Swing Trading (days to weeks) | 4-23-19
And. Good morning everyone. John McNichol here and welcome to swing, trading. Days, two weeks for April 23rd. 2019. Do appreciate all you that here live with us today as, well as listening to the archived webcast good. Morning you michelle christine Scott Chuck Pierre. And everyone, else that is logging. In let's. Go ahead take care of disclosures, and we'll get right into it. Remember. Options are not suitable for all investors as, the special, risks, inherent to. Options, trading, makes those investors, potentially, rapid and substantial. Losses carefully, read the previously, provide a copy of characteristics, and risk of standardized options, spread, straddles, I know the multi leg option transaction, another, multi, leg option strategies, can, entail substantial, transaction, costs include multiple commissions also, keep my advanced option strategies off involve greater more, complex, risk than, single leg option trades investors, should also consider, contacting. A tax advisor regarding, the tax treatment applicable. To, those spreads and of the multi leg option transactions, now, in order to demonstrate the functionality the platform we need to use actual symbols, keeping. In mind that TD, Ameritrade does not make recommendations. Or determine, the suitability of, any security or strategy, for individual traders any, investment, decision you make in your self-directed, account, is solely, your, responsibility as. With. Active, trading when, one is placed in many, trades transaction, costs commissions, and other fees are important factors and should be considered when evaluating any trade. Now. We, certainly, practice. Various. Trades. In our, practice. Demo, account you. Have the ability of doing the same thing utilize, in paper-money. Our. Platform, looks, like a real platform but it's actually, a practice. Platform, there so we can actually show the full functionality, of thinkorswim but. You can go ahead and practice these concepts, utilizing, the paper-money software, that is for educational, purposes and successful, virtual trading during, one time period does not guarantee, successful. Investment of actual funds during later time period isms market conditions, change continuously. As always. Past performance, of any security or strategy, does not guarantee future results our, and all, investing. Involves, risk including, the risk of loss now while this webcast discusses, technical, analysis, other approaches. Include fundamental, analysis, may, assert very, different. Views, all. Right, and there's, are Greeks we, will place practise. Trades sometimes, on stock also on, options, once, the trade options one should understand, the impact of price volatility. And time, the. Greeks, give, us that illustration, to that in positions, as well as with pricing, there if. You're new to this class. Certainly. Welcome, do, appreciate you being here we. Try to make this more, of an application, class. Where we take, a lot of the concepts, that we hopefully. Have learned in our technical analysis, course also. Potentially, the trading, options. Course and put, it in the practice by, trading. Short. Term trades typically, shorter, duration, days two weeks hence in the title. Place. Those on a paper money account and. Also manage, those and discuss some of those outcomes on an, ongoing basis. So, if that's what you're looking for hopefully your you're.
In The right place if. You feel it's a little over your head feel free to go ahead and attend some of our other webcasts. Such. As getting, started with technical analysis with Cameron May 11 a.m. every, Monday as well. As with getting, started with options, which. Is every, Friday with Barbara Armstrong, at 11:00 a.m. all right let's, go ahead and ring up the thinkorswim platform and, see, what we'll discuss, here today. As. We. Have another market, open here. So. What, we'll do is we'll review the market open. We. Will go ahead and review, some of our open, open. Swing, practice, trades to. See how they're working, out there we'll, go ahead and review some additional practice swing trade setups, and we'll. Enter those, practice, trades on paper money. The. Objective, for this class as a matter of application, is, by. After, identifying, a. Potential swing set up being. Able to enter, that. Trade on the. Paper money platform, with, a potential, entry, as well as, an exit, from. A positive outcome as well as a negative. Outcome that's our objective for today now if you have any questions feel free to utilize the chat Raphael. For zod diane paul bharat ricardo thanks for joining us as well along with basil and everyone. Else always, appreciate participation, there also. Keep in mind towards. The end of the, session. Here there will be a survey that'll come out so. Once, i headline that feel. Free to click on that link and provide, some feedback all, right so. Market. Open looking. At the SP. SP. Is a, little, bit above the. High. From yesterday, really. Not a lot of momentum. Overall. When, we look at some of these indices. Now that, can be a bit. Of a a, damper. For. Swing, traders, as swing. Traders are typically trying to capture those. Short bursts of momentum. Sometimes. The market may lead a lot, of that momentum for many stocks however if the market. Is more, in a consolidation. Hence. Going a little more sideways. One. May not see, as many, of those setups it may be a little bit farther and in between we, may actually see that reflective. On some. Of our, practice, trades that we've done over the previous week or so so. We're. In the middle of earnings, as well which. Can be certainly, a driver, for. That momentum or sometimes lack of momentum as the market just kind of weights things out. But. As we lay at the current price action on the, SP, not. Much movement over, this past week you know after we had kind, of more of a gap up on the market back onto 12th the, market has continued, to consolidate. In a. Relatively. Narrow. Range, kind. Of round that 2,900, mark acting. As a area. Of support. With. The highs