Technically Speaking: Trading the Trend | James Boyd | 10-3-19
Hello. And welcome to technically, speaking trading, the trend weeks to months mining, machines Boyd we welcome you here on the class of relative strength I think this topic of talking, about trend very important here today I'm gonna talk about the long-term trend shorter term trend and also, today as we talk about relative strength we're really gonna be hammering down on strategy. Selection. With. That set if you're just. Tuning in you, can also follow me on twitter my handle is Jay Boyd underscore. TBA and we. Welcome you here today let's go ahead and kick it off, just, real quick remember the options as we talk about options, here today, are. Not suitable for all investors special. Risk and Heretic trading options please make sure you're aware of that please, make sure you've read the previously, provided copy of the characteristics, and risk of standardized, options and also, understand in order to demonstrate the functionality of the platform, we will use actual symbols you're going to see past examples we're going to get current examples, but, remember though that TD Ameritrade, the, broker does, not make any recommendations, in terms of the security, or strategy that, is up to the individual, to pick what. They want to trade and, what type of strategy, I also, want to give you a quick reminder when we talk about the option, Greeks we talked about these on on, Monday evening, Delta. Gamma theta Vega know, how they apply in general. The terminology, but also to the strategy, now, let's go ahead and actually kick it off let's, bring up what we're gonna address. Here today first, off let's take a quick read on the markets, a, couple. Days ago I think it was last Monday we did a class on talking about protection, I don't. Know maybe what other instructors, teach on a daily basis, but I think, you probably get a little healthy, dose of that, from me I always. Do that because I think it actually is pertinent because. Trends, aren't always up but. We're gonna take a look at the SPX, the NDX SPX. And the dgx very similar so we don't need to look at those but, I do want to bring up the VIX we, talked about that on Monday night we talked about what that means and so we, will take a look at the VIX as well we're look at the relative strength of the Dow and the SP and also. Maybe also looking at relative weakness, are there any stocks, that. Really have a bearish trade where we can trend. We, can practice doing bear, traits and maybe what are some of the things we want to know from that the. Learning objective, is, identifying. The trend especially longer-term, but. Picking a strategy. The reason why I say that is I, think sometimes investors. They just do stocks stocks. Stocks. Stocks. Stocks. All the newest stocks but. Stocks you need to realize that are very capital intensive okay. You, could actually you directionally. Have the most directional. Exposure of any, strategy. Outside. Along synthetic, and so, buying, stocks, all the time in that's the only strategy can. Be a risky, strategy especially. If you have a more volatile, market, with that said let's go ahead and kick it off shall, we so. First off when. We actually look at the SPX you're, gonna see that we've kind of had this up and, down up and down it's been a wave and this is not surprising you're. Gonna kind of see that it's done this before goes up pulls back goes up pulls back and then, when, you look over here to the right the, idea was is that, as we come up to this resistance, area we might pull, back, hence. Why we talked about protection. Cover calls protective puts collars and the idea was maybe somewhere, right around and maybe about right here. Week, actually could get a potential. Bounce off that, support, area or maybe the moving average and, what you'll notice is the longer, that we actually kind of fell down fell down fell down the. Price, action okay, really. Just kind of never really bounced it just kind of kept, falling. Back down and, what you're going to notice is we, saw a large bearish, engulfing candle. Okay, and I'm going to point to that in about three days ago I'll, kind of put, that right there and what, you're going to notice is it closed down below, the ten and a, closed down below the 30 now again also want to give a quick reminder, whenever.
