Technically Speaking | Pat Mullaly, CMT | 11-25-20 | Trading Options Post-Earnings and Manage Trades
Time to give thanks, time to think about new trades, time to think about old trades. We're going to do a lot of that, stick. Around. Good. Afternoon, good evening good morning, wherever, you are on this, big blue marble that we're floating around in space on my name is pat malali, and this is technically, speaking. Technical analysis, with options. And, in, the chats. I want to say hello to barb armstrong, and you should all as well. Barb's going to be in there helping us answer questions. Today i do believe this is the last webcast. For the day. Due to the holiday. Due to the holidays. Uh you should see some of those banners, on the. Thinkorswim. Uh, charting, or the education, tab in any event and td ameritrade. We're going to look at. Managing, some trades we're going to look at some new trades some earnings. Ideas. Today but before we do any of that remember that we are doing this for educational, purposes, only and not for recommendations. Options. Are not suitable for all investors, there are special risks that are inherent to options. Uh remember, that any, multi-leg, option strategy, spread straddles. Other, types of that are going to carry extra transaction, fees, anything that has extra transaction, fees, can impair, trades with small. Potential, benefit, we're going to look at real symbols. So we can demonstrate, the platform. But that does not mean that td ameritrade's, making any kind of recommendation. Or determination. About the suitability, of the security, and or strategy. Past performance, of any security. Does not guarantee, future results you are responsible, for your own, uh decisions, in your self-directed, account. And, um, remember, that, all investing involves risk including the risk of loss. Zero commissions. On us exchange listed stocks etfs. And options. But however options do carry a 65, cent contract, fee delta gamma vega theta, price time and volatility. If you're new to options. You need to get to know those if you're new to options you need to get to know barb. Barb has a, options, um. Getting started with options on every, friday. A great series, of all different types of things the ins and outs, to get you rolling there, at 11 o'clock eastern time, on, fridays, which, unfortunately, this friday. We are going to be, uh. Not. Broadcasting. So, uh with that. They can help you measure your, risk as well as your. Determining, certain strategies. Post. Earnings, example, trades, where we're in the kind of the end of the earnings, season, we're going to look at some of those we're going to look at managing, some positions, some some decisions, need to be made we talked about good decisions. Bad decisions. Last a couple weeks ago we did some. Trades, last week that. Might be considered, possible. To, close or roll or some of those other things, so we will get out there and get rolling on those before we do anything though let me say hello. Uh to, everyone. As well, and uh that goes. If you are new by the way, in your live here, there are chats, over on the chat side watch those chats there's a lot of very, good people in there. Great, nice people willing to help and, they know they know their stuff. But i want to say hello to colonel tm, pandu. Tajar. Uh. And mike and george and peter and yoko. And. Charles. And. Ljn. Ljn, biz. Ricardo. Ramon. Ramona, sorry, uh jay lewis willie. Die ha die high. Probably not got that wrong i apologize. Uh, j eve is in the room. As well, uh, and uh tony. And, uh. Mark, and carlos. And everybody else listening on the archives. Welcome welcome welcome. Uh, for those that are new you can you can watch these on archives. As well, as um. Watching this live you can go back and, and. Fast forward, or or you know replay, things to get to know and understand, what's going on here, okay. With that, uh. The uh. What we want to see here look at here is. The, s p 500, we always start off with the s p, the s p holding, up a really strong move. Yesterday. There was good. Up down volume. As far as the breath goes good up down volume is good as far as advancers, and decliners. Good advancers, and decliners, however. The market, seems to want to. Struggle. Up at these, up at these highs in here it's going to be interesting to see how the day closes, out if we will get, that po that pre-thanksgiving. Rally. And maybe push into new all-time, highs who knows, only time will tell, right now when we look at the up down volume for the day with with the price down two tenths of a percent.