bein upwards. I had around the, 2918, mark. Pardon. Me there little uh a. Little. Flick, limp there in the throat. Alright. Let's go ahead and bring up a few other things here. Will. Bring up the. MDX, for the Nasdaq now, the Nasdaq on the other hand has, demonstrated, a, little, more momentum so, on. Some of your NASDAQ, stocks, may. Have been demonstrating, more, stronger, swings. In. Fact as. We look at today the Nasdaq's. Actually, making, a high a, new, high going. Back and, reclaiming. Some. Of those previous highs that. We've. Haven't. Seen for a bit going. Actually back to the summer months so a little bit of a divergence, on what, some of the indices, have been doing, Nasdaq. Making new highs, the. S&P. And the, Dow, to. Bring up the Dow, approaching. Those. Highs, now. Yesterday in our technically, speaking class which is reversal, in bounce patterns. Certainly. A bit, of an index, watch as some. Traders may be keeping, an eye to, see if there's going to be any selling. Pressure on. The larger caps as whether, they make or. Attain. Some of these previous, highs. As. Markets, have sold off from, those previous highs before and, as, that hasn't shown any signs of that and then, finally with the Russell. The. Russell still continued into lag. And. Some. Traders may look, at the Russell is a little more of a lead on. Kind. Of more of the economic, health not. That that's always the, case. But. The and Russell is still about 10%, away from. Their highs back. In, September. There and this. Is a weekly chart pretty. Much has been range bound since. Going back to February. So. Kind of keeping an eye on some. Of these individual, indices you, know may imply, some. Of that momentum whether, up or down or in, some cases. A bit more non-existent. As prices go sideways, there's. Other strategies. That, one can learn if you haven't already, such, as spread, trades, long. Vertical short, verticals, which. One. May be able to profit. What, from whether little direction, or slight. Momentum. There I do. Teach that class every, Wednesday I believe, it's at 3:00, p.m. Eastern Time, you can join us for that it's also discussed, in our, in. Our. Trading. Options, course. All. Right so that's what we got going on with the broader market, looking. At some of our, practice. Opening positions, and, we'll just go we, currently have 3, of them on there right now I.
Have. To recall if we, go. To our account statement, if any of these may have closed out over, the. Previous week or so, let. Me just take a quick, look, on. Some, of these. And. We had a holiday last week so not, much activity on Friday anyway and. Looks. Like, yeah. I don't think we have anything, new. Here. So. On West. Bend digital WDC. This. Was done on the 16th which I believe was our session, last week. We. Had 300, shares. If. You go and look at the chart, WDC. You. See this is an example of a breakout. Trade as, price. Was break-in, above, resistance. We. Entered, into, a trade there. If. We go back on. The. Trade price was at 54. 3454. 34. So. We were capturing that as the price was breaking, through that resistance, during, our session and, what's. Happened since then similar, to the market not, a big, swing up fact, a little more of a consolidation, this is, typical. In many, cases, where, when prices, breakout. Sometimes. The prices may go ahead and actually pull, back and retest, that breakout this. Pattern is more, of a flag, trait. So. What some traders may, look for if they didn't already have an entry on the, breakout may. Look for a possible, entry as the, price bounces. Breakouts. And bounces, breakouts, and bounces, are some, of the common, entry. Techniques for. A swing trade. So. If we go ahead and. Bring. Up. A. Potential, entry. Where, we're at a potential entry fee. We've, utilized, an example, of a technique. An. Offshoot, of the cold, or close, above the high the low day is looking. To see if prices are able, to trade above. The high of a. Low day so, looking at the candles notice, intraday, prices, came right, within that breakout, point came. Up a little above there. So a potential, setup is prices. To trade above, that high that low day currently. Price action is inside. The. Previous, day otherwise. Referred to as a whore ami. Now. Some, of the script. That was shared due to you in the past and we'll look at today over. On the lower. Left. Here, kind. Of some script that attempts. To find Co, holds when prices trade above the high the low day or in, the case of the close below or. The bearish. Reversal at prices closed below a previous. Day this, script also will. Attempt, to find these haram ease or inside, days which. Are a small consolidation. Now if the, prices were to stay in this, tighter range inside, that previous, day. Then. On the, next day if the, prices does not trade higher is. Looking. At adjusting. The. Entry to, trade above the high. Of that inside day. Now. As far as potentially. Setting a stop. We've. Utilized. Examples, of sudden they stopped 1% below the low of. 1%. Below the low. Of that low day. In. This case would be putting it a little below that 53:37. And as, far as potential targets is looking, at the size, of the pattern, now, what we had done is we had previously and measured the, distance, between. Support. And resistance, and. Added. That to the. Resistance. Part i. Believe. We came up with a, target. Of. Around. 50 990. So. That was approximately bout a six dollar move, i think. We were a little conservative. On, the, move they're looking at more of the mid-range. Of. That. Pattern, so. Not. A lot of momentum since last week but potentially setting up for, another, entry if one. Does. Not like, trading a breakout. So. That's we got with WDC. Going. Back to position. Well. CW says can you change to the Greeks I. Certainly. Can although not. Necessarily is important, for this discussion here, on swing. Trading. But. If we if, you want to go ahead and bring up the Greeks there's a few ways of doing that we, have a new template here you, can go ahead and actually customize, the various columns, and add.
