Short Term Trading Strategies | Portfolio Management Basics | Barbara Armstrong
well hello everyone welcome to portfolio management basics i'm delighted to be joining you this afternoon so pleased that so many of you are able to join us live want to thank each and every one of you for being here and the hundreds more who catch this in the archives today we're going to talk about some different types of strategies it's kind of what do you do when the market looks like it might be rebounding but you're not really sure you're not super confident that this downtrend is over and how might you approach that as an investor so that's going to be our topic for today i'm delighted that you're with us hello to juanita and todd and bj and lucy and lamar and chuck and vijay and mary and kim and the rest of the gang thank you all for being here i also want to thank connie hill for joining me in the chat she's a friend and a fellow coach she brings a wealth of experience so if you've got questions please don't hesitate to ask and connie and i will do our best to answer those questions for you okay um yes if you are in the archives you too can type your questions in just by typing them into the chat or into the comment section um on youtube i do look at those at every trading day so i'll get back to you quickly on that and the last way to get in touch with connie and i is through the wonderful world of twitter and you know both connie and i are posting useful content content or hopefully informative content on a daily basis um that can help you in the world of investing and trading it's free um and i hope you choose to take advantage of it my handle is at the armstrong underscore tda connie at sea hill underscore tda so uh if you'd like to follow us you'll make sure that you don't miss a thing okay so let's get through our important information so that we can get out to the platform um like where i like to say where the magic happens know that everything in this introductory level class is done for education and informational purposes only none of it is to be construed as a recommendation or advice on trading any particular security or strategy in any particular way know that when it comes to dividends payment isn't guaranteed dividends can be discontinued and then the underlying security is subject to market business risks including insolvency while we look at technical analysis in this class we other other approaches including fundamental analysis can provide a different perspective and sometimes we spend the entire class more oriented to fundamentals and sometimes the other way around know that options aren't suitable for all investors there are special risks inherent to options trading that can um excuse me that can end up with rapid and substantial losses so we need to be aware of what those are and we do talk about those every time we discuss trades that might include options know that all investing involves risk including the potential risk for loss when we use a stop loss order and we have demonstrated that many times in this class know that a stop isn't a guarantee that you'll get out at a particular price but rather it will trigger a market order and it will fill up the next available price so if a stock gaps down as we have recently seen happen with walmart and dollar tree for example we might end up out at a lower price than we were anticipating okay so what's on our menu for today well we're going to have a look as we always do at what's going on in the market currently um we're going to uh manage a couple of the trades we're going to look at a couple of the trades that we put on i'm going to look at specifically one that we exited this week and then we're going to look at adding new trades to our paper money for portfolio so that's what's on the docket so let's get out and have a look at what's cooking in the markets let me just adjust my screen spoiler alert we may look at energy a little later um okay so we're going to start with the s p 500 and you know there's been just there's so much chat going on let me just get rid of a couple of these things that we don't maybe necessarily need today and that'll give us a bigger screen so this is the s p 500 now um is the downtrend complete so i would say that if you you know are bullish dang it okay the bulls might say well i spy with my little eye a bit of a double bottom here and that's a bullish pattern so you know the bottom being around that 3 900 the top being around the 40 87 ish mark so then one might say if you subtracted 40 87 from 3 900 40 87 you'd expect about a hundred and eighty seven point move to the upside more or less so if i added 40 87 you might expect it to go up somewhere here to around that 40 40 to 75 mark and then maybe it would consolidate again before breaking out this is just speculation and and those that are looking at this is a double bottom let's say and it's broken out it came back to retest and it's moving again to the upside and it's also for the first time in a while crossing the 30-day moving average okay so it's made it back above this old floor so will that hold as a new ceiling okay so and another group of bulls may say well i see this diagonal resistance line and it's broken out came back for two days and it looks like it's going to continue on so i see that is a bullish sign now the bears now today you know the bears are getting stomped on a bit because the bears might be saying and we still have to give the bears a voice because overall you know we've seen bear flag bear flag bear flag now here this is the first time we're seeing a a higher high not a lower high and this low is a lower low but the bears might say this is a bit of a fake out really this is just a skewed bear flag so um we're not kind of out of the woods yet don't think the bears have all packed up their picnic baskets and gone home you're to date we are still down you know ten percent nine point three percent so getting better because at one point down here you know oh this is six months let me go to year to date so year to date actually we're still down 13 but at one point we were down almost 21 we were down 20.6 which is officially bear