Uh We're right about where, price should be in other words the two-sided, trade going off, not a lot of extra selling not a lot of extra buying in other words not a lot of extra, down volume. Uh with price the way it is and not a lot of extra up volume, where price, is the way it is as well. Um. Oh i did it right good thank you. Let's see. Let's, move a forward, here and let's get into, a couple of, trades here, dollar tree now these, some of these trades will be low dollar, uh stocks, and some are going to be high dollar stocks. Uh but we're going to look at some ideas. And the idea, here, is just using technical, analysis. And, what you're probably going to learn about over time uh is going to make sense there's the old saying oh it's gone too far too fast can't go any higher, really, can it not. Um, maybe not. In the near future maybe it will, how do we trade, that how do we look at that and say, um. From a technical, basis. There's a little bit too much uh, there's a little bit too much, energy, expended. In, in the move, we're going to use uh. Volume we're going to use. Rsi, you can use stochastic. If you want. Any bounded, oscillator. And if you know how to use some of the other unbounded, oscillators, like macd. Uh you can use that but that's, not really, for overbought, and oversold, areas. But the rsi. Can be. So what do we know if you're new. One of the things uh. One of the things. That. We're looking at is. The amount of volume, this is an earnings, gap to the upside. When we see earnings gaps to the upside. What we look for, is. Exhaustion. Right how do we know exhaustion. How do we know. All the buyers are in you don't but we can. We can, kind of get an idea, so. Let's first. Talk about. How we want to set this up first there has to be. Some kind, of a, gap if we're going to sell. Options. Around, this action over in here. Around this action over in here we want to see some kind of a gap, on earnings, with a, lot of expended. Volume, which which means, in the case of an upside maybe a lot of short sellers. Are are closing out people buying back in demand, has come in. But demand can only, hold up so far before there's some exhaustion. So we'll look at this last earnings on. Dollar tree as an example. We'll pop all the way down here because we're going to look at these three things. Uh. And, these three things, involve. The gap. Right here. The volume. Here. And. The, over. Botanist, getting up at the 80 level. On the rsi. And it doesn't mean that it can't continue, to trend higher. But the point is it may trend higher but how much further, can it really go, to the upside before. It has to breathe out what do we know about trends they breathe in they breathe out, in theory there's, uh there are. Five waves to a trend three up and two down. Uh often times though, uh there's smaller trends inside of larger trends we're looking to capitalize, possibly, on, those smaller. Uh those smaller, trends. All right. So, that's the idea so, do we see. In today's, action. Do we see anything. That is similar. To what we saw. Back, in. In the june, may june, earnings, announcement. The uh. Second quarter. Earnings, announcement. By uh by s p terms i don't know what it was exactly, for the fiscal year for dollar tree.
Uh But in other words, yes we do. What do we see we see that we have. Let me draw a, square around all of this. And then back over here. Just to isolate, these. And we see. Gaps. We see. Strong. Volume. Maybe climactic. Sure very short-term, climactic. Volume. And we see the rsi. At the, you know, really strong overbought, areas, now when we look at the chart right now let's zoom in on the chart, because. What we're what we're going to notice is, this is what i call. A a high harami, now had this not been earnings. Then maybe this has maybe a little bit more importance. There is something we need to consider. We'll talk about in a second but you can see here, big jumps to the upside, and, uh, a, stalling, these spinning, tops that were over here on the left hand side. This is a high harami. A lot of people look at harambees, and say it's got to reverse, well. Depends, on where it's coming from, okay so, this high harami, could be an indication. Of just some uh. Just some breathing out people don't want to jump in there and buy some more, so we might, see, because of this a little bit more upside. The other thing we need to take into, account. Is, the. Type, of gap, that we have here, so i'm going to draw a couple of uh. Lines, a couple of, resistance, lines in here, the one it broke above. And then ultimately, this one over in here. Which gives us. A, a better idea of what's happening here this is called we're going to call this a breakaway, gap. A breakaway, gap why because. It broke out of a longer term, consolidation. Pattern, in this case, an ascending. Triangle. An ascending, style triangle, and let me turn this to red as well. So we can delineate, those, all the way from all of these moving averages, and everything. Um so we've got this ascending, triangle, let's back this out to a longer term chart. Look at a five-year, weekly chart to give us a better idea. And then. Once we do this we see some other things so there's a couple of reasons, that we might want to, uh do this do this what we're going to do, number one. We're we want to take advantage, maybe of a. Move that's, gone too far too fast. And maybe it'll. Relax, a little bit after maybe moving a little bit higher but then, there's also a chance if we're paying attention to this and we know, the kind of action that we've seen in the past. That when we look at this structure, of this. Action, right in here. The this longer term weekly action remember we have a five-year. Weekly, chart on here so each one of these bars.