That Price is below the ten day moving average. Sellers. Are, in. Control, at that, moment in time when. That price gets below the ten and the thirty who's, in control. Sellers. Are in control you. Should not be surprised, about that if that price gets below the 10 to the 30 it could. Get bloody, okay. Sellers. Are using, stocks as a, way. To raise. Liquidity. Or cash. Okay. We, saw that with that when the index. Broke. This old resistance, and let's say that level, was about twenty nine thirty five it can, swiftly. And, quickly. Drop. Down. To the next level support now what you'll notice is that, level of support is really probably, about twenty, eight thirty, or so and what, you're going to notice is how long did it take to go from old. Resistance. New potential, support here. At the twenty nine thirty five how, long did it take to. Go down to that previous. Level support, mmm. Less than 24 hours so. What you're going to notice is when those support levels break there is a clearing. If you want to call it just, an a fire. Sale, if you want to call it of selling. Stocks because, they're saying hey if it breaks support, the, price actually could drop down to the support very, quickly and investors. Are trying to sell as soon as they can, to get the best possible. Prices. Now, what. You're going to see actually here today is as we come down to that second support level some investors, are using that shorter term volatility, as an opportunity, maybe to, buy some select, maybe, an index or maybe. A sector, or a stock, we're gonna come to that and that's a pretty long tail here today but, when you look at the posture, what you're gonna notice is kind. Of still more looks like sideways, shorter. Term down okay, bouncing. Off longer-term, support, now if, we, see that the the, SP is like that okay this. Really means that when we look at the volatility. We made a comment on Friday Monday, we. Said you know one thing that's different about the current, market, relative. To what we've seen before is when, the market would actually rally, the VIX would go down to about twelve and you're, gonna see that right there I'm not making this up you're gonna see that when, when the market went up the, VIX went down to, twelve. Okay, right around those support areas but. Lately we didn't see the VIX drop down as low, I mean what's that saying greater. Forecasts, of expected. Movement, if, ball Attila T is actually building, like it what actually, has been it's not just in the last two three days what, you're gonna notice in the last couple of days we've been seeing, that the volatility, has. Been increasing. And you're, gonna see that it really was increasing. Right, about, okay. On that. Date on that. Date these are all boys engulfing so when I put a little strike, mark through each candle, all, three, of those are bullish, and golfing examples, and that's, really saying hey you know what there's some wind coming, okay if like. Weather if wind. Comes, the. Storm, might, not be too far behind now. Does that mean, everything. Gets sold off down, the river. Everything. Will actually get sold off and a, different, proportion based. On what the betas are etc or, who, in how much they're selling, some, stocks they'll get hit harder than others now when we kind of come down to the brass tacks what, you're going to notice is the, VIX is actually high again here's, the VIX high again and then, here's the VIX high again so when the VIX is high, stocks. Could be near some support levels when. The VIX is high prices. Below both moving averages. Above. Or below the, answers below, both, moving averages, and if those stocks are below both moving averages, and near, horizontal.
Support Levels that, might lead us into what. Type of strategies, we might consider because. If we look at selling options now there. Are a lot better priced, than, where they were just a couple of days ago in terms of premium. Percentage, okay, now. Are. There any comments. Okay, let's, just kind of make sure we good on that are there any comments, with what I just said want, to make sure so. Right now if the VIX is high that means price action price, is below both moving averages we're, gonna be looking for some stocks near some horizontal support levels but. When we talk about strategy. We. Might not be talking about maybe buying as much stocks, because, the trend. Might, not be there okay, now, let's kind of bring this up just real quick, if. We go back hello, Jeff Jim and the active Ricardo, Heather. What, I'm gonna do and many others I'm gonna bring up let's say let's kind of go, down to bullet point number two okay. On a daily. Basis, when you think about your, routine. Okay. I want to kind of imagine that I'm just gonna hear by myself, okay and I'm not talking, to any it's no class I'll just take you look this, might be a routine that investor, might actually do so. When we're taking a look at the market watch tab we're. Looking at the quotes okay, and the list I'm looking at is the Dow Jones what. We're really doing is we're really scanning. Okay, first. Off the. First thing you might take a look at is all, our. Stocks, above. The 10 and the 30 day moving average now again this