market territory but what we're seeing if you go out and you look is that we're seeing a lot of these types of patterns setting up on the charts okay when we look at our tech heavy index the nasdaq we see you know something similar so again the bulls might be saying you know i spy with my little eye uh you know the same kinds of patterns one diagonal resistance breakout two-day pullback looks like it's off to the races again so this is a good sign for the bulls um the another bullish pattern is that little double bottom again i'm spending a little more time on this than i normally do but you know still this index is down over 20 and then it's broken out come back to retest but you know we saw this in january where it came down we had this double bottom [Music] it broke above came up and we're going oh is it going to break above here and then the whole thing turned out to be a big fake out and we came down and we hit established a new low so we're not out of the woods yet um but you know the bulls are smiling today let me put it to you that way now when we come to the russell and you know somebody has typed into the chat you know i'm unfortunately still in the bear camp thinking this is just a head fake um and you know it could well be so what do we do if we're primarily a stock investor because if you're comfortable trading options and i teach it getting started with options on tuesdays at noon eastern you know there are strategies that will do well when the market's going up there are other strategies that do well when the market's going down and there are strategies that do really well when the market's going a whole lot of nowhere and connie talked about one of those strategies in her technical analysis class earlier today um but you know if we're primarily a stock investor what do we do and and how can we perhaps participate in this market you know maybe even just in a smaller way and and benefit and so that's what we're going to talk about today so we can see the russell came down i mean it has certainly been down trending but it's back above the 30-day moving average came back to retest and then the next question will be can it get above this kind of 1900 level and right now it's sitting at 1890 and so the jury is still out and then if it gets above will it hold that would be the next question the dow has actually been the healthiest still down year-to-date you know and and down by how much you know down by almost 10 seven percent even with this rally but you know it's broken out of this diagonal um a bearish diagonal range and and looks like it may be moving to the upside and so then the next thing would be you know can it come up and break above this like 347 ish level and so we'll see the answer is we don't really know then when we come and we look at the vix it's continuing to come back down but still at 25 um you know not exactly low now if we come over to the td ameritrade page and and come to research and ideas sectors and industries we can see that every sector except energy that's interesting is up today but you know when we look at one date is not a trend make when if we said well and when we look at our portfolio we'll see we have more energy stocks than any stocks in any other sector and part of the reason for that is whether we look at 30 days 60 days nine months um you know six months three months like energy is has been the leading sector but who's in spot number two and three well utilities and and materials sectors over the last 30 days well how about over the last three months utilities and materials energy of course having a firm grip on the number one spot and then if we even come out six months what is it energy utilities materials well we currently have no positions in utilities or materials so when we look at over the last six months materials up five percent the overall market down somewhere between 10 and 20 um you know might we we look at materials or utilities in addition to energy and the answer is that might be a good place to look and then the next question would be how do we find stocks in those sectors and so we can come out to when we come out to the thinkorswim platform we can look at industry groups so if i come here to we see by industry i could say well let's just pick materials here's the challenge if i select all materials stocks it will bring up all of them but it will include some that don't trade very many shares so what i did is i took some time i went out to the internet and i said give me all the energy stocks that or all the material stocks and i just created a personal watch list of all the stocks that are part of the materials sector and this may not be current so i can't share it with you but and then you know because i get asked a lot how do i pick a stock how do i find a stock so i'm walking you through that process and so then what i do is i link my chart to my watch list and then i can just start clicking along and so with this you know it's not the tidiest but some might say oh here's year to date you know i like to play i spy with my little eye do you see kind of like it it's not perfect but a bit of a an inverted head and shoulders here you know where it's now broken out come back and moving to the upside again today but you might say oh i don't know that kind of makes me nervous because it came up to here to here to i i might only want to enter this if it goes above maybe we keep looking maybe we keep looking but we could put that one on our short list and say well that one you know might be interesting so we'll put a star beside that um and then you could just keep clicking oh this one amcr hitting a new high today and you know since it hit this low back on march 8th has certainly been up trending what's the challenge here well the challenge here some might say we're a little late to the picnic it's so far above the 30-day moving average it's been trending off the 10 and you might say well you know an object in motion tends to stay in motion um and you know we might say we let's come out to the analyze tab let's see what business they're in and this is not giving us details so we could come out to the thinkorswim platform but