These Candlesticks. Is one week, in, length meaning there is five days worth. On average five days worth of information, in here now, there are holidays, so sometimes there's only four days, worth of, information. And so what do we see, we see more of a kind of a complex. Head and shoulders, after a fashion. A, bit of a shoulder here, a shoulder there a head, and then the shoulder in here, uh it's. Fairly symmetrical. Not so much but the head and shoulders pattern. Is oftentimes. In this case what we're going to call, a. Continuation. Pattern. Meaning that, maybe we're seeing, a, the possibility, of an upside break, so. Since. That has occurred. Or since we see this. Uh, it has. Completed, the head and shoulders, pattern. When i say completed, a lot of people get ahead of themselves. And. They say things like, well. Um. The, head and shoulders pattern. It's a head and shoulders pattern but it hasn't completed. So when we say completed. What we want to see, is price. Moving. Up, to. Let me remove this line there, i'm going to get rid of some of these moving averages so you can see this a little more clearly because this is important, distinction. And often, times one that, uh, most uh. People who are, are. New to. Uh, technical, analysis, don't really understand, we're going to call this. The neckline. This bread. Up longer up trending line here. That's the. Neckline. And, a head and shoulders. And this is kind of a tilted head and shoulders pattern, a head and shoulders, pattern, uh doesn't complete, until, price. Touches. That, neckline, now it's complete, right, now we're through it right now we've got, now we can, do our measurement, and our measurement, says that, this could possibly, run over time that distance. From high to low which is a from about say 65. Let's say, up to. Uh. About a hundred, so let's say that can run, uh, 35. 35, dollars, okay so 35, dollars added to where that breaks out from the headline. Uh or from the neckline, excuse me, is going to be put us at about 140. Bucks, that's going to put us up in here but it doesn't happen all in one fell swoop, right, so, with the with the big push today. One of the things that people, fail to do, is they see something they say they're going to act on it but they want to wait, they want to wait for what. They want to wait for the pullback, right, i can't get it now it's gone too far i want to wait for the pullback, do we need to, wait for the pullback, using options. A, lot of people would argue, no, because what we're thinking about doing, is maybe selling.
An Iron condor, or just selling a call spread. And wrapping, around. Price action in other words. In other words selling something above. Price. And selling something. Below, price right getting below that top of that gap. And. Seeing, seeing, if we can, and seeing where we are so let's go ahead and put this trade on, uh, price is sitting at 111, right now. There's probably, a tad, bit of, volatility. Implied volatility, left in it probably not very much at all, so what we'll do is we're going to come out here. It's moved pretty far, so we're not going to get a lot of. Choices, perhaps, let's put in all and see what our choices, are, so going out 23, days. Until expiration. Uh. We get. A uh and this is going to be pretty tight. We get a uh. A, a. Call, excuse me a 30, call option. At. The 39. At the 39, delta. That's pretty tight, right because, we are trading at, uh. Excuse me at 30 delta. 39, delta 30 strike price. I got myself confused. So here we are sitting at 28, bucks only two dollars, higher. We could sell a call spread, now. The question becomes. Can it, oops i've got the wrong stock in there no wonder okay. This is something else we're going to do today too. Uh. Okay so what are we looking at dollar tree. Okay this is going to make more sense to me 23, days out. Maybe a little bit of, volatility, left in it. And here. Maybe we want to look at selling. A call spread and we don't get a lot of choice with this this has moved a long way, typically, when we do. Selling, two call two spreads a put spread in the call spread, that's going to, actually. Impair. Our uh, our, probabilities. Because we have two things. Uh, two places that can lose, not at the same time. That just won't happen unless we do something silly, but we're going to look at selling and see what we can get for selling a call spread, at the 15, delta. Right so in theory, 15 delta has what kind of ex, what kind of, probability, of expiring. About, 85, percent if we look at probability, of out of the money right here, in this column. That's 86, percent. But we're not going to gather too much money from this the spreads, are fairly tight. But at the same time we want to, couple that perhaps, with. A, a put spread and maybe sell a put spread. Somewhere. Uh. Somewhere a little bit lower if we expect. Maybe a little bit more upside on the breakaway, gap maybe we can put those puts, a little bit closer so maybe we sell the 105. 105, 103, puts, a put spread. Now here's the issue. Is, these are, five dollars, wide up in here. So let's go out, a little bit further, in time, or. Shorter in time and see what we get. If we don't want to go to five dollar wide strikes. Like we were. On the. 23. Days in other words we would be selling, five dollars, wide on one side that's a lot of risk we have five dollars worth of risk, and you really wouldn't be garnering. Too much uh. Profits. On those on that spread. So we want to be very careful with that so what we'll do, is go to see, if there's, either further out in time or shorter in time, if there's something that makes more sense so now we have dollar wide spreads, this is one way to manage your strategy, decisions. Dollar wide spreads. Uh can give us. More, uh choices. In this case more choices. And we can kind of stick to maybe a little bit better, uh, analysis. Of. Of price movement so here we might use. Say a uh. An 18, delta. 83, percent chance of being out of the money, and then we're going to come up here, with uh and we'll sell say a. Explain the call side first. We'll we'll sell the the 118. Delta. Or 118, strike with the 18 delta, will buy. For protection. Of the 120, strike with the 12 delta. We're more focused, on really the short strike with the 18, delta, than we are the delta of the call the delta of the the call is there for protection, in case price blasts, through, 120, that's going to be. Nine, eight and a half dollars away from where it is now, now on the other side we want, we want to sell a put spread one of the reasons you might want to do that, is if we right click on this. And we do. Some. We just look at this spread. We're going to sell. A straight vertical. Just for, demonstration. Purposes. Sell a straight vertical, two dollars wide 118. Sell the 118. Buy the 120. And that pays 23, cents that's really kind of on the.
