Technically Speaking: Trading Stocks & Options | Connie Hill | 10-1-19
Good. Afternoon and welcome to technically, speaking trading. Stocks and options we've. Been focusing on intermediate, term trading I'm Connie Hill how, many of you feel like you still struggle, a little bit with, managing, trades especially, that when the trend changes, we're. Gonna focus on that today as well as position sizing, we haven't had as much time to focus on position sizing so, we're going to send some emphasis there, and that are spanned I should say, you. Can see up here my. Twitter. Handle. And you'll. Notice as coaches were tweeting, multiple, times during the day. You. Can also like, and subscribe, to our youtube channel here, many of you have already subscribed to it which is great if you, haven't, go ahead and do that and then you'll be able to see those those. Updates, as they come through but. Yeah. If you like what you see today and, you want to subscribe please, feel free to go ahead and do so. Options. Are not suitable I should say we're going to go through some quick disclaimers. Options. Are not suitable for all investors as, the special risks inherent to, options trading may, expose investors, to potentially, wrap it in substantial, losses. Actually. All. Right I have to get around the right. Screen, here, let, me just go back so it catches that. In. Order to demonstrate functionality. Of the platform we need to use actual symbols, however. TD Ameritrade does not make recommendations. Or determine, suitability of, any security or strategy, any, investment, decision you're making your self-directed account, is solely your responsibility. We. Will be talking a little bit about stops today a stop market, order will not guarantee an execution, at or near the activation, price once. Activated, they compete with other incoming, market orders, past. Performance, of any security or strategy, does not guarantee, future, results or. Success. All. Right we. Have some greetings, here, from john ricardo, sereth. Welcome. To class this afternoon I'm happy to see you here and, again. Focusing, on more, intermediate. Trades. And so today what we really want to focus on. You'll. See down here the. First three bullet. Points have kind of grayed out we're not going to focus there so much but we are going to really focus on trade management, techniques, how. To determine appropriate risk, and position, sizing, with. A new position and possibly. If we have time to, positions. Okay well, we put some emphasis there, and, then, of course we're going to be using paper money as, our. Platform. That we go in and. Excuse. I should say so let's go ahead pull up thinkorswim here. Off, the SPX, up here to, begin with. I want, to take us over here to our monitor, tab. And. Let's. Grab up our right portfolio. There we are the trading stocks and options. Section. We've got it all grouped together, some. Of these we were able to take a look at last week some. Of them we didn't have time to get through as far as the trade management, so I want to spend some time doing, that today all. Right first one we're gonna take a look at is. Micron. Now. Micron, we enter this trade. On. September. 17th. So, just a couple of weeks ago all, right looks. Like we're down 880, for net. Liquidations. 4,000, so we, had put on an initial, position there somewhere in the $5,000. Area. All. Right a little bit of that as today and of course as we go over here and take, a look at. The markets. Let. Me, let. Me zoom in here on, this, little section and, let's. Take a better. Look here at the chart, now. The day, that we entered into this trade is right, here. Where. That green oval is alright, that wasn't too long ago like. I said, September. 17th, just a couple of weeks ago we. Were getting in because we had a nice little, flag. Pole. There with, this nice little pullback. Here, and. It, looked like it was breaking out of that flag. Flag. Pattern. Now. Madam. Fell apart pretty quickly on us didn't it yeah is that ever happened to you you. Get in you feel like you followed your rules gonna set up you. Get to the trade starting, to go on and then it, does this kind. Of goes flat does. Not continue, to go up like you thought that it would goes, a little bit flat and then the last couple of days of course, from earnings. Huge. Drop down on micron, alright. Now, what, was one of the mistakes that we made here well one of the mistakes we made was. Not. Putting, on a stop loss alright. Who's in charge of, putting on the stop loss well. It would be the person with the mouse okay. At. That point in time we didn't determine a stop loss so the question, would be now. What. Are our choices, our. Choice. Could be put, on a pretty tight stop-loss. Or. Identify. Hey we would have already stopped ourselves out if we. Had for example, let's. Kind of look back here in time. Looks, like there's some decent support, through here let's go ahead and draw in.
