trades so. Know that the. Trades we place they were for, example purposes, only not, a recommendation, to buy or sell or, use, any particular strategy, on any particular stock, on the part of TD Ameritrade, or myself, any investment, decision you make in your live account is totally, your responsibility. Also. Know that all investing, involves risk without. My friends I say farewell today thank, you so much for joining me I will, look forward to seeing you in a webcast coming up soon bye for now.
2019-09-15 23:01