Uh, Really on the very edge of a, lot of risk for not a lot of profit for a lot of people, right, and so what we might do. Uh, to. Increase, our credit. And with the expectation. That price, is not going to move too far down, it price won't move. Too far, too much further higher, we're going to come over here and we're going to sell a put, say at the uh. At the uh. 106, strike we'll use the 22, delta. On the put, so i'm going to hold the. Control, key down and i'm going to sell that 106. And that adds that to down in here now we have a dollar 16, credit. But, we have no protection, on the downside, in other words. We have. Anything, below, 106. Is going to have higher risk. So to protect, ourselves, on the downside, we will buy. Hold the control key down, and the spreads are pretty wide in here so you may have to do so a little bit of work. To get a better spread, but now we have a two dollar wide spread with a 49, cent credit. A 49, cent credit that is, a little bit more palatable. Uh, and you can see here the mid price and the and the natural. Those are fairly wide you may, here's the thing you need to understand, about wide spreads, often. Is that there's somebody out there that may need, one of the other, one side or the other, so leave it at the mid price, don't do anything, sit on your hands. And then maybe work it a, little bit, a little bit as, as time goes on but try to get, your price, you can go a little bit further out in time. And see if you can find something. Similar but we still don't get, a. A a a, as far away, as we would. Possibly, like, so we're just going to go ahead and send that one off. Try to have your bids, ask spreads as tight as possible so here's the idea. We, sold. The uh. 118. And we sold the 106.. So i'm going to come up here i'm going to right click on this click there. And i'm going to put in 18. 118. Here, on the edit. Click ok. And then i'm going to put. Edit. The idea here is that, these go out worthless. I'm going to put the value in at 106. And there is our trade so the bottom of the gap, giving this a little bit more upside. Expecting, that if it does pull back that people, may want to buy. In this zone provided, that the market holds up especially going into the holidays. And we're only 16, days out so a nice little rally would be good, uh, or a nice little sell-off would be good where they buy right. And so in theory and paper money, uh we do we just got filled on that okay so that's dollar tree. Overbought. Really big move to the upside. Gap, we don't expect it to fill the gap we expect it to pull back though, and then bounce. And really kind of make. The uh the the. This kind of a move where, maybe down in here. That or maybe does this. But ultimately, staying, somewhere. In in the zone, in there, all right let's move on to. Jwn. This is the one i was trying to do, earlier so what do we see here with, with, um. With. Jwm. And that is, this has moved, pretty far. Pretty fast, retail, has been, very strong. No gap on earnings but ahead of earnings, did you think they anticipated. Earnings here, do you think they anticipated. A big push to the or a good, earnings. And after they do that. If they are anticipating. Strong earnings how many of these people are going to take profits, in here, that moved, pretty darn far. In a very, small, amount of time let's get a trend line.
And Let's just go back a few weeks, from low to high. And that's, about. Is that really say 142. Percent. In a matter of a few weeks. Is that sustainable. Well who knows, but if we look at the volume, we know the volumes picked up, that's fairly bullish, right, but we probably don't expect, price to. Really make any super. Strong headway. In the future. So what we're going to do here is we're going to come over here to the trade tab. This time type in the right symbol. I always tell myself now make sure you type in the right symbol pat. And. We'll go out in time, depending on how far out in time you want to go, expecting. What, we expect. This. This amount of volume. Meaning, it could be very bullish, but we do expect. This. Uh, momentum, that's sitting up here. Rsi, sitting up here at 84. We expect some breathing, out, and with that breathing out what's that afford, us it affords us the ability to sell either a put or a call, depending on, what you want to do or both. Um. And uh. If you sell a call we expect price to, uh. Start to, drift, back lower, if you sell a put, we expect, price to drift back lower and maybe. Uh. Buy the stock, at a at a lower price, so we, it's up to you how you want to do this, for this example, trade today though we're just going to, look at selling. A, call spread. So stock trading at 28. When we sell. Spreads. We can, either sell a 40 delta, we can sell a 30 delta. Let's look at this 40 delta if you if, somebody. Has a pretty high conviction. That price is going to struggle over the next 23, days to really go that much higher without having some breathing out period. This might be, the one now the the bid ask spreads on these are much better a dollar thirty one to a dollar thirty five, and seventy, two to seventy six. They are two and a half dollar wide, spreads, so we're going to right click here. We're going to sell. Vertical. Because we don't want to sell that uh call option naked right. And that is going to garner, 58, 57. Cents, for two and a half dollar widespread. That's kind of borderline, for some people some people would like to see that up around 80, depends on what you want to do. But the idea here is. That. We go over to the charts. Jwm. In, right click we're going to edit we're going to put in 30 dollars so you can see how close that is, and this scares, a lot of people don't let that scare you we're, dealing with mathematical. Probabilities. And we're looking, at. A technical, probabilities. It's gone so far. It's way overdone. When we know that it can go higher if it's above 80 but oftentimes. It goes higher and then it pulls back