Kind. Of from about here, over. Looks. Like. Well. Certainly after there it kind of tested, that but as the day we got into the trade you. Know our support, level could have been back down here about $44. That's. What it might have looked like is that was the previous low. So. We. Kind of come over here and say okay $44. Is kind of right smack in the middle of that red candle, the data that it dropped. Possibly. We would have been stopped out on that date so, the question is do we put on a tight stop loss or do we just exit, the trade if you, want to vote and tell me what you think is the best thing to do now. Sometimes. If you don't put protective, stops in place like. We didn't on this trade that can happen to you and it's a real. Choice. That. You have to determine what's the best thing to do. Looks like Rey is here and Remmy good. Afternoon to both of you as well and everyone else whether. You're watching and joining us live or whether you're watching this on the archive so. I'm gonna give you just a moment to chat in here, all. Right how do we really put, on a stop, loss. At. The day that we got into the trade, this. Could have been the previous, low point again. That's the midpoint of this this giant. Red candle, when they dropped on earnings. All. Right. What. Do you think I. Might. Just have to make the decision usually I let whoever votes. A, particular. Way, will. Be the one who who, we are going to follow we're, gonna play follow-the-leader. Ray, excellent. Ray appreciate, that they, says exit. Do. Not go down with, the ship. Right. I kind. Of zoom out a little bit you get a little bit better idea, of what's going on here. Lynn, says clothes, sereth. Says clothes. All. Right let's, get out of this trade if things change around if, it starts to uptrend, right now we, certainly don't have an uptrend do we then. We can always re-enter, the trade all. Right if micron. Kind of gets back on track. So. Let's go find micron, that we did 100 shares and. We. Hate to take that big of a loss but, again, since we didn't set up a stop loss those. Are the risks, those are real risks that you take in the market. All. Right so 41, 95, is, the, bid price right here we're just going to confirm, and send that off make, sure to look at it notice. The Commission's looks, like we just got filled here's, the message in the upper left-hand corner okay. Let's go to our next one oh, I. See. Tom and Patrick. As well. We're saying too close and it sounds like that was the unanimous. Choice doesn't, it all, right next one we're. Going to take a look at Visa we're looking a problem children today by the way. Our. Visa, trade, here, is. We were trend, trading B so we did it with the stock I believe, as well as a long. Call option out, in December, we. Enter this trade. Back. July. 23rd. Now. When you buy something out that far you don't necessarily intend. To be in the trade all that long, right. But. When we got into the trade the, price of this option but was 1245. If. We go and look at the chart here on visa, you're. Gonna see if we got in in July let's. Back this up a little bit. You. Can see this nice, steady. Uptrend. I'm. Just gonna go to about, there. Kind. Of take a look zoom, in here, so. Here's. Our date of entry our. Nice green, oval I like to do that keep track of things the. Time it had a nice little uptrend. It had earnings coming, on earnings. Popped it up a little bit, wasn't huge but good. Enough to have a close above the high of the low day or, at least a move above the close of the, high. Of the low day. And. Then we have a little bit of pointed back action but what did it do it started forming higher highs, higher. Lows in. Fact it got up here all the way to 187. Now. If we had been tracking, out that, long call dated, out in December and this, was about September.
Because. It was still making a higher highs and higher lows you, might not have, thought about getting. Out of the trade right, because right it's, doing what we want it to do so. What's our first sign, that, things. Are going awry, okay. First sign could, be. This. Actually. This very first candle the day that, it. Made. That higher high of 187. Well. What's the problem the problem is, that, it's a giant, bearish. Engulfing candle. Right. That. Tells us it's like, to reverse. Maybe. Not a big deal if, you're if, you're trading things in turn with. The intermediate rent if. You're doing a short-term trend now, and that's a big signal that says hey you might want to consider getting out right, but. With it intermedia, the peaks and the pullbacks well. Notice. Here it got down the, second day to be about that low. Right. There on our screen, so. Did, it form a lower low. Well. Technically. This was the previous low right, here so. If formed, a lower low so. That's our first clue that maybe. It's not gonna pan out the way we want it to, all. Right then it gets stuck in this consolidation pattern. Nothing. Happening, nothing, happening. Still. Kind of stuck in this rectangle. Alright, we're down on the position, though I, do. Want to point out the, implied. Volatility. Here that's what I have on my lowest. Graph, it. Is tracking, what's been going on with, the price action now the implied, volatility, today's. Pulling. Back a little bit so. It's not quite as volatile, as it was initially. For. Example, right. There like. Yesterday. Was the highest day it had in terms of volatility, for a long long time now. I'm going to ask you guys to do the same thing, in. Terms of would. You stay. In the trade we've got cleared of December today's only October first, or. Would. We want to exit, it ok. That's. Your choice I'll go ahead and vote. There. We go. Hello. Diane and, Joe appreciate. You joining us here in class today okay. So the question is should. We get out of the theme or, not let. Me give you a couple things to think about let's go price, out or, see what the price is when, we entered, into this trade. So. We had. Let's. See here, price. Of the option cost. 1245. Some. People when, they are trading. A long option, that's dated, out in the, in. The future quite a ways. They. May say well if it gets down to 50 percent of what I paid for it that mean might be a time that they decide to get out so, that would be in the neighborhood of what, 625.