we could put that one on our list also uh i'm amcr okay how about air products apd well you know what this was i mean wow fell off a cliff right like from 309 down to 216 and seems to be recovering but it hasn't kind of gone above this 250ish level yet and so some might say well i could put in a conditional order and others might say you know i'm i the jury's still out let's look and see what else oh look at ball ouch that's not looking so hot uh celanese cf oh here's one that might be interesting ctva where you know it pulled back came up broke above this previous high came back to retest so this is you know quite the we would call a bull flag pattern where it came up for several days down for one day moved up again came back for three days retested old ceiling looks like it may be a new floor might that be interesting and it's like i don't even know what ctva does and so you know we could say well maybe we should find out before we buy shares so if we look at this it's in the material sector we knew that they are a global provider of seed and crop protection solutions focused on agriculture well is that going to be an area getting lots of love and attention it could well be um you know they're looking to help produce optimum uh yields for farms around the world um we could come out here and say like tell me about ctva what can i find out well we can see that most of this year has been certainly outperforming the nasdaq and the s p p e ratio of 26 um pays a small dividend has two dollars and 41 cents of earnings per share i'm pretty highly rated so we could you know kind of go under the covers on this where is it trading 6251 barclays initiates coverage on corte'va overweight rating price target of 71. so you know this is a very cursory look corteva maintained as a buy so you know if we come and look at this and say you know what if we've kind of done our due diligence on this and we said this looks interesting and we come out to our chart might we put a target on this well we could but it is at an all-time high so what might we do is what we might do is just keep a stop on it to manage our risk and say well if i come back in on a shorter time frame and i look at this and i say well here's this ceiling the high this day was 6204.
so if i use 62 as a you know support level what was this low here 61.22 if it goes three percent below that it's not going in the direction we were expecting so we could take our 61 22 and i'm going to switch this to a calculator i could take my 61 22 and multiply that times 0.97 so my stop would be at 59 28 59 38 rather and we can have up to about a 15 000 position on ctva what's the beta on ctva was a question and you can find that by looking at the summary screen on the td ameritrade platform or you can come here i don't know why it says beta is zero i don't know why it's let's come out here and see if it says the same thing yeah it doesn't have a beta rating so i don't know if they need a certain time frame and i think this company was established in 2018 so if i come back here and come to the analyze tab it said established in march of 18 so i don't know with beta i was seattle michelle is saying tosh shows beta is 0.873
okay so which means it's not a terribly volatile stock so if we look at this and we say well you know on average we'd be comfortable having a position size of about you know fifteen thousand dollars or more we have a two hundred and forty thousand dollar account and so if we said we don't want it to any one position to be more than about seven percent of the account value that would say we could have an you know a position size size of about 16 800 but we might say you know what we don't want to go for the maximum position size in these times of uncertainty so what we might do is say you know what we do see that these trade options and if we want to preserve the right to maybe be able to sell a covered call at some point or to be able to use a protective put one of the things we could do is you know say well we're comfortable buying 200 shares so we would buy custom with a stop or stop if our stop is at 59.38 now remember that's not a guarantee that we get out at this price how much are we risking well we're risking about three dollars and 20 cents a share yeah i take my 6251 and i subtract 5938 and assuming we ended up exiting the position at close to where our stop was if we did 200 shares that's 600 worth of risk and we're saying in this um class we're willing to risk up to 12.50 so if we're willing to risk 1250 that's like half of a risk position size wise so we'd make that good till cancelled and we would put this in our trend trading growth stock and say you know exposure to materials sector it's an agricultural stock um beta is a number that um is a reflection of how volatile the stock is as compared to the s p 500. and connie clarified it's usually based on five years of stock performance and this stock hasn't been out for quite five years yet which is why we're not seeing an official beta um for it so this is giving us exposure to the materials sector so we're going to send that in now i wanted to review a position that we did and there's a reason that i'm kind of mid-stream going to review and it's because in um getting started with options we talked about buy right covered calls and on may 19th which i've got my little calendar in front of me here which was two weeks ago we bought 200 shares of devon and then we sold two covered calls against them and we were paid two dollars and 42 cents for those covered calls and if you're not familiar with um our strategy on this particular trade when we bought the stock the goal was to end up called out now in order to wait and be called out we would have had to wait until june 17th and so in that class just as an example of how one might manage a trade we said well the most we can make on this trade is 75 because even if it goes up to 80 we would be called out at 75 and what did we pay to get in well the net of what we paid to get in was 67.78 so then our max gain potentially on this was 722 dollars and on tuesday when we looked at it at 73 21 we had well 543 dollars of our potential 722.