or oftentimes, it pulls back, before it goes higher, so we'll pick a shorter. Amount, of time to do that in whoops. Come over here to the trade tab. And. Decide, is this the credit. That we're, that we're. Comfortable, with, sell that 30 strike. Out 23, days. At a two and a half dollar wide strike now that the risk involved, in this, is two and a half dollars i'm trying to get this mouse under control here, the risk is two and a half dollars. The difference between the strike, prices. And. That's our that's our total risk two dollars and fifty cents but we pick up a credit, of 61, cents. So that cuts our risk down. Uh by a little bit right. Now. In. In a perfect, world, maybe we get all 61, cents if it goes out worthless, maybe we have to close it out for a loss. But there are also. Fees, involved. With this so we have our 65. Contract, fee, so there's our fees. And uh we have our max profit, of 61, cents, and a dollar 89. Worth, of uh a dollar 89 worth of rest now for some people. That's, too much they they may, rather sell. A put spread, a little bit further, away. At a uh say a two dollar wide strike, there's nothing wrong, uh with that you can even. Condorize. This if you will. And. And uh, try to. Capitalize. On, on some kind of an iron condor. But for this example we're just going to leave it at the call spread.
But There are puts there are calls you need to decide, which one's more important, the idea. After a fashion let me send that off, the idea after fashion, is, when we see these things, i want to ask everybody, who's bullish. Who's bullish on this, you know if you're bullish, on this. Do you want to buy after this big rally. And how often have you said well when this pulls back, i'm gonna buy. And then not done anything, and forgotten, about it and then the next thing you know, two months go by and you and you see oh geez i forgot all about that one and now it's up you know, 20 percent above, where i wanted to buy the stock right, so, get involved. Put your toe in the water not necessarily, just test out theories but to use a technical probability. Of price. Relaxing, a little bit, but being able to keep the eye on the ball because if this does, pull back and then bounce strong, we might lose, a little bit on that call spread. But we are keeping our eye on this and it's going to give us the, uh the opportunity. To buy that stock if we have the opportunity, to buy that stock and taking in a credit. That can also, also help, in the overall, position. Over time. All right. Um. Let's um. Uh. Let's get on to our. Monitoring, of our positions, that we have over here, so here's apple these are some we've put on in the past, so what we're going to do is we're going to, manage, these positions, we've got a stack of them in here that we need to make some decisions, on. Apple being the first one because this is alphabetical. Order. And we have sold a call spread, on apple it has two days left, you need to make a decision. If you own this, there's four contracts. So let's let's kind of work through this. We have four contracts. The 124. Call, the 126. Call we sold. Short the 124. Call bought the 126. Call, above, the market on apple. Back in time. Expecting. Uh price to uh. Close out below that right we're expecting. Not necessarily, total bearishness. Just that we didn't expect price to move much higher when we sold that. There was. A. Trade price. On this two dollar wide spread. Of 48, cents, so we took in 48, cents four times. Now each one of these is basically, worthless. They're worth. A penny. Now here's the here's the thing we have two days left and this is, something you need to be careful about let's go out here to apple. And if you think, that, through the end of the day. And next week that app, and friday that apple can make a really strong run, then this short strike, is going to be at peril. In other words what will happen. And it might, what will happen is, this, penny, may turn into 10 cents now, in the overall scheme of thing, things when we look at, selling something for 48, cents and have to close it out. For, say five cents that's not a horrible thing because that's probably, something that could happen right. But if you want to get that risk off the table. And uh especially, if there's more than two days left, so what's the guideline. Ten, ten to four days, from expiration. Think about closing out strikes. Now in the, back in time when there were more, fees involved. This was, you know more important. Aspect, but, here we can sell. The, we can buy back this short strike. In theory for a penny we'll probably have to pay more than that. And we may not even be able to sell it in real life. In real money. Maybe nobody wants it right because it's it's just. Doesn't do them any good, it's lost all of its delta. It's lost all of its time. Time premium and volatility, premium, so there's not a lot left but if it does, we get some kind of. Wave, to the upside, this could expand, in in value, so what, sometimes, what you might think about doing and not saying this is what you need to do here. Is maybe you want to just close out the short strike. The one that carries the risk the risk is always at the short strike. So in a right click here put on a closing, order. Instead, of, closing, out the vertical. We're going to go ahead and buy back, the 124. Strike. Right here we're gonna buy four of those for two cents, and just for you know who knows what can happen, get that risk off the table. And uh. Then what we're left with, is. A an option that can expand, in value, should some crazy, thing happen and they some kind of bullish announcement, comes out, and. By the end of the day and and the end of friday. Uh price rallies, really strong. At some point, during friday. Doubtful. But some point during friday, this these calls might be worth. A bit more and you might be able to, to close those out, uh for a little bit you know they're not going to bother us if they go out worthless.