If The, price of the option got, that low now currently, it's not quite that low. What. Else could we do could we sell a call, against. This long long. Dated long, options. Could. We do that yeah that's called a diagonal. And we, could do that it's, kind of like it covered a call but, instead of owning the stock we, own the. Long, option. And you have to have trading, privileges to, trade this. Particular type. Of strategy, but let's see what you guys are seen. Let's. Okay. So we have some chat going on. John. Had to log out log back on George. Texas. Says out. Get. Out of there. See. With it there's any others that say. What. You think we ought to do here with old visa. Alright. Stuck in this sideways pattern after the big drop. One. Thing we might note. Is. I pointed out let's. Let's. Zoom in first. We. Have. The. Lower low that was the initial lower low here on this second red candle, day, see. If I can get it to dry in my. Dry, has not been working so effectively, lately. Using. My tools. On the thinkorswim charts. So. George said to get out ray says by the call. Now. Ray I'm gonna ask for some clarification by. The call back to, close the trade or are. You saying sell, a call if we, sold a call. Let's. Go. We're. Let's, go to our short time frame. We. Could sell, something that's a weekly that's not very far out but that sometimes we don't get a lot of premium for that visa. Is a pretty, liquid. Stock. We. Have another trade going on with it on the put side so ignore that but we could come down here to the call side, we. Could look at the Delta column, that's right here and we, could determine is there a strike price that we might feel comfortable, bringing. In some premium, to have to, help help, offset, the, loss that we're experiencing. On that long. Long. Dated, December, option. Okay. We could do that we. Could maybe sell the 180, would, bring us in a buck. It. Has a 24 Delta so pretty, high probability, it could expire, out of the, money. And and we, could possibly be able to keep all that premium, we. Could do the 36, which is a little bit more aggressive but certainly not out of the picture that strike, price is 177. 50 currently. The price of the stocks at 174. Ok, so this, definitely, is closer, but, 170 750, closer. Here than the 180 so that's why we're saying it's a little bit more aggressive. Alright. Looking. For some clarification there. If we needed it but, Ray had said by just by the call. Let's do this we're, gonna see if we can't extend, this. Today's. A down day in the market so, and, this stock is actually up a little bit in, a day when the the, markets are down a little bit so we're gonna in.
Terms, Of managing, this trade we, are going to sell this October, option, let's. Go out here let's, choose, the. Let's. Just look at the chart real, quick 177. Or 180. 177. Is, about. Here. We'd. Want the price of the option to stay below there to get all the premium or if, it just continues, to go sideways then, we'll start to see that positive theta working. In our favor. Ultimately. We still don't want that, a huge, that want there to be a huge drop, and, so this is just I'm going to call it kind of a band-aid, to help bring in some premium, because, ultimately, for that long. December call option the price of the stock needs to go up, okay. Versus, stay. In sideways we don't want it to stay sideways. Alright, ray says okay do that the one with the 24, Delta since ray is the only one contributing. Here, I'm gonna go with Ray's idea, although. I kind of pushed it that way ray thank you alright, let's go ahead we're just gonna sell, for. $100, and three dollars essentially. We. Just have one. Strike. Price, let. Me review how many, we. Have here okay we just have one contract, here so, typically. People might want to, equally. Wait that. So. We have just the one contract, and. Let's. See, let's. Go ahead and hit if. You, want to do a little bit better you could try for the midpoint price, it's not guaranteed that you'll get Phil there but. If the price of the stocks fluctuating, around you might get filled there we'll just go with the natural price which is what is being asked, 103. We're going to hit confirm and send just. Make sure it, represents. What you wanted you really want it to sell that option as opposed to buy it what, the premium is notice. Transaction. Fees on it and then, we're going to go ahead and hit send. All. Right. Let's. See what else we have on our docket that maybe is not working out so well. Let's. Take a look at Facebook chart, here first. Facebook. We, looked at it a little bit last week I believe. And. Earlier. Today. And. I'm pretty sure it was in this account our, paper account, here. That. I, moved. Our stop-loss, up on Facebook. All. Right so I closed, out, where. The current stop order, was and. It. Should be in the working orders today. For. Facebook, that I am not seeing it. It. Looks like it did execute. Wonder. If it came down do you know what it looks. Like it came down and hit my stop that I adjusted. At. 11:58. Which was about two, minutes, before our class started, so that's what happened, on it okay. So, we did adjust, the stop-loss, recognizing. The. Weakness, that was in here and this. One, the. Same type of thing when, you're trading inter mediate, trends, as soon, as it forms a new support, level you, want to move that stop off if. We look, at. Say. Just this area here where it came up had. A higher peak, you, know come down here and look has it created, a new support, level and if so adjust, the stop-loss to it now. Because we weren't carefully. Managing, this trade. The. Stock probably, pulled back down on us a lot more then. It would have how, do we set okay 197. 