is where we get some overlap this is not new I said. You before the VIX is high that. Means a lot of stocks are probably below their tens in the 38 moving averages, remember. Than 0, in, red, right, here is saying. James were not, above. The 10 period moving average. The. One, in green. Ok. Put. It little arrow to it is saying. James it, does meet the criteria the, price is, above. That, 10 day moving average or the 30 period moving average you. Should be able to immediately look at this list and say wow out, of, 30 stocks, there's, two, one two we're. Gonna have to count further than that one, two actually, three now, that. Are actually above the 10 and the 30 that's it so 10% of, the stocks are above. The 10 and the 30 period moving efforts what does that tell you about posture, or sentiment. Negative. Right we're, still kind of seeing that the trends, haven't bounced back up as much to. Get the prices back above the 10 period moving average now when we pull up the S&P, 100. What. You're gonna notice now is we say okay hundred, stocks here how, many of them are above that ten and thirty peer moving average where, there is a trend. Okay. The, 30 period moving average and also, mo men price, above the ten period moving average I won't, count but it looks like there's about ten so, out of let's say a hundred stocks, ten. Of them are above. Both moving averages so, again that tells you immediately our posture, sellers. Predominantly, still in control need. To be careful that also tells us something about strategy, selection when. We take a look at individual stocks they're, gonna be down near some support, levels to, we're probably gonna be looking for bullish MACD divergence as, three, we're gonna be looking for let's say diagonal. Resistance. Breakout setups, but we're probably going to be considering, maybe more, selling. Type strategies, or buy. Stop, conditions, because. We're looking to see can those stocks break up through resistance, now other, thing I want to bring up here when, we actually bring up let's say the Dow 30 let's kind of talk about the relative strength very, simple, where we can see where that relative strength has been we. Might look and see if there's a little continuation. Of this shall we so, when we actually look at the Dow list we're kind of asking yourself well what stocks, have. Really had some of the strongest relative. Strength well we, actually take a look at that column right there the, stocks and I'll just kind of label them Nike, Procter, & Gamble Walmart.
And I'll, just kind of label these I'm gonna go down to about right there. These. Stocks. Okay. Those, are the ones that have had a history. Of actually. Some strong trends, now, you're gonna see that those are the ones that are in that green, color or deeper. Ndrine the. Deeper, the shade of green the stronger. The relative. Strength, does, that make sense now. When we actually come back to a couple of these stocks I mean quickly, fast fire through a couple of them when, I look at this stock and here's. Where I want, to kind of see your comment, did, this, stock. Break. Support. I, mean. If the old resistance. Was. 8208. E-excuse, me 18 I know too the, stock, went to a high went. To a brand new high did. It break. Okay. Did. It break support, I mean it, it changed. The trend longer-term. We know it's an upward trend but it did it change, the trend. Get. It I don't. Think it did now. We actually might look at this how do we find their stock we're just use the market watch tab pull down upon the, relative strength okay. Then we would take a look at the stock let's. Kind of go back to what we're saying in terms of strategy. Selection now, sometimes, when the VIX has, been, low what. You'll notice is selling. Strategies, might not be that interesting, well, again when the volatility, goes high like the VIX of 20 that, actually, means, individual. Stocks implied, volatility, might be a little bit inflated, compared. To where they typically. Are now. I'm going to look at this and what you're going to notice is this. Does not have a really, high. Current. IV, percentage, it's still, at the, 21st. Percentile. And when, we go look at the options, maybe thought, of no 40, or so days to expiration what. You're going to notice is it has an implied volatility. Remember that's the annualized number has, an implied volatility, 24, now. Let's talk about strategy, selection, when. The volatility. Goes up sometimes investors. Can become, gun-shy. To. Trade because. Their stocks just went down okay, and sort, of thinking well geez I don't want to get in because I just, endured like three or four days of the market going down even though we talked about opt trend sideways trans down trends I didn't, know that really markets, could go down I thought it was just a PowerPoint example. No. That's, not true so, the biggest actually thing is an example. That we could look at is if you find a stock that has an upward trend where, that implied volatility, is lower and an, investor, wants to maybe take a directional. Type strategy, well. And the, implied volatility is lower we might say you know what James I'm going to come in and actually I'm going to buy the stock left.