um and this was 722 times two because we had two contracts okay so we said well if we've got 543 of our 722 which is our potential max gain what is that as a percentage and that was 75 of our max gain and it looked like devin might be starting to pull back and so we said you know what we are going to take this over a thousand dollars because it was 543 dollars times two so you know it was a thousand dollars plus we're going to take that profit and ring the bell and turn it from an unrealized game into a realized game to be specific it was 1086 less commissions because there's a commission there's a transaction fee to both buy the call sell the call to open it and buy it back to close it okay and so we ended up exiting this position on devon now we still have we did several buy right covered calls and this was our idea of doing let's do a short term trade in on stocks that are moving bullishly but if we come and we look at devon now and one of our our options in that class would have been just to roll it and so we could have rolled it we ended up just closing it out as an example um so we got in a couple of weeks ago on the 19th and we ended up getting out on on tuesday and we did end up getting out for a profit now we've done a lot of different trades between this class and the long call class um on devon but if we look at it it kind of seemed to consolidate for a couple of weeks so if we wanted to put that on our chart we'd make it gold because it was a profitable trade for us um but if it's pulled back a little bit and today it's it's pulled back and tested and looks like it could be moving to the upside again could we kind of do a wash rinse repeat and say you know what this could continue to the upside it's in the energy sector which has been the strongest sector and could we come out and instead of looking at june which is now two weeks away could we come out and look at july it's trading at 76 dollars a share and sell the 80 which is the closest strike to being in the money and would that be worth our while i mean they're paying three dollars and 20 cents and you might say well that's not that much but three dollars and 20 cents if i clear this and say 320 on a let's call it 76 dollars is what we'd be paying for the stock right now it's at 75.98 so i just rounded up that said 3.9 return so if we could get almost a 4 return plus then we'd get the four dollars that the stock was going up what might that be worth so if we come here on the thinkorswim platform we'd be buying covered stock 72.88 so if i round that well it would be seven dollars and let's call it seven dollars and ten cents is the most we could make and how much would it cost us to get in 72.88 well that smells a lot
like 10 percent to me 9.7 percent would be the potential return if it went up to 80 and got called out now what if it doesn't go up to 80 what if it continues to pull back well we could say well this previous ceiling here was around 72.88 so if it went three percent below that we could exit the trade so if we looked at that and said okay 72.88 times 0.97
and the way we're going to put this in we would both be selling the stock and buying back the call to exit the position now sometimes you know if if something has gone up and then it's come back down and it's close to expiration you may just choose to buy back the call and still own the stock but in order to protect the entire position to the downside our example is going to be that we're going to look at buying you know we could buy 200 shares which is what we did the last time and we're going to change our our order from a single order to a first trigger sequence we're going to right click anywhere on the green lines create an opposite order make it a market order good till cancelled and say hey if devon goes at or below what was our number 70 69 we want to exit this position and again one of the choices we would have had would have been to just roll the other position yes i there was one where i i put in an extra zero that somebody caught me on that chat i put in an extra zero so it looked like it was a fraction of one percent um you know our return but actually you know when you look at it if we can make a seven dollar return on a 73 dollar investment um that's in in how long in about 45 days you know 43 days that would be considered to many investors acceptable and we have an exit to the downside if devon starts to break support levels and so we would put that in our buy right covered call bucket and go ahead and send it in and it's saying you know if devon goes below 70 69 we want to exit the position our maximum profit on this would be 1404 so that's that seven dollars a share times a hundred uh which is the multiplier um and times two contracts and our max loss it doesn't recognize that we have this stop in um below 7069 this max loss would be if devon went to zero um in the trade journal you'd put it in as a stock and then as a call a sold call and sometimes people will buy a covered call when they're