39, let's. Go 2, or 3% below, that 3%. Is going to be in the neighborhood, of. What. Let's, see. Eight. Maybe. Six bucks or, so and so. It probably would have stopped us out here, how do we been paying attention to, it all. Right and putting, in and adjusting, our stop loss today. It's breaking, down even, more and so it's, probably a good thing that we our stop list was down here quite a ways it's probably, a good thing we adjusted, it and moved it up before a class to. Protect, ourselves from any further loss. All. Right. Let's, see John has a question here could you get exercised, on that. Without, a cover. Okay so John's asking, about our 24, call, that. If, we do get, called. Out on that John we, will have to use because, we don't own the stock we'll, have to use our option to buy the price. Of the stock at whatever the strike price is if. The price if the strike prices is, lower than, the current price of the stock that's a good thing more, likely than that when it would get called out is is the, price of the stock has dipped below the strike price would. Still X we could still exercise, it if we wanted to, to. Come up with that. Shares. That are all that we're obligated. Again. You have to have trading. Rights to do that because, there's more that's required, more. Potential, obligation, than if you sell a cover to call because then a cover to call you've got the stock it. Can be called away, from. You at any time. So. Good question there John I appreciate, that. Let's, look at one other one real, quick this is McDonald's then. I want to get into our new setups in our position sizing. Oops. Got to give it all its letters.
McDonald's. Mickey D's. Go. To about. There. All. Right. So. McDonald's. We entered into that trade, right, there about, mid-june is when we got into the trade and it, did what we thought it might do right it had an upward trend it, continued. To trend upward, hit, a new high here, of 221, 93. Alright. And look. Where our stop loss is right, now we adjusted this last week wanting. To bring it up a little bit last, week it was already, in this sideways, trading. Pattern, and it stayed there during this, week as well, so. The, question might be do we want to leave our stop-loss, right, word is it's. Gonna put us a little, bit below breaking, even because, I think it's we're down on the position just a little bit, beyond, those shares. And. Right. Down here is our stop. Right, here, looks. Like the bottom range, or. The bottom end of that trading, range that, the stock is going through. Alright. So. Again, I'm. Gonna say what, do you think go ahead and vote. Should. We get out of it so we leave the stop alone those are two, essential choices. Here stay. In. It. Goes down that far, then. Our stop loss our take it out we, could leave, it here we can choose to move it up a little bit too we could say okay, we. Could look at this 207. Maybe go 1%, below it since. We're already seeing a little bit of weakness on the chart. Let's. Just go over to our calculator, and see what that value, would be. And. Let's. Swap. Out our scratch pad. Actually. Let's do this one, let's. Watch switch, the gadget, we're gonna go for the calculator, here and. We're, gonna put in, 207. Point one four times I'm, going to do x point 99 that's. Gonna put us just 1%, below giving. It just a little bit of leeway it looks like the value that comes up here is 200 500 6. Okay. Where's 205 Oh 6 just whoo. Look at out right there, so, we're moving this stop-loss, up a little bit we're gonna give it just 1% leeway, if it's. Crashes. Down hits her stop we. Say I don't want to be in there anymore so. Let's put our stop there what do you guys think. All. Right looking, for, you. To let me know what your thoughts are there. McDonald's. Let's see they don't have burnings coming up for a while their last earnings was here, July, 26. Looked. Like the market responded, favorably. Initially, right a big gap up and then it kind of faded through the day and. Then. We have kind, of the biggest pullback here was on September. 10th, when. A really, I would, say broke. Through, this. Area of support have we then being. More careful and watchful, and, keeping. Better track of, the trade here more. Likely than not we, would have had a support, or a stop loss in place whatever. Percent, 1 2 or 3 percent 5% whatever, you want below, to 15. More. Likely than not it, would have Exodus. Taking. Us out of the trade on this, big red candle, day day, which was the 10th. Let's. See ok Diane, says 2:30, in value. In. Theory. I. Want. To hold, depending, upon the success, I. Think. You might be talking about something, else there Diane so I'll skip over that John. Said this is not an option but a stock trade yes John I think it's 100 shares even you. Have 100, shares even that's. Where we are on it hmm. And we. Are currently up on it a little bit, 513. Dollars although it. Was more than twice that before, today's move right. Because, we're down 546. On the day so. First. Thing this morning man, that stock was trading, with.