Click Right on the ass price nothing unusual there, now. If. I actually take a look at this option. Number one is setting. A stop now I hope, you saw over the last I don't know three four days, when. You set a stop, and the. VIX, go, so let's say twenty. Where, we have been in the last two days the. Likelihood, of the stop hitting. Out is. High. It's. Highly probable an. Investor. Might consider, buying, the put because. That way they don't miss the upside, that way, they can define, where, they, get. Out which, is the strike price now, what we're going to do is we're gonna look for stocks, that, maybe have lower implied volatility, an investor. Might say well what does that mean well, maybe that means an implied, volatility, of fifteen to twenty four maybe. That actually means, an IV percentile. Okay. We saw that on this one the IV percentile, is twenty one okay. So that's still in the lower end. So. What does that mean in English well. If they're if the implied volatility, is low that, means buying, the. Options, it's. Not as expensive, now. We know if we buy the stock, and then we buy the put, they're still on. Limited. Upside okay. Now. If we take a look at this if we come back to let's say the fifteen of November, gonna, look at the forty. Three days to expiration we're. Gonna go look at the ones about right here and I'm gonna kind of show you this if, we, pick let's say and I'm gonna look at two different ones if we. Pick the 90s. There is a gap, now between 90. And eighty seven fifty there's a gap what. I'm going to go look to do is say look could we go look at let's say the eight November's, and see, if there's anything there where we could get strikes, maybe. In in. Where. We could get them let's say every 50 Cent's and it looks like there is oh goody, now. What you're gonna see is if we said look gonna pick an option maybe. 30, to 40 days to expiration something, like short-term where, if there was going to be selling, pressure we, could try to avoid some of that selling pressure okay, have, a defined. Risk not theoretical, what. I'm going to look to go do is no we have a couple options the 90 and a half this, one this, one this one those, are all strikes, with, a delta 3040, they're all out of the money that means, the strike price that we're picking is below, the current price now. If let's just kind of say that the investor, said look I'm cheap I don't want to pay for I don't want to pay. So let's say we go down to let's say the 89 we pick the load on this table we, pick the strike the. 89 that's, a dollar, 51. Now. What you're going to notice is that dollar, 51. Represents. How, much, the stock needs, to, go, up from. Now until. Expiration. Now. The one thing I want to make you sure, that you realize and I trust, me I was thinking about it. When. You look at this okay. I want you to imagine we go to a garage sale we. Go the garage sale and there's. Like this white. Elvis. Presley, jacket, that, to me, just, looks like a crappy. Jacket, but. To somebody, else with a trained, eye. They. Recognize. What it is and what. The value is, someone. Else deciding worth five dollars to, someone else they might say I'll give you 50 right, they, understand what it is I want. You to think about that, analogy with. This so. If we go look at the 89 we might look at that and say our, 51, I ain't gonna pay the dollar 51 well, what what were the value of those puts doing in the last couple days right a lot, and so, what you're going to notice is that's really like paying one, point, six, nine percent. Of the. Value, of the stock so. Think about this we're saying look I'm going to buy the stock and all. Of that stock, we're gonna really, invest. 1.69, percent, of the stock value to, buy protection, a. Hedge okay. On the. Stock now, remember, what this really means now.
When. We buy the stock what, is the transaction, fee, zero. When. We buy the option. What's, the transaction, fee sixty, five cents okay. Go. Back and listen to that recording pretty. Cool I know you're getting goosebumps now if we take a look at this what I'm going to do is for every 100 shares we have we're. Gonna buy a put, now. If you take a look at this if the stock and little in the next couple days goes to 88, 87, 86. 85. It doesn't, matter okay doesn't. Matter because you still have the right to sell the stock at that strike price so, this is where we want to make sure we really get some practice, here okay, we're, buying the stock it's. Still an up or trend longer-term, still, an upward trend shorter term we. Evaluate. The implied volatility and say whoa the, implied volatility is law what, type of strategy, could you do when, the stock still has a long term uptrend still, in the short term uptrend and the implied volatilities, low. Well. You could do like a married put married, put is buying stock buying put at the same time okay. Now, if we do this what you're going to notice is order, to talk about the transaction, fees and what. I'm going to now do is I'm going to put this right in the section, right here of where it says, protective. Puts, right there now are, there, any questions. Okay, with. What. I said okay. It terms up doing this protective put so the, learning outcome was really understanding. Not only the trend but. Also understanding what type of strategy, might pick listen, to what I just said, when the trend is still bullish, long-term trend. Is still bullish on the shorter term and the, implied volatility, is low you. Might actually pick a directional. Type strategy, like. A stock. But. When that implied, volatility, is low an, investor. Might say hey might, be willing to buy those puts now, the timeframe that we talked about wasn't, employed was days. To expiration about. 