So That's apple. Let's move on, uh to the next one amazon. Now this has 23, days left now this is something we need to make some decisions, on, because we have 23, days left. And again, like similar to apple. Watch your. What your, thoughts, on. Amazon. So let's do, some uh, some analysis. Some technical. Oops technical analysis, i'm going to draw. A, trend line because we've got. Price. Drifting, higher. On amazon, should amazon. Decide. It wants to break to the upside. With 23, days left. Then. Our. Whatever, gain that we have right now, is going to be put apparel now if you're going to if you want to play for the total. Uh percentage, gain when we say total percentage, gain, uh that would be the options, going out worthless. However. Uh however. Uh if. Your guidelines. Are. Uh i want to take profits somewhere between 65, and 80 percent, but if something is telling if if something doesn't seem right and something seems to be changing, then maybe i'll take fifty percent, some people will have, fifty percent to eighty percent as a guideline. So we'll go back and look at what we've, what we have right now, but right now. It looks like. Amazon, is trying to make a push to the upside. If we look at the, volumes, as it pulled back in, volumes, drifted. Lower. We have, the, rsi. Really showing some strength. Pushing back above that 50 level. And it wouldn't take much. As far as decisions, go, to see, uh amazon. Uh push higher now amazon, has a tendency, seasonality. To be strong in november. And maybe the first week or two of december and then fade. Who knows if that will be the case. Uh this year. But if we come back over to the monitor, tab and we look at amazon. With 23, days, out. And we see that we sold four of these. For 90, cents. And. There's a better than 50. Gain on these. Perhaps. Looking at this. Not wanting to take, you know a risk of this really popping and running. Take that 50, off the table. Relax, let some of the some of the smoke in our heads clear, and then maybe look to put on another, a different type of position, so that's what we are going to do, we're going to close this out see what we can get for amazon. Now this is a high dollar. We we talked about this before this is a high dollar stock the spreads are wide. Uh on these. So. Uh. Getting the uh. The. The 40, cents. And, you can see the difference between the mid price and the natural. May be hard. To do. So. Again, with 23, days left somebody, might need. That. 35. Strike price call. So, uh to sell that right and so you want to buy it, back, they'll be willing to sell it they may need it for, the other side of their spread and they may be willing, to get closer, to, uh one side of the bid ask spread. The a better positive side of the bid ask spread, or the other that oftentimes, will happen. But again, it's probably better idea if you're new especially. To keep as tight a bit as spreads, as possible, so we're trying to take that one off the table.
And Close that one out. What we talked about last week was, this day last week was energy. And we talked about. Some of the. Staples. Uh, type stocks in the in the materials, type stocks. And we and so here we had, bungie, that we sold. And had a put on the 55, dollar put, if we sold that for a dollar 15 it's worth 22, cents if you were a pure speculator. At that point you may want to say you know what. Speculation. Says, you know i've got 80, or something like that, i'm going to go ahead and take profits. If, you put this on as a cash secured, put wanting to buy. Uh, bungie. Uh. Then, the question becomes do you just close it out or do you roll it up, so right now we can close it out and take that dollar 15. Credit. Minus, 22, cents or whatever we can get on the exit. And come come away with, 90, 90 cents or so, uh uh. As a. As a possible, gain right. Now, if we still want to buy the stock and we still look at this from a technical, aspect. And we say wow you know, the trend seems to be, picking up speed. It looks like it wants to break out of. A. A consolidation. Pattern. Up in here. We had this. What we've talked about. Previously, today, uh relative strength getting up above 80.. We expect, did some kind of a pullback. And sure enough it pulled back, because we sold this. Right here. It pulled back right to our short strike but oftentimes. With cash secured, put, just because it's there doesn't mean that you're they're going to give you the stock right, so now it's moved higher. Uh and, it didn't, it didn't. Oscillate, as much as perhaps somebody might have thought it would be, so can we sell. Buy this one back, and sell something higher up. For. For more credit, so let's come back over here to the monitor, tab here, and what we'll do, is we're going to right click here. And we're going to create a closing, order, so we can sell this and take in 90 cents worth of gain. We can do that or we can come down here and roll it if you really want to buy the stock but you think it's going to continue to trend higher. Maybe we roll this put, to the upside. Rolled it out and up so we're going to pop in here. And we're going to put in create, rolling order. This is going to show as a diagonal. Spread, that's because we have two different time frames, the same strikes. What we're going to do here, because we've already sold. The 55. We can go ahead we can do that out in january, the same 55, and, create that 42, cent credit, or we can come out here in january. And scroll, up. And sell the 57, and a half, and create, a 90, cent 97, cent credit. So we'll buy back. That 155. Uh. Strike. For 20 25. Cents. Right. And then sell the 57. And a half strike, out in time. For a dollar, increasing. The credits that we have out there, keeping us in that trade, looking for bungie to pull back at some point, and enter into that trade if we don't we just keep doing it at some point though you may decide. That you know what i just need to buy the stock, right, and that's okay too, so we're going to go ahead and roll this remember you have those uh, transaction, fees.