Greater Than a. $1000. Ish profit. All, right now. If you guys don't vote. I'm. Gonna have to take matters into my own hands and I'll walk you through it. Okay. We. Are getting going, to adjust the stop all. Right. It's. One of those things when you say gee. I didn't, manage it I didn't put a stop loss on it. Then. You have, to make some choices maybe I'll do the best with the lemons that I have try to make some lemonade. One. Thing that's interesting to me is that the, 207. Is acting as fairly decent support if, it does break through this support level it's. Quite likely to go a little bit longer in fact. Let. Me just see. Using. A Fibonacci, retracement. Let's go to our lowest candle, there let's. Go to a high, of that high day when it was a fire or 221. That's. Pretty close just. Looking, to see where the candle, was today, about the seventy eight point six area as far as not, a full retracement. But in that range, the, 78 has been up and down at all day Oh. Diane. Thank, you for the clarification I, am sad. Analyst. Today valued McDonald's, at 2:30 so their price target, for McDonald's, is basically, getting. Back to 221, and higher, up to 230. PLT. Is, the plant lettuce, and tomato, being launched, in Canada. And. You're. Interested, in moving up the stop-loss, Paul. Says I want to take the profits. Alright, so, those are the two of you that voted one is get out the, other one is moved to stop-loss. Let's. Do. This let's move our stop loss up to. 200 506. We're only going to give it a 1%. Leeway from. That Fibonacci, and that low point kind, of its retracement, point, let's. Go ahead and just move that out of the way make it cleaner so, we're going to move this up to 200. 5:06. Okay, oh seven is gonna have to be close enough so. 205 oh seven. Kind. Of tells you in. English, sort. Of in English what you could determine. There and. We. See our transaction fees, let's go ahead and hit Send. Okay. Counsel of our old stop-loss. Move this one up if this one really does start to crater then. The opinion is going to be we don't want to do be in the trade any longer it's not doing us any favors. Something. Else I wanted to mention here is maybe. It's. It's, got some good support here maybe. It's trying to form a double bottom where, the first bottom is here it to a 714. Ish and maybe. You know even if it pulls back a little bit further today or. Tomorrow, hits that support, very. Likely that it could go up it's not guaranteed to right, but that's what support it, does. All. Right let's. Talk about the next part of. Focusing. On, trade. Management, and risk management. When. We initially get into trades sometimes, in this class have, been a little bit lazy about saying Ah let's fix. Every, little detail on this trade, today. We are going to look at every little detail on the street and determine, position, sizing we're. Going to take a look at this dog XL, and, X.