Those, Various Greeks. Another. Way you can do it is you can go ahead and go up to, the. Layout. In. The. Upper right and. Typically. The old layout by default, will, go ahead and bring up the Greeks. Okay. But, if you don't mind CWI, will, keep it on, the, older. Layout here since. Really the focus is a little more on the underlying, versus. On necessarily, an options portfolio, however, I will bring up the Greeks when. You go ahead and review me in my vertical. Class. There, alright. Okay. So you, got Western Digital dere. Boston. Scientific this. One, was. A pretty good positive outcome, here this was a put. We. Initiated, this example on for, two, so. We've been in this one going into the weeks they're. Looking. At the chart. This. Is an example of a. Bearish. Bounce. You. Can see some of the transitions, as, far as change. In trend where, previously. Boston. Scientific was, was up for. And more of a rectangle. Will. More of the top and pattern price, went ahead and broke below. Support, and as. Price came up and retested. That. Broken support acting as new resistance we. Looked at this as an example of a bearish, bounce really. The inverse, of what we, were just looking at there with Western, Digital. Depends. For price to trade, below, the low, of the. High day. That's. What occurred on, the second, triggered. An entry we went ahead and did a put. That. Was a little bit out of the money that. Was. A thirty nine strike. And. Actually. It was pretty, much at the money is what we did, we're. Actually a little I guess conservative. From the standpoint as far as you know a little bit of equity in the, option did, it at the money if I actually did an out of the money option. Would. Have been a little more. Well. Would say potentially, be. Some. Greater, reward. Based. Off the premium, that was paid for it so we did this a little more, on the conservative side. However. As, far as being conservative, across. The board is defining, risk we position size to a maximum, loss and the. Prices, basically. Fell, and. Exceeded. Actually. The initial, target, which is at around thirty five what. I've been doing over the last week is, adjusting. The. Stop, based. Off of the. The. High of the. Fall in days, right. Now if. I go ahead and do a cancel, and replace on, this, order. We. Have a conditional. Order on here we'll talk about this today as we look at some other setups, if I click on the, little.
Gear. Over. To the right, of the order. No. Prompts CW appreciate you being here. Looking, at this one here. Boston, Scientific, mark. Greater. Than or equal to thirty five sixty six, that's where the current, trigger is to close out the, option, now. What we can do is we can adjust this each and every day as that price falls until, the price comes, back, up. So. Looking. At the current, bars. On. For. Eighteen. The. High was thirty, five fifty two. You. Know looking, at the. Next, bar around, 35, 42, so. One can adjust the stop just a little bit above. That high so if the price bounces, and goes higher then. One. Can basically close, out the trade now. Notice there is an earnings event coming out coming out tomorrow, so. Many. Traders some, may have a tendency of closing, out the, position, locking, in those gains and, then. Moving on to something else. Others. If one was speculating, that earnings. Would be continued. To be that. Or that the price would drop or continue to drop what. Can scale out of the position and possibly leave some. Contracts, on there so. What I'm going to do here is, we. Currently have 10 contracts, I'm. Gonna go ahead and right-click. Fact. What we'll need to do is since there is an existing. Order, is. Come. Here and, we'll. Right-click. On that order. Actually. Need to open it first. Then. You can right-click on it do, a cancel, and replace. What. We can do is. Reduce. This to 8. Contracts, let's say we'll sell, 80%. Of position. Now. There was a condition on this. Order someone. Would have to delete. Out that condition. The. Other technique is just to cancel the, existent, order and start anew. Which. May be easier for most people there because if you make a little mistake here that. Order may not go through as intended. So. We'll go ahead and do a. Confirm. And send this would be a day order here. We. Want we can also go ahead and change it to wherever. The current limit. Order is. Current. Is at 38. 85. We'll. Go and confirm and said. And. Send so we locked in some of the games on that and. Basically. Reducing. The risk on the trade as, well on. That, earnings event we still have two contracts, on there so, if the price continues to fall we Mabel to continue to profit on this position. So. Theoretically, with. Those two contracts, we have left there's about four hundred and, seventy-five, dollars in profit, that. Unrealized. Profit that we didn't lock in there, you. Know if we want to go and put a stop on this as well or a conditional. Order to. Close it out if, it goes above a certain price we can do that as well. We can do that based off of thirty five fifty four, will. Go off the high here, thirty. Five forty two. Let's. Say we go and set about one percent, above. That. See. Thirty five forty two will go bring up our calculator. Here. Thirty. Five point four, two. Times. And. This will be a dollar, one, looking at one percent above that that. Be thirty five seventy seven now some traders may set at twenty cents above it whatever. You'd like go. Ahead, and practice see what works for you there. And. Then what we can do is right, click on the order, create. Close in order for those other two contracts. And. Set. It condition notice. That little, gear, will, appear if you put your cursor on it, if. It disappears, it means there's no condition, so. When I go and click on it it. Brings up a window and we. Can go ahead and put in that condition now. Keep in mind this condition, we're. Saying bsx. Mark. Which. Is essentially, the last price. Is. Greater. Than or equal to i.
Think. It said thirty five seventy seven maybe off just a little bit on that or. Maybe was 47. So. Just to illustrate that and click. Save. And. Confirm and send and. There. Will continue managing, that, existent, trade last. One we had was baba. Off. A little bit about, 375, this. Was a, a. Call. One eighty seven and a half call thirty, one days left we have, two. Contracts. On that if you look at Baba probably, very similar to, what we've been seeing with. Some of these other breakouts, from the previous week. Price. Had broken out of a, triangle. You. Know kind of retest, it and notice kind of in that range, over. This last week, and. A half. Now. Some. Traders may be running into. Having. It thinking, about a potential, exit, if the. Price doesn't hit their target, nor. Does it potentially. Stop them out. I. Believe. We have a trigger somewhere at around 180, 182, if, the price was to fall down it will go ahead and, trigger. An order to sell those options, at the market, not a defined price. Now. If time, keeps going this price keeps going sideways those options, will continue, to, lose value. Some. Traders may consider a time, stop. Because. Think consider as far as with options so I'm you know I'm sure remove, as a concept is. An. Option is like a melting. Ice cube as far as its time, premium. One. Is paying a premium for that option on top of whatever equity, or intrinsic, values in that option. Typically. In that last 30 days to, expiration. The. Time, premium, the time will decay relatively. Quickly as it gets closer and closer to expiration if the price hasn't moved fast. And far, enough as one. Anticipates, then one, can see that, option continued, depreciate, now, that's great if you're an option seller but. Someone whose directional, and, potentially. Buying options not, so much so. One of considerations. Is having a time, stop. Where. If the price hasn't moved a certain, amount within, a certain amount of time is to possibly consider closing. Out the trade and moving, on to something else so. Let's see if we can apply this with, Alibaba. Here all right so. The. Original, idea as. Far as with the trade. If. You go back and look at when. We initiated this this was on 4/9. There's. 31 days left to. Expiration. So approximately, I. Believe. We had about 45 days, if I recall, when. We originally did, the trade. Now. A part of this selection as far as the days, the expiration, is consider, in buy as much time as you need and then, potentially add, a month, on top of that and. So. That way that can help mitigate some, of that time decay, now. So. With that in mind this. Was on 4/9 so, we're looking, at about two weeks ago. Looking. At the chart, this. Pattern, from. The. Third week in March. We. Grab, a little trendline, the. Third week in March you, know going to where it, broke out was, about 24, bars. Now. Certainly that's well over about, 30 days you. Know you know let's say about five about. Five weeks or so. Because. If one's looking at from training days that's actually about five, weeks. So. With that in mind if it was about five weeks one. Would. Be buying, enough time to cover, those. Five. Weeks and then some. So. Again we went out around, 45, days. Now. Currently, since the breakout it's moved very. Little over ten days so. One consideration, is if the price hasn't made let's, say half the move in about. Half the time then. One may consider. Possibly, closing, out the position, and preserved in whatever, time. Premium is left and moving, on to something else or looking for a better, setup. So. In this case here we. Can see I actually drew, over the, area, as far. As the matte matter of time and as, we see we've actually gone about half. Of this time but, it really hasn't made half, of that move so. If we wanted to we can go ahead and, potentially. Close out the. Trade. Can. Do a. Right-click, on the order we'll, just cancel that order. Right. Click and close. Out Dewar now notice, this. Option still has premium. $6.65. And. By. Closing this out we're freeing up some equity and moving. On to something else so I'll, go ahead and do that. We. Always look for a nother. Potential. Entry. And. That. May be, looking. At something. I'm. Gonna go ahead and remove this strong here is. You. Know looking for price to actually, you, know break, out of this. Pattern which it may potentially, do you know Murphy's Law as soon as you close out the position that's when it pops okay, but. Again this is for illustrative. Purposes. So. Francisco, says we say Baba's losing momentum are just pausing or is that the same thing, okay. That's. Kind of in the eye that beholder Francisco, the question once again is would you say Baba is losing momentum, or pausing, or is that the same thing. So. Looking. At it from a standpoint of you. Know some. Traders from a swing trade perspective, you know made to find a pause as more, of you know kind of the little, more of a flag you know kind of a pull back over, just a couple of days there. When. One, seeing that prices, are stalling. For. You. Know one, week two weeks going. Into a period of time that is certainly, more of a, consolidation.