buying a stock expecting that you know if the stock was at an all-time high it might be about to pull back we're using this as a short-term trading strategy or a shorter term trading strategy okay so we'll let that one percolate i'm not going to go into details on the other ones that we have in the account but you can now see we did one on a firm last week you can see we're down on that position a little bit but it's bouncing today and if we come and we look at a firm because we could say you know hey we have an exit on this but you know just because we have an exit doesn't mean we can't get out earlier but when we look at this one and we say well you know what do we see trend wise and what we see trend wise is higher highs and higher lows so you know we got in on this day unfortunately then the market was closed for three days a two-day pullback and now it appears to be moving to the upside again and so we might say well we're just going to watch that one and this is where we put our strike on a firm which is considered a tech stock it's you know they do loans it's a lending company when we look at so i i found it kind of interesting you know digital and mobile commerce that it wasn't considered a financial stock that it's considered a tux stop so that's a firm um i wanted to look at one other one before we wrap up and you know this is energy and i did the same thing that i did with the utilities with the material sector i did the same thing with the utility sector i created a watch list and then i just started going through to see something that might be up trending and of course when we look at this one do we see an uptrend well it went up for three days one day pull back up one day pull back up one day pull back well and then a day and so it's come back to kind of a similar spot here but it appears to be bouncing today now if you're saying you know what i'm a little bit apprehensive about the market overall um but what if we bought it at at 45.83 at the current price and said hey if it gets back up to this 47 82 like that's only a two dollar move but it's only a forty five dollar stock so if you said well you know that would be maybe three and a half or four percent might i be okay with a four percent gain in you know a market that has been plagued by red and so if we looked at that and said okay you know i'm rounding a little bit but a two dollar move and if i divide that by my let's just call it forty six dollars to make the math easy that would be a four point three percent return so about four percentage and this is known as a swing trade so this is known as a swing trade when you're just going to buy something and trade it until it gets back up to where it was trading it swings back up to where it was trading before and so we might even make our target 47.50 just a little tiny bit lower so what if we made our target 47.50 and we call that our target and we put it on the right and we could do that just by buying the stock and then we could say well here was our recent low 44.97
if it goes like even two percent below that i i want out so if i said okay 44.97 or you could use three percent we use three percent that would be 0.97 so if it hits 4360 we're out okay so if we look at this and we said well i know we can do a sixteen thousand dollar position how about we just do two contra or you know 200 shares which would be you know about 9 000 so not quite half so if we come to the trade tab the other thing we could do with this is you know some might say well why wouldn't we do this as a buy right i mean the you know you've got some volume here and you've got a relatively reasonable badass spread and it and it's you know it's paying a pretty high premium like a dollar 92 on a 46 dollar investment let's just round it to two divided by forty six um yeah that's a four percent return right there um scalping is more of a term that's used in futures with futures contracts so swing trading is a thing just in and of itself so we're just going to go with um yeah so somebody said they just saw the uh this week's trade mini management session and you know what um those are a labor of love and not just on my part the management team is involved they review them our admin team has you know they have to do their thing we have uh a compliance team making sure that we're not saying things in a way that can be misunderstood um to protect you um so yeah it's um yeah it's a labor of love for a lot of people but i'm glad that you're finding them helpful i'm going to do the next one tomorrow and you'll see it next week so so with this one we're going to buy custom and we're going to put an oco bracket on it because we're going to put in both a target and what's our target going to be [Music] dang it 47.50 energy 47.50 and our stop oh i didn't write it down did anybody else write it down okay 40 let's call it 44.97