And. We've. Got kind of a six-month chart here you can see its. High point was at 140, 160 right. Down it's it's, down to 92, some. Change, so. What's been happening let's come in from here over. Options. Or earnings, is looks. Like it's gonna be the 23rd of October we're gonna start getting into earnings again right. So you want to be aware of when those are, this. Particular trade. It. Looks, like we're getting lower highs and lower lows and look what happened, today on this. Stock let's, kind of zoom in can, you see how support, short-term, support was here about 95, for a few, days on end until today, and, then today it, cops down. We're. Not seeing the volume on this but it does gap down maybe we should take a look at the volume and. Let's. Do, I. Don't. Really want Ellen balance volume we, just want volume. Volume. Average that's the one I'm looking for. All. Right let's play that and we. Can see oh yeah it's trading, off in, above-average volume, today what's. That a sign up well it's a sign that definitely. There's weakness and. If. There's weakness. Like. That it's not likely to, go. Barging, right, through, what now is resistance. Right, old support, becomes. New resistance. Many. Times new resistance becomes the old resistance, becomes the new support so. It's not down at it at its, absolute low, in fact it has a little bit of a hammer. Candle. Pattern here although the day is not closed okay, but. If we were sitting at the close when we could have a chance to just sit down and chat. Then. We might. Give. A better idea about this candle, and get, a feel for is it going to reverse on us maybe or not but. As of right now is broken through support which can be an entry point into, a new trade right so. Oh hey. Christopher, I have to welcome, you to our class I just so you know that says hi. All first live event here whoo-hoo. Glad. You're here it's. A great place to be all. Right now. You, look at this and say implied. Volatility. Is going up. Should. We look for maybe if we're going to kind of lean the options way a little bit here covered, a lot of stock trades we're going to go options, implied. Volatility. Is going up here does. That mean maybe, this is better suited for a selling. Strategy, or from, a buying strategy. Part. Of it depends, on it what you think it's likely to do if you think it's likely to continue to go up if. The price of the stock continues, to drop or if. It's gonna drop and play volatility, because it stabilizes, and then therefore, starts, to maybe go up so. It's very dependent on your forecast for the stock. All. Right let's zoom back in here, looks, like the high points, on the implied volatility, or about 45. That. Day about 40. July. 18th, right, now it's a 0.45. Okay. So it's getting near those higher points, but it doesn't mean it couldn't go higher, all. Right, let's. Look at trade, potentials, and the one that I want to focus on here. Yes. Let's. See let me just get rid of all that because I want to write a couple of things out here I want, to focus on a long put. Vertical. A, long. Put vertical is something. I think it's a strategy maybe a little bit underutilized. All. Right and, so we're going to look at the possibilities. Here, 17. Days out is not a lot of time. But. We could, possibly use. That. Time frame so you, other, considerations. Might be going out to the monthly the November monthlies if we, look at the these timeframes here, the weeklies, that are in November you'll, notice there's very little open, interest, okay. Open interest means it's. Going to be hard for you to get in and out so you might not be so interested, in it let's.
Look At October, twenty fives, we're. Gonna do a long put vertical this, one actually does have quite a bit more open, interest which is more favorable for us. Spreads. About fifteen, cents this is twenty, cents on the strike prices so, they're. Somewhat. Narrow but maybe not as a look what are some other things we're. Gonna come up and we are gonna use the October, 18s, even though there are seventeen, days until. This. Particular. Set. Of strike. Prices expire. And. I'm gonna line up two. Different. Spreads for you that we can choose from alright, and. Then I'm gonna have your vote alright, here's the first one price. Of the stocks at ninety two fifty, five so. Which one of these strike prices, is technically. At the money, is. It the ninety strike price or is it the 9350. Many times when people are setting up a sort. Or at long vertical they. Want to start with the at the money strike price so technically. The 9350. Is only a dollar away so. It's gonna be our closest, one, so. I'm going to start, with the, leg that I want to be my long leg which. Is going to be the 9350. And. I'm, just gonna do a right, mouse-click anywhere. On the line then. I'm going to say bye and. Vertical. Remember. Vertical, is where you have two strikes, in the same expiration. Period alright, and, when. We go ahead and say hey we want to. Do. A vertical here by. Default it'll. Automatically. Go and grab the next strike price in sequence which is the ninety. If. You want to change it you can change it but you don't have to change it. Alright. To make our math easy I'm going to lock that in a 150. It was at 151. A 148, bouncing, around so we're, gonna lock it in at 150, now. On this particular trade. What's, our max, potential, loss that we could have options. Expiration, date. Keeping. This, spread. Together our max loss is actually going to be them, the, net debit, all. Right if, everything. In the world goes wrong with this trade and those options become worthless then. That's. What we're out. Okay. Our max. Gain on the trade is. Going to be the difference in the strike prices this, is kind of a little bit of an odd number here it's, going to be 93 50, so if we have 93 50, -. A buck 50 that. Is gonna give us two dollars right. I. Mislabeled. That we already had the max gain there okay, should. Be 350, minus 150, should be -. All. Right so we would be risking. A buck 50, to make $2. All. Right now. For position, sizing purposes. That's the part I want to focus on in this trade if it's, possible that we're gonna lose 150. And we're, willing to risk, $10,000. In any given trade how, many contracts, can we do do, you want to do this math is it 1.5, John. 9350. So. We've got 350, here. -. 150, I. Think. That really should be -. Will. Use the handy dandy calculator just, to make sure 350. -, 150. Yeah. That's just 2 bucks all. Right so. If. Our, net debit our max potential loss is 150. Going, back to the calculator here let's, suppose your. Threshold, is by, 500. You could you're willing to risk or maybe it's a thousand, you're willing to risk that'll, help you back in - how many contracts, you need so.