There. And. You, know that pattern may fall for days. Weeks, or even months. Paul. Says would be a good strategy to, go no longer, to. Go, longer on calls 50, 60 days and shorter, on shorts 20 to 30, yeah. So Paul which are actually sharing is actually discussed, in, our. Options. Trading course. But. Also keep in mind a lot of times when it comes into some, of the trades as far as duration. Yes, 50, to 60 days is fine. However. If one, is doing many, trades and. They're, typically may only be in a trade of about 7 to 10 days, what. Doesn't necessarily. Need that 50, to 60 days so you can certainly do that. The. Balance being is as. Far as how much equity may be locked, up in that trade, but. Actually what you put out there is not. A bad starting, point for. Some traders and they. May go ahead and adjust accordingly from that all. Right okay. So we spent some time managing. Looking, at our existing positions there, let's. Go and look for some additional setups, here, what. We'll do is we'll go ahead and go to. The. Public, list for penny increments. That's. Accessible, through your watchlist there these. Are examples of stocks that are widely traded and. That are optional and may have spreads as small as a penny, typically. Maybe closer to about a nickel. And. You. Know some traders may go ahead and build their own watchlist, based, off of some of these stocks that they may trade again and again I. Some. Other ideas. As far as you're looking to see where, there may, be some momentum now there is earnings, that are going on right now that are causing, some stocks to move is. Through. That same public list, there. Is an area, called lovers, and losers, and. If, I click on that drop down go. To lovers and losers, one. Can look at pre market movers. Now. These, do not necessarily translate into widely, traded stocks. You may see some familiar faces that. May come, up in the list, you. Know like Bowen Bank. Of America. Viii-b. Stocks. That are in there and seeing, if there's. Anything move, in here. The. Other area too is and. I've shared just once before if we go to the market watch page. And. You can do it likewise. Under your watch list page. But. When you bring up a public. List let's say the Dow SP. You. Can add a column for. Mark. Percent. Change. When. Mark percent change is basically, showing, the, percentage change. More. Reflective, of what's, been a current. Overnight. Although. When, the market is open it should pretty much be the same as the regular percent, change but. As bid and ask, prices, may be changing, in the overnight this, mark percent change would be reflective, of that so.
All You need to do is right click on a column header. And. Select. Customize and. This. Is where you can go ahead and find that mark. Percent, change. If. I go ahead and just add a percent, change. Since. The market is open that's. Going to be showing. The same stuff. Whereas. When you're looking at it during the pre market, your. Regular, percent change. Would. Only be reflective, from the close. Of. That previous day. As. We see now since the market is open these should pretty much match so. For, instance in a pre market before, we came in you. Know sort by percent change on the Dow, was. Able to see that UT action nine technology, was, up about three percent followed. By Coca Cola and Disney. You. Can go ahead and change that list go to public lists let's, bring up the Nasdaq and. Hasbro. Up 15. Percent more. Than likely. Earnings. On that one. Where. Price went ahead and gapped, or. As I refer to as an overachieving, breakout, this, is what the gaps are all. Right so. So. With that let's go ahead and see we can. Find some, additional swing, setups here. Since. We had utx on there you. Know UTX, you, know already in the process of a swing and gap. In there so. What some traders may look for you. Know after, a gap. And after on earnings you know may look for a little. More of consolidation, see if price kind of Flags back a little bit and, looks. For the price to, trade above the high the low deck. Now. Disney, Disney. Went ahead and, actually, broke. Out today. Go. Ahead and look at. From. The gap a. Little. More of a triangle. Here. Go. Ahead and zoom in on this. Now, if we wanted to see if we can capture. A little more of a potential. Swing here it, pulls back a little bit. You're, looking at the distance of the pattern from support to resistance that's, about a six dollar move. Some. Traders may actually measure that gap as well as being part of that swing now. That may be a little. A. Little. More aggressive, but. One can go back and look at some previous swings, on Disney and. Come. Up with an expectation that prices, may move similar if it bounces you know there's about another six, seven dollar move. You. Know about, six dollars before, it consolidated. Went. Up you know about another $5, there. So. Let's go and do an, example of a. Swing. Trade here on Disney we'll. Go ahead and, go. To the trade, tab. We'll. Go in and look at a selection as far as number of days out. And. Again. We can apply some of those principles you. Know Paul shared. You know as far as on you know buying, a long, options, you. Know some of the considerations, may be buying more, time than one needs and, whether. That's going beyond fifty days or, looking. At the number of days one needs add in a month, kind of comes around the same area there. Uh. If, we wanted to focus and this could be a good once again a good starting point for, some of you if you're new if, you're, not. As adept on looking. At how. Long it may take for the stock to make its move, certainly. Buy more time one can sell it back. We'll. Go ahead and focus also looking. At closer to being apt. The money on here. Now. Some traders if they're looking, to capture more of an intrinsic move they, may go more in the money. However. The risk there is the intrinsic value if. They.