And Boom out it goes. Um. The next one. Devin this goes along with the energies. Uh, we talked about. Energy breaking, above. The the. The, energy, sector. Itself, breaking above its 200-day, moving average or right at its 200-day, moving average devon, energy, above its 200-day, moving average last week, looking for it to pull back, uh and it did for like a day, we sold these for 44, cents. Testing, out our theory, basically, remember, we talked about that, we we think that perhaps. The the trend is changing, for energy, and perhaps is going to move higher, we can sit and wait, for, strong pullbacks. Or we can go ahead and get in by selling puts, and if it does pull back perhaps, perhaps get put the stock test our theory out, with a small risk. Meaning that well it shouldn't say small risk because it's cash secured puts, it could drop to zero and the risk isn't that small, but we can see it's had a nice run to the upside. Come back over to the monitor, tab here, 23, days left. Do we take profits. With 15, cents with 23, days left, if, if we say. No, because we still want to own the stock, we think it's that price has moved pretty far pretty fast. And looking at the relative, strength. It's pulling back in we expect it to pull back down, and we expect it to pull back down into this 20 period, uh, moving average, and then bounce and head higher, you would hang on, to devon, energy. Okay so that's what we're going to do we're going to leave that one alone. Intel. Is a, upside, call spread, long call spread. Uh that's uh got 16, days left. And uh is now just barely starting to work we. Bought this for 33, cents we. Bought the, sold the 50, call, and bought the 48, call so we sold the bought the one closer to where price was, sold the other one this was done on on. The conference, day jj, and i jj. Wanted to put this one on and there we go, it's working out, so, 16 days left, we'll let, that, continue, to, work now here's another one. This is one where. You need to make, really, there's a couple things to understand, about ingersoll, rand here, we're up quite a bit two thousand. Dollars, what we do what are we doing this when we bought three calls. Way out way back in time. On uh august 24. It's up. 330. Percent. The, the trade is. But why we bought a lot of time, and let's go back here out here and let's take a look, at eager sol. Rand. Let's zoom in on this. This is why we buy a lot of time if you have conviction, that things are changing. And in this case. This. We knew back then that this sector. Uh was changing, and things seemed to be getting bullish, so this is when we bought the call but it went nowhere, for a while. Now it's rallied really strong, now we're losing momentum. If we look at this momentum. Right. This momentum. Is, way has been way overbought, for a while we know that about trends. And when something goes overbought. On an uptrend it could stay overbought. Volume. As it's starting to move higher. Really. Wasn't really going anywhere, it's starting to, drift sideways. That's really not a bad sign. However. How much of this, 300, percent. Do you want to give up, to see if um. To see just how much you can get, and that's oftentimes. The uh. The failure number number one failure is people don't buy enough time. Right, and then it drifts sideways, and if we think about that, you know, in from a short term perspective. Yeah, we'll buy, we'll bind when it gets to resistance. On a short term trade we're going to sell. This was put on as a long term. Trend trade expecting. The trend to get rolling and it took a while, for it to get rolling so there were, a few, short-term, trades that would have worked out in here, finally the long-term, trade. Took out short-term, trades. Probably won't be 300, percenters. They're probably going to be somewhere. Between. You know 20 percent. Uh 100. 50, 30, some 100, losers, some 20, percent losers all different types of things, but with a longer term. We want to stick with those who are expecting, a bigger gain. And this allowed us to hang with that trade. But we're going to close that out, and take uh take those profits so we'll right click, close that out, nothing left to be done. Why did we do that we're seeing momentum, start to slow. After a long push now, that being said this is something to watch, because this was sitting sideways, for a long time, which often times mean the longer it drifts sideways.