Let's Suppose today. You're. Willing to. Lose. 800, dollars. All. Right we'll, take $800. Which is the most you're willing to risk and. We're gonna divide that by 150. Because that's the max potential, loss. Let's. See if this did that oh it, didn't let me try this again let me get my mouse in there let it stay there. So. We're gonna say max loss. That. We're willing to take on our portfolio. Risk. Divided. By. 150. There, we go we. Could do five contracts. Ignore. The point 333 cuz you never do partial contracts, right but, that would be the max that. You would be willing to risk and so let me just write this out here especially for those of you that are a little bit newer to this. Portfolio. Risk. Was. $800. The. Position, whether it's a stock whether it's an option and you're. Determining, hey what you. Know in this case what's, my max out-of-pocket, that it could be, it. Could be max, loss or. Instead. Of portfolio, risk let's call it trade risk. We'll. Give it its proper name is 150. And just, doing that math tells us we could do five contracts. Now. Is there anybody has any questions, about that okay Christopher, was. On the, ball here, doing five contracts, for us I upped, it to 800, just so we could see the decimals, there but. Yeah we would certainly come down here change. That to the five contracts. All. Right you could also put in orders to buy it back you could put in stop losses as well the. Key here is just you. Know to figuring. Out what your potential, mass max, risk is now it's not guaranteed. Absolutely. Positively. That. It couldn't be more, than that but that's what the max loss is at options, expiration, day all. Right sometimes. Things will happen in the market that, might. Increase. Implied, volatility. And make the spread a little bit wider than that and so. In that kind of a scenario you might say I'm just gonna hold on because it can't, get worse than 150, for, a contract, or in, this case 750, for the total loss, on the trade. Just. Checking my notes here. Or. My chats you're making sure I didn't neglect, anyone. All. Right we're, gonna go ahead we're gonna hit confirm. I'm. Gonna put this into our. Trading. Stocks and options. Portfolio. Notice, the Commission's on this, one we're gonna have a few more contracts, there it looks like it went ahead and filled. Us on that. Now. Where can you learn more about these kind of strategies, all, right we, have several classes now one specifically. About verticals, that you might be interested in is Wednesdays, at 3:00 Eastern it's, just called trading verticals. John. McNichol teaches that class so. That would be tomorrow. Today. A little. Bit later this evening at 6:00 Eastern Time, there, will be value investing, investing, in, value, stocks with Mike Fairborn that, has a tendency to be a little bit longer time frame and then. We have. Thursdays. At 4:00 Eastern Time. Value. And growth strategies, that's with James Boyd and he'll kind of mix it up its are the different types of trades that he likes to do in there. All. Right well, tell you what looks. Like we've answered your questions, which makes, me happy let's. Come back to our slides here. All. Right so today. Let. Me just go back a slight the, things that we talked about the things that you learned were. Trade, management techniques, decisions. You can make, and. Now just recently we, focused on risk. And position. Sizing to help, manage. Your risk and of course we use the thinkorswim platform, now. In order to demonstrate functionality. Of the platform, I'm gonna go back to this last slide, we, need to use actual ticker symbols, but, keep in mind TD Ameritrade doesn't give recommendations, or, determine, suitability of, any security or strategy, so, any investment, decision you make in your self-directed account, is solely your responsibility, appreciate. You being here next, up is going to be Cameron's. Question, and answer session, for. Trader talks if you have questions, great place to go to. Be able to ask. Them ok so that will start at the top of the hour. John. Says in a journal would that be a bear put trade it. Would be, or. You could use the term long put vertical either, one of swine alright. Hey thanks everyone have, a great afternoon. Next, week we're going to start and go into, longer. Term trading all right thanks everyone buh bye. You.
2019-10-06 03:55