30 to 40 days out in this example, the. Strike price that we picked a delta. Of 30 to 40 something that's out of the money or in other words below. That okay, now, what happens at expiration, it's a binary event, if, you close them at the stock closes above the strike price the. Put becomes, worthless, the. Other part of that binary event, one thing or the other if the stock closes, below the strike price we. Have a right to sell the stock at that strike. Price okay, which is kind of nice so. Now we don't have to worry about op down up down up down up down on the market we don't need to worry about that we, need to worry about the expiration, date. Okay now, you, are probably more worried about up down up down up down on the market, price-wise if you're, just setting stops and probably. Using instruments. Like only stocks. That. Might be too bullish of strategies, when there's volatility. Present. In the market, now. If I go ahead and actually send that order okay, now. Jim actually says isn't, selling, puts below. A support. Level a good. Strategy, no way. Let's talk about that so, if we go back to let's say the VIX, remember. What we just said earlier right when. The VIX is high. Okay. This is this is so dadgum, important. I want, to make sure we get it okay, when. VIX. High. Okay. So this would actually probably mean price below. Both. I'll, capitalize, that both, moving. Averages. Price. Okay. Down. Near. Support. Now Jim is asking, that question, okay. Well. Would you consider maybe in that case doing buying, strategies. Or maybe selling strategies, well. When that VIX is maybe high, can. You buy options, of course you can but. When those premiums, are higher the. Stock has to make a bigger, move, just. To break even so, when. An investor maybe let's say sells, the foot they're saying look I would rather take in the high premium, and have.
A Higher. Probability, of that. Trade, going my weight not a hundred percent so, Jim you're right okay. You're right that's. Why it investment I'm going to show that in just a sec so, the second, thing is just real quick is hey, James, where. Did you get that road to strength one on my, Twitter page Jay Boyd underscore. TDA. You. Can follow me on Twitter any. Thing. I put here or talk. About here is on the, Twitter page so sandy, if you've. Follow, me on twitter you. Can look. At any of the posts or tweets that, I did and you'll. See there's, two different, ones for relative, strength if, you're free to look at that and there's also the script, there right, on the Twitter page okay, underneath. Jeans point now I want to bring up something that was just stated. And let's, go to for example I'm gonna go to let's say Microsoft, okay, now. If we actually. You know what let, me actually change up, the list just real quick I'm gonna go to let's say the S&P 100 and, when. We actually take a look at the S&P 100 let's shuffle the deck a little bit when, we actually look at the the, S&P, 100, relative. Strength one, of the stocks let's kind of take a look at this just real quick see what we have I'm. Gonna go down to a stock, and, Jim. If you don't mind I'm gonna use a stock, like. Casco. Okay. Casco. Now. Wait, now here's, the deal these, are stocks that, historically. It's, not, predicting. Okay, that, they're always going. To be the best that's not true it's, a history, okay that's what relative strength is now. If we take a look at this what you're going to notice is the ones that are in the darker, sheet have. Had have had past, tense a stronger. History. Of outperforming. The SP the, ones that are in this lighter color what. You're gonna notice is they're still strong just not as high and if, you scroll down the list even a little bit more, you'll. Get down to this area where you're gonna see kind of like a grayish color by. The way the greatest color is not saying it's horrible. It's. Just not as strong as that green or that darker, green color okay. Now, what, I want to talk about just real quick is that, casco, stock and I want to kind of use. Jim's. Comment, okay so, when the volatility. Goes up a column. That we might look at so I chose the relative, strength it's at the 91 percentile. It is also a stock that is above the tended period moving average it's, above the 30 now. You're. Also gonna see geez when that VIX is high what does that mean well. There could be a better chance may, be that. Where that volatility, is now might. Be in the, upper. Range, from. The low to the high over. The last year, for him why volatility, ah what. You're now going to see on that IV percentile. Right. There. You're. Gonna see that casco. Is actually. At the 77 percentile, now, for. Someone they might say and that. Means, what. Well, if an option, seller is looking for current. Implied, volatility. Near. The upper end of the range and again this. Is a simple concept if, your teacher tells, you you're, at the, 77th. Percentile, in your class what. Does that tell you well. You're. Like it a C+ okay, there's. Some people that are ahead of you there's, some people that are below you you're, not the high but. You're not near, the low either the, higher that implied, volatility, is let's take a look at Costco, let's take a look at that trend, so. When we go back and take a look at Costco now here's the thing I know as investors, when, that volatility, goes high this. Is sometimes what investors, do, don't. Tell, me when it's over, tell. Me when it's over I don't want to see it and so, what happens, is the short term price action. Drops. Now. We're, good at seeing where that long-term, trend is after. The stock bounced but, as it's falling I don't, see, it eclipsed, take it anymore, right we kind of have this emotional. Meltdown, did. I just have one right there okay. Just, having a little fun here now but, that's what it feels like especially. If you don't understand, really how trends, work if, we, go back and look at the trend what you're now going to see is if.