Go More out of the money it looks. Like those options are cheaper. Which. Notionally, they are but. The probabilities. Those strikes, being into money. Decrease, as we. Can see by the Delta 17. Delta represents a 7017. Percent probability of it hidden 145. So. We'll. Go closer. Six days out will, go. Closer. To at the money for this example and. What some traders may do as well is you, know wherever their target, is if. That strike would be a couple dollars into money then. They may go with whatever their target strike is. So. We'll stick with the 135. Which currently, is about. Two. Dollars a buck, or so above the. Current price. Now. We're going to position size this to a maximum, loss. So. If we were just to. Do. A buy and. What we'll do is we'll do a buy custom, with stop. And. Since. It's 390, we'll. Do a half a percent of this account or accounts sitting at 280,000. 1400. Would. Be about half a percent. So. We'll take the calculator, will. Do, 1400. /. 395. That'd. Be 354, shares, three. And a half contracts, we'll go ahead and roll that to. Three. Contracts, so. We'll do three. So, we can add that there my big fat mouse here so everyone can see it sometimes, it's hard to be precise. Francisco. Says are those probabilities based on calculus, or technicals. So the. The. The deltas. As. Far as with the black Scholes model of, variations, of that is. I. Don't. Have the exact formula for your Francisco, but it's based off of. Calculations. Really. Relative, as far as how the options market, sees, where prices may go, if. They, believe prices, may move a certain, level those. Premiums, may, be increasing, whereas, if there's less of a. Potential. Move those. Premiums, may be less so, those, deltas refer. To not only the rate of change for, the option, relative. To the price kind. Of lens towards the probabilities, as of now as. Always. These things can change on, a day to day basis, and. One. Takeaway on this is key word the key word is probable, not, certainty. Okay. Great. Question thanks for asking that all right, now if. We go ahead and look at a. Potential, exit we're. Gonna go ahead and make this a market GTC. Renews a conditional, order now, keep in mind a market order one does not have control over. Does. Not have control over price. This. Is why we're position, sizing this option.
As A. Maximum. Loss. So. We've already priced in a worst case scenario even. Though that may or may not happen. Also. Keep, mine if one uses technique like this is consider. Liquidity. Widely. Trade stocks widely traded options. Now. If you go and look back at the chart, let's. Go and set a target here then. We based off of a, move, of, about. Six. And a half dollars, we. Can go ahead and project that same move. Based. Off the breakout point of about, 180. 130. To 81. Believe, that was too high actually. High was 132. 87. So. We'll take one, 3287. Plus. We'll. Do six dollars and fifty cents so that would be a potential target of 139, 37. So. We can do is down. On the bottom of the chart since we're on the chart if you do have an order that you're working on. You. Have a little arrow down here. If. You click on that that, will enable you to bring. Up that same order. We'll. Click on the gear. Next. To that sell order so we got a market GTC and we'll add our condition. We'll. Say if the, stock mark. Is. Greater. Than or equal to we'll. Put in the target one, thirty nine point. Three seven. Click. Save and. Went. Ahead and took care of that now didn't. Put in a exit, on the downside. We. Position, size to a max loss which. That. Could be fine. For this purposes, or, if. We wanted to say if the price went ahead and broke back down, below that breakout, point we, can go ahead and subtract off of, that 132, 87. And. Let's. Say multiply, that by a certain percentage, we. Can go ahead and multiply by 1 percent 2 percent 3 percent. Let's. Say we'll do point. Nine. Eight about two percent below there that. Would be at about 1:30, 21. Now. If we go ahead and change that up we can click on that order click. On the condition, and say. If Disney. Is. Less. Than or equal to. 130. Point. To one. That'll. Go ahead and. Sell. It at the market and, preserve, some of that premium. And. Okay. We're into trade. Since. Price is already broken out there and we'll. Go ahead and we'll manage this for next week and we'll see how things pan, out with that let's. See what else we got what. We'll do is. We'll. Switch to bring. Up that. Penny. Increment list. And, looking at some of the comments. Yep. Thanks for sharing that you know as far as direct. Measures, you. Know again remember, folks this is always map to, the question Rafael's, mentioned, there, are some other fields, that one can add, on. Your options, table. In, fact in the layout at the top of the layout there, is a selection, for, implied volatility, and probability, out of the money and your. Deltas. So. With our position that we put in. The. Probability, of those options being, out of the money is at around 54%. Which. Means there's a, 46%, probability. Of those options expiring. In-the-money. That's. Compared to the Delta that's shown up at about, 46. Cents so there's a little deviation. There. However. Question, is is to three percent a big, difference, there so the deltas count a little you know little cheer or once a cheater but kind of a quick reference. On. How some traders may look at probabilities, again. Key words probable, and that does that mean probability. Of success, or probability, of profit. Just. Means that the, probability as far as the option mark sees it that the price will be above 135. Now. We can do the math on this one. If. We just went ahead and paid. Since.