about 45 times 0.97 4365 ish okay so come back to our trade tab so our target is 47.50 47 now 50. our stop is at 43.65 [Music] we're going to make both of those good till canceled looks like the price has gone up a few pennies since we started putting this trade in and we are going to change our quantity on the whole lot to 200. okay so we've done three trades we've done a buy right covered call we have done a swing trade so both of these are short-term trades and then we did one trend trade and we haven't done a lot of trend trades of late but we've put an exit in as an attempt to define our risk and as i said it's not a guarantee um you know but um it's an attempt to define our positions our our risk so you know we want to get out when we're either up a dollar 65 or down 220 so then that would have our risk being about 440 dollars which is acceptable our position size just under 10 000 acceptable we're putting that in our swing trade and we're trading up to the previous high the neighborhood of the previous high okay what did i do with vert i don't recall i bet we ended up my guess would be that we were stopped out of vert we got invert up here so yeah we're long we'd be long out of that one yeah yeah so yeah swing trade with a swing trade how long might we expect to be in that stock um you know well it was a four day pullback and it seems to have been you know moving nicely to the upside so we might only be in this for a few days um and we could be in it for a couple of weeks but you know we just have to be patient right so i think that we have done what we set out to do today i've been kind of keeping my eye on the comments but let me just go through and make sure there were questions about the trading journal if you haven't used a trading journal i would recommend that you give it a shot it's important to understand you know what's working and what isn't um there is a trading journal that is linked to the trading a smaller account archive so you can click on that link if you go to td ameritrade dot com go to education webcast and that link will be right there i also have directions on how to find that in the post at the top of my tweet um let me just see i just want to make sure we got all the questions connie is so awesome about handling questions as they come up somebody's saying i can't listen and calculate i obviously struggle with that too um yes so crazy foxy is asking when closing the covered call position is it typical to sell the underlying shares as well as the option so when you come and you look at this um on the monitor tab all of these have a both a buy and cell so it and the reason we've done that is to prevent ourselves from kind of starting to smoke the hopium and go oh well the stock is falling and i can close out the call for a fraction of what i received for it but um i think the stock will come back up and sometimes it does and sometimes it doesn't so we're using our discipline when we enter the trade and that isn't to say that we might not cancel that order to exit both you know the call and the sell our shares but that it certainly we we have put that in and we don't have one on oxy right now i'm not sure why but um maybe we'll tackle that next week how do you get different accounts all of these paper money accounts are set up with two the other side of this is our trading a smaller account and so we'll be looking at that one you know this one started the last one started with 250 we're down 10 000 which is about 5 um in this one we started with 20 000 and we're at 27 five so we're you know doing very well in that one as a percentage okay so guys that's a wrap we have covered the markets we've looked at our trade management we've placed a couple of new trades so i think that we have uh it's a complete so thank you to connie for hanging out in the chat and bringing so much value thanks to each and every one of you who've shown up not only live but for those in the archives my ask for you is in the corner this corner over here there's a subscribe tab so if you haven't subscribed to our channel you're going to want to link arms with us and do that if you like this session hit the like button it just lets other people know that you found this content valuable so i'd appreciate you doing that know that all investing involves risk including the risk of loss know that everything we cover in this class is for education and informational purposes only none of it is to be construed as a recommendation know that options aren't suitable for all investors there are special risks inherent options trading that can result in rapid and substantial losses know that all investing involves risk so guys that's a wrap for today thank you so much for joining me i appreciate um each and every one of you for continuing to come back week after week if you'd like to join me for trading a smaller account that's tomorrow when the market opens um up next is brent moore's with getting started with td ameritrade you'll be amazed at how much awesome information is available on that platform i hope you'll check it out take care everyone have an awesome rest of your day bye for now
2022-06-04 16:48