We Draw, a line and, just kind of connect this. Huh. That's. Interesting so. What you're now going to notice is we drew a diagonal line that's that's the trend line that's where the past history. Has been that, buyers, have, bought the stock now here's the deal is that. Always going to be the support level no support, levels can change just like resistance, levels can change now. What you're going to notice is that stock does actually have earnings today. After. The market, now Jim. Is actually talking about maybe saddling. A put okay. I'm. Gonna bring up the example, maybe doing a short, put. Vertical. Now. If, you. Had Sol puts in the, last couple of days you. Had a front. Row, seat, to what. Vega is, when. The, volatility. Increases, it. Literally. Like a balloon. Pumps. Up that. Option price, thus, making it more expensive to buy back okay, now, I know this is kind of more it's. An event-driven okay. But, I'm gonna still use it from a trend, I'm, still gonna use it for an example of doing something that might be a little, safer. Where. There is defined. Risk. Built-in so. The example I'm going to go look at here is, I'm gonna go look at let's say let's say we pick something now, you'll notice that the ones that are closer to the expiration, yeah eighty-one exactly. 35. 29. So, clearly, we can see the, options that are closer to the current earnings the. Implied volatility, is off the charts we can see that now, the, market. Maker move, it's. $12.49. And that says plus, or. Minus. Okay. Now. They could they be wrong, absolutely. Okay now. If we went down let's say twelve dollars we might actually say well could I look to maybe sell, a. Strike. Below. That. Current. That market. Maker move let's. Say we went down fifteen. Dollars, from where we are right now well, we might go look at the 275, strikes. Okay. Well. In this case what I'm gonna do is let's open this up a little bit let's go all, what. I'm now gonna do is I'm gonna go look at the 275. Okay. Now notice the 275, they. Have a lower, Delta, okay. Now, what you're going to notice is the learning outcome again was identifying. The stratifying. The trend longer. Term uptrend, shorter. Term coming. To support number. Two higher. Implied, volatility. Compared. To the last. Year's, range. Of, volatility. With. That we're. Now saying we might choose a selling strategy matter of fact Jim led us down this path thank. You Jim and so. Great, discussion, now. If we actually sell that plot that's the obligation to buy the stock at the strike price and if. We actually take this strike price let's say two strikes. Wide maybe. We actually buy we sell the 275, by, their to seven, DS now. What I'm going to do in this case is so, we're gonna do the 275. And the 270's what. I'm now gonna do is gonna right click on, the bid gonna. Go to where it says sell, vertical, now the last time we did this over earnings it was Nike and the, trade lasted. About. Three hours the, stock gapped to the upside not saying this one's going to do that but you're gonna see what I'm gonna do in just a sec when. We do the 275 to seven. Days there's. Two credit, upfront step. Two what we're going to do is change this to single, order change the first triggers. Seq. And now. What I'm going to do is change that and right. Click, on this line we're going to make an opposite. Order here if we, do create an opposite, order now what you're going to see is we're gonna say look could we buy that back now. You have to maybe you don't have to but. If you said look I want to buy this back, it may be only. 20%, of. The. Credit. Okay. Thus, trying, to make a tea okay, now, in this case if, we, now you could see maybe different, percentage maybe you are looking for 50 etc, but, if we said look we're gonna try to get a bigger, piece. We're. Trying to sell it high and then buy it back low, so, in that case what you're going to notice is selling, it for about a dollar 15 buying. It back it looks like it's about 23, cents so. If we took on a calculator, and it's moving on price on us if. We took 1/10 on a calculator, times, point, two zero it's. Going to get us down to a debit of 22 cents now. What you're going to notice is when, we, look at the key chains, that, day to. GTC. This. Is a limit. Order meaning that's the most we're willing to buy a bat for in this, paper money account we're, gonna go ahead and actually confirm and send that now. What you're gonna see is this is a, probability. Type, trade okay, it's a probability. Type trade 110. Max, profit, max. Loss is built-in so if, this portfolio said, look can, handle. Thousand. Dollars of maximum. Loss, okay. That. Would allow, the portfolio. To do two. Contracts. And so, what you'll see right there is 220, max. Lost 780. Okay, now, remember for each option, contract. Okay. Check. Your emails okay see, the TV Meritor website 65.