There's Interest, in this discussion here. Going. Back to Disney let's go ahead and right click and we'll move that to, our. Swing. Trading group so, we can track it. Now. Remember this, example we paid three, dollars and ninety five cents, we. Paid three dollars and ninety five cents in premium, for. An option, that has no intrinsic value. Because. It strikes, at 135, stocks, at, 133. And change. We. Just paid the right to pay, more for something, then it's currently worth well. The reason for that is the expectation, is the price will go higher and this premium will increase in value. However. A quick little, bit of math here if you, take 135. Which. Is the strike and. Add. The premium that paid which, is 395. Your. Breakeven. You, got to add the transaction, fees into that which I did not mention when we showed. The trade. There remember there's transaction, fees, 135. Plus, 1. Plus 35, 95, that's, going to be 130, 895. For. This trade to be profitable, at. Expiration. The. Price would need to be above 130. 895, okay. So, meaning the price needs to move for. This trade, to be profitable, now, we gave it some time to do that, hence. We, paid a lot of premium for. That extra, time. Whereas. If one went closer in. Again. Pros and cons here folks let's. Say 30 days for. That same option, we, would have paid about half. So. There's pros and cons as far as going further out versus. Coming closer in further, out by, sometime we, can always sell that time back not. Necessarily as much leverage. All. Right didn't know this be as much of discussion on the option side but it certainly seems to be some interest on it, appreciate. It options. Can be a great tool on trying. To capture. Some shorter term momentum with less equity. However. Keep in mind it's, not stock ownership you, don't get dividends, or anything like that and. You. Know compared, to a hundred shares of Disney would. Be about $13,000, versus, the I think, 1400, that we put up all. Right, let's. We can find one more here, as. We wrap up and, this. Kind of a precursor later. On this. Evening, 5:30. Eastern Time, I'm, gonna be covering down on scripting, studies, on thinkorswim, from a good friend Ken Rose it's, a 30-minute session, we're. Gonna spend a little take, a deeper dive on. How. One. May, you. Know create a script. Like this, which. Is looking, for stocks that maybe trading, above. The. High of a load a. Which. May be able maybe a bullish bounce again these are not. Recommendations. Or or, triggers. That this is a actual, bounce. Trade, but, potentially, a set, up there. Let's. Look at a couple examples stocks. And may be trending up so. Get RT. N. So. Here's a, Raytheon. Now, their earnings are coming out on the 25th. But. Notice today not only did price bounce it kind of actually broke out. Kind. Of looking at that resistance, their. Price. Basically, traded, above, the high of a, low day and that's. What this script attempts to do as. Well as attempt, to find some inside days. We. Already talked about UTX which did the same thing. Broke. Above a high, of an inside day. Juniper. Now. Notice there's a lot of things that are coming up with. Flags. Here or coming up with earnings. And. Since we are coming to the bottom of the hour let me show you one other. Tool. That, may. Help if you're. Trying to avoid an, earnings.