The The longer the uptrend, can be, so now a decision needs to be made. Do we look for an opportunity. Uh for this to consolidate. And then buy another. Uh, option. Uh, a call option out there, in time. Um. Microsoft. This is one, that we did. This is a mistake. Should we have gotten out of this a long time ago this was another one we bought a long time ago. One call option. Uh. Two days after we bought the uh. Bought the ir. The the the the aerosol, rand, but we gave up most of those profits that we made on ingersoll, rand right here, right, so in reality. Um, we we, put this on to risk the whole. The whole trade the whole two thousand dollars. But in reality. With the longer term trade if it drops and it's down 50 percent, you should probably think about getting out right, now it's. We have, 487. Dollars, left. Now some people might say well there's still some time left 23, days. Maybe we'll see some kind of miracle. And price will. Break to the upside. And uh, we'll be able to have less of a loss. Right, the key is to not necessarily, worry about having less of a loss. Uh, or worrying about, regaining, your loss the key is to keep your loss small. Now from what we look what it looks like here, this could possibly, break to the upside. But if it doesn't then we're going to lose the rest of that. Well you know that 487. Dollars, probably should look to exit, out of this, look for. Further strength to come in which very well could be happening. Right now as we're seeing things really hold up, but. The danger, of time. Is that. We don't. Uh. We don't want to fall into the trap of saying we have a lot more time. Maybe. Hope, will uh will reign supreme, and it'll pop, and move to the upside so we're not going to take that risk, we're going to close this one out, and create. A. Buy, back or a cell excuse me of that call option. And. Lick our wounds, and then. Swear, we'll never make that mistake again, don't ever swear you're never going to make it write it down write down what happened, write down what you did that was correct, write down, before you make the trade what you think is going to happen. Write down, what happened, and you're gonna be a lot better off, over time. Did i look at the wrong chart for, devon. How could i look at the wrong chart for devon. Oh i did. How did that get in there. They got all mixed up. All right. Devin. My, my apologies. Uh. 15, cents left in this. Charts. Same, same type of chart these were all put on the same way, looking for this. Strength in this to pull back. So many of these look exactly, the same. I'm looking for this to pull back. It's overbought. We're looking to buy this on the pullback. Looking for this to move up you'll see if we go back to baker which i think is the one we were looking at. Looks very similar. Overbought.
Pushing To the upside. So the thesis, is on both of these, that it will continue to trend. Sorry, that i was looking at the long, wrong one they were supposed to be in order, and somehow. I didn't get him in order, uh. My apologies. But, with that. Manage those trades. Don't risk. Giving back. Too much of your of your gains get the risk off the table. Right, if it's a long-term, trade you're going to have to hang on with it but at some point that long-term, trade, is no longer valid, like on microsoft. Right now that long-term, trade on ingersoll, rand, is probably, run its course not a lot of time left, we're going to get into that time decay, area, on ingersoll, rand where time is going to start, decaying. A lot um, a lot quicker. Where the heck did i use all saw rango. Uh, decay is going to start happening a lot quicker, we're going to start seeing momentum, slow. That means we're going to lose intrinsic, value. And whatever, small amount of time value we might have left, so, exit out of those trades look for a re-entry, point. Uh if. Uh, you've got to remember that, typically. We would have. Ken rose coming up next but. We are off, uh, today. After this one you can see right here, due to the market holidays, live webcasts, after 5 p.m. Are gone short verticals, will not be on today. And we are going to be off on friday, as well. But if you did enjoy this please click the like. The thumbs up like button. If. You. Haven't. Subscribed. Please subscribe. And, if you think somebody can benefit from this, share it go back, and watch, and try to. Assimilate. Some of the ideas, about why we would put something on, why we would take something off why we wouldn't hold on to a trade, any further. Just for. Greed and remember there's greed and fear, there's hope there's attachment, all these things are not our friend. But they're going to creep in, so we want to be a bit careful of that, so. If there was a survey, as well i didn't see one but if there was a survey please, fill that out, we, we, use your, comments, to, try to. Make ourselves, better make the webcast better we really appreciate, that. So. Barb says short verticals, is running actually and so is callers and synthetics.
Well There you go. Even though it said, 5 pm eastern time. Well, there you go so they are coming, out. So stick around and join those, thanks barb, and, my fridays, 11. If you're new to options. Barb's, your person, barb is going to, get you started. Uh in a, in a in a very, well-defined. Manner. So, very understandable, so so please join her, and remember that everything we're doing here is for, educational, purposes, only. And not, for recommendations. Uh and you are responsible, as are we, for our own decisions that we make in our self-directed, accounts, thanks a lot everyone, have a great thanksgiving. And youtube barb, we'll talk to you. Soon.
2020-12-02 19:33