Cents All contract. Okay and so, what you gonna see is that's odd the transaction. Fees. That. Are stated here they're, not correct. Okay, with. A new update as of this morning, now. If we take a look at this we're going to go ahead and actually go ahead and send. That put that right in that short, vertical put, section, and if, we put that right let's, kind of put that right there and that short verticals, right there and what. We're gonna do now is we're going to send, that now, if we send that right there now we. Know that hey, we, have a short, put trade we've. Tried, to position, that where it's giving. It some breathing, room there's, a buyback, in place okay. Now. So. That's on Costco now. Marquette, she says is your relative strength, calculating. For one day or one week well, let's. Kind of just touch on this real quick okay so, if you want what. I'm gonna do is let me kind of tell you the exact. Dates. Okay, so, let me kind of scroll down just real quick and. Let me give you the exact dates so, if, you go to if you follow me on Twitter, I'm, just trying to answer your question but, I'm also kind of trying. To show you where you could find the information, so, number, one is if you if you write down the if you look at the date of September 25th. This. Script right there is it, will allow you to for example, identify. You can, type in how, many, days, that you want so mark yes. Your. You, can customize, that the. Relative. Strength I'm discussing, is more, of an annual. Number. But. If you said James I like a kind, of a road to strength well I could customize, what. Time frame then, you could actually use that code. Right there, or script, okay. And you. Could actually type in the number of days you want okay, also. If you like the other relative, strength feel free to scroll, down and, it's, also in there as well I'll show you a picture okay and I even tell you right there that are s that's. Throughout the strength and it says annual, and if. You said look I'd like to kind of see something where I can specify, to, my. Liking to, your liking, well. You can use a different, relative strength script, that, is customizable. Based, upon your liking, okay, so, I want you to have that do, you accept that gift, good. Now, if we, have a little fun there now, let's kind of go back let's take a look at the markets here so first off when we go back to the markup so we did the Nike example we did the Costco example, and I'm, gonna go back to let's say djx, Dow is actually sitting here about eighty three points or so when. You also take a look at the let's say the SPX, sitting. Here about let's say 1829. And the. Nasdaq, when you take a look at this what, you're going to notice is the Nasdaq, is really doing more of a hammer, like, candle, near support, okay, and if, we take a look at this what I want you to recognize is. When. We take a really, look at where these indexes, are they're down again, near support now again historically. This. Is where investors, have been willing to buy that can, change if, that. Technical. Weakness continues, to happen if we. See fundamental. Data continue. To kind of wear down right, and that. Might challenge, or, the price might. Start to breathe, those. Support, levels okay, alright now, if we take a look at that what I'm going to do is I'm going to kind of change this and let's, kind of go back and maybe look at it a little different stock here so, what we actually look at relative, strength some. Of the stocks and I'm going to kind of use maybe ones that might not necessarily be. In a, great upward trend now there's been a lot of conversation. The. Is. M numbers, the main of factoring numbers the. Is M numbers, the service, numbers. Durable. Goods orders okay, all. Type of numbers, this week have kind of showed maybe a. Confirmation. Of slowing. Now, one of the stocks that we've talked about historically. Has, really been a stock like. Caterpillar. Okay, and, you got to think about this not just here in the US it's also a global, company. As well and that's, actually one where the relative strength has not really. Been that. Strong it's at the 11%, it's at the 11, number and that. IV, percentage, right there what you're gonna notice is it's. 42 so. It's not in the high it's kind of more in the middle range and what you're going to notice is there's all plethora. Of stocks. That are in that burnt. Burgundy. Color again, was that saying these. Are stocks that have underperformed. The, benchmark, okay, does that make sense now. Investor, might look for those stocks that might have had a history, of. Underperforming. The, benchmark, now, what I'm gonna do is I want to kind of talk about this when we look at a stock let's say like caterpillar.