Event. That's. Utilizing the scan tool, we're. Gonna go to scan. And. Look. At a. Public. List we'll go ahead and focus on that penny increment list. Thanks. For sharing Ricardo so. We're gonna search that pending. Increment list will, clear the filter there. And. What. I can do is add now, this can only be done on the, thinkorswim. The real-time platform. Paper-money you may not be able to bring it up it's called a study filter, we're. Gonna click on study, filter, and. Look. For corporate. Actions and. Select. Earnings. So, add study, filter, once. It's added go, find corporate actions and earnings. And say. Hmm, want. To know any stock in my penny increment list, that. Does, not have an, earnings. Announcement. Anytime. In the next, and you can specify the number of bars now, since this is kind of days two weeks you. Know maybe, as long, as it doesn't have earnings within the next 15, days or, you. Can specify 20, 30 days whatever you wish, go. Ahead and scan, for that. And. It should bring up some results, although. It looks like it's working a little overtime here. And. That's. What has Tennessee happened Murphy's Law when you try and demonstrate something, doesn't, work as quickly as you'd like. Let's. See if I can go ahead and, remove. Some of these other filters see if it does it there. We go. So. Actually quite a few stocks. In that list do, not have earnings within the next 15 days you. Know if you want to go ahead and go a little further let's. Say 30. Bars. Scan, for that still. Quite a few. Then. Kind of do the same thing. One, can go ahead and utilize. Whatever. Tools they have. Again. If you want to join us for that, scripting class again, it'll be at 5:30 via, if you can't make it live no. Worries it is archived, along with this one as well. And. It, looks like things are not loading up as quickly as we'd like. This, has tentative happen if you do have a large list, it. Can take a little time for some of the things to recalculate. Let's. Look at it looks like a couple of banks maybe. Move in here key. And. USB. Looks. Like the kind of flag in a little bit right after earnings this, could be one of the things as far as looking at the market. Momentum see, if financials, are able to make another, move so. There's a little bit of a consolidation. There let's. Bring up USB, kind. Of the same thing. And. They. Both anis, Imel er there let's. See one other area, here. So. Anything else is popped, key, a. Few. These few these regional, banks. Kind. Of after. Breaking. Through a downtrend. We're. Kind of consolidating. After. The last breakout very similar to what the broader. Market, has done in a, lot of ways. You. Know potential trigger is looking for prices to trade above the high, the low day, now. Did look at options. On some of these some of these spreads, can. Be quite large, so, from, an option standpoint, may not necessarily be. An. Option, for you so to speak. Let. Me do a quick example, of a. Just. Do a quick stock trade will do 100 shares. We'll. Go ahead and look at a potential, target, based, off of some. Of the previous swings. Here. Now. This is notionally not, a large, move here. In. Fact doesn't even look much more than about a dollar move. Or two there but. Just do this for illustrative purposes for, a stock. Trade I can. Right click. We. Can go ahead and. Do. A, buy. Custom, with, Osio bracket, I'll just go ahead and use the, the. Orders themselves. Will. Say if the price goes an, example. 20 cents above the high of. Yesterday. Which. The high was forty nine fifty seven. Twenty. Cents above there would be forty. Nine seventy. Seven so. I'm going to change this to a, stop. Limit. Well. Against a forty. Nine. Seventy. Seven. And, one. Could specify how, much above there they're willing to pay for it I'll just go ahead and just put a. About. A 10 cent buffer there. We'll. Go ahead and we'll target. The. Swing high there. Right. Now it's currently around 51 and a half we'll go a little target, 52.
For, Our example. We'll. Make the order GTC, for good til canceled and. Then. What we'll do is we'll set a stop that's going to be 1%. Below. The. Load a which, with, the low of 48:28. Will. Do. 48. 28. Times, 0.99. That. Would be 47. 79. Now. Again this is from a standpoint of reward, to risk. It's. Closer about a 1 to 1 some traders may be looking for. Something. More. Substantial. Again. We're just kind of illustrating, with some of these setups here we'll, make that GTC, and, we'll. Confirm and, send. That now. If, this order does not trade higher this, order will cancel, so this order may not even come, into play as price is pulling back well. This is a way of basically planning, a trade and trade. In the plan, Jennifer. Thanks for being with us there, and. While. We're at it I'm pushing a survey to you guys right now if. You can take a moment going. To click on that it's 5 questions, we'd love to get your feedback there, what. We did today is we, followed. Some trade management and. Reviewed. Some of our existing practice, positions. We. Went ahead and reviewed, some additional setups there and. Went, ahead and did. A practice, trade, in a, case of, Disney. As. Well. As with B BT we'll, see if that actually fills. We'd. Encourage you to go ahead and practice these, as well. Take, in whatever you learn and not put in application, doesn't, seem to make a lot of sense to me so, we want to make sure you actually apply what you learn so go ahead and whether it's a stock trade that we did an example with or an option, trade do, a practice, trade with, an entry as well, as a target and a. Potential, stop or at least position, size to a max loss in the, case of an option. Now. Remember learning doesn't end here coming up next hey. Getting started with futures Barbara Armstrong, coming. Up at the. Belief. At the top, of the hour there so, let's go ahead and, let, you guys go for now john, McNichols signing off and remember, in, order to demonstrate the function I have the platform we had to use actual symbols, keep, in mind TD Ameritrade does not make recommendations. Or, determine, the suitability of, any. Security, or strategy. Through the use of our tools any. Investment, decision you make in your self-directed, account, is solely. Your, responsibility so. Once again folks do appreciate you taking the time out to spend some time with me today as, we go over swing trading hopefully. Looking forward to seeing you next week or at, my next, session everyone, have a great day bye now.
2019-04-25 10:57