Okay. One. Of the things that. I just want to state I'm not gonna do this trade on this but I want to state the point if, you, put, on bearish. Trades. When. The VIX, is at 20. There's. Probably, not. A high likelihood that, that trade, in the short term will work, why. Because, when. The volatility, is high the. Stock has already been really, pounded. Down. To. A support. Level or to a low and if. You put on puts or you. Do short, call spreads, when. The VIX is that high let's say 18 19 20 21 22 whatever the number is you're. Putting those trades on when. That stock is already near, lows or at a support. Level but, here's. Where I think the value comes in I don't, think it would be a bad idea to start drawing. Or looking for some stocks that. Have a downward, trend and where. You say you know what James if, these stocks again maybe came up to some levels of resistance, I want, you a take, away here, okay, don't, just kind of let this, blow over here I think, it would be a not a bad idea to say look I want to create a list of eight, or ten stocks, that. Have had a history, of relative, weakness. Caterpillar. Being one of them second. I would. Like to actually on a chart pre. Identify, maybe. Some areas, of resistance. That, if those stocks were to come back up to. Resistance. That. You might say look I'm going to start practice, doing more bearish. Trades now, remember, when. Stocks. Are up, near, resistance. Where's. Volatility, will. Volatility, go below okay. When, volatility. Is low stocks, could be up near their highs or resistance. And that, means buying, of the puts okay. Is. Cheaper. And the. Lower that, premium. Is the less. The stock has to move to. Break-even. Okay. So. A take away here what I want to make sure you grab is I, like you pull up on that relative, strength how, many stocks I like, you to actually pick eight to, ten stocks that. Have, a. Downtrend. Number. - James, you're demanding, right now look, I think, there's probably what, data that we're seeing right now we're. Seeing an increasing. Amount of data that is, actually showing that the economy. Fundamentally.
Getting. Softer, and that. Could actually mean from a technical. Point of view that, support. Level that we've been kind of looking, at for the past two three months that. Support, level might always hold. And so the biggest actually, thing is we want to make sure that we have some stocks. Pre-identified. That. We might use as examples. Or practice. In doing bears trades such as short. Call verticals, or long. Put, verticals, X cetera. Okay, can, you do that okay. Now, the one thing I want to kind of bring out also with this is. When we take a look at this. When. I bring when I go to the the the test tube right there click on that test tube what. I'm now going to do is they're going to go to where it says relative. Strength. Let, me give you a picture of what we're really doing, well. When I bring up relative, strength and I actually go to a head and go apply, and. Then okay well. On the, market, watch tab, instead. Of having to look at each one, of. The. Graphs. It. Gives, us a number, that is she so. We saw previously that, that relative. Strength of tab. Okay. It was. In the burgundy, color meaning red it was saying James, this stock has had a history, of, underperforming. The S&P the benchmark, and what, you're gonna see is it's, actually kind of getting further and further away from the best mark that's, what that burgundy, color means okay, now. Does, that make sense, all. Right want. To make sure not again, take away here we, talked about. Identifying. Let's say a stock still in a short-term upward, trend we did two examples, we, didn't Nike and Costco. Nike. We actually bought the stock as an example and bought, the foot as we, saw implied volatility, was, kind. Of in the lower end of the range second. Stock we actually did we did casco, saw. The Costco still had a longer term upward trend short-term. Trend. Down. Near the support level saw. The implied, volatility, high was, aware, of the earnings this afternoon and said look let's, try to sell a put try to be a little bit more conservative, and we. Also chose, a strategy. That, was a little bit more conservative, based, upon, the, event, risk of earnings. Okay so, notice that today relative. Strength has been a big part of this discussion, and also the takeaway from what we talked about here today is I'd, like you to make a list of 8 or 10 stocks that. Have been underperforming that have a downward trend and number, two I want, you to identify levels. Of resistance, that if those stocks were to go to those levels. You. Might start practicing. More bears trades that KITT that could become a theme, now. If we take a look at this I also want to give you a quick reminder. When. We talk about, things. That we discuss here today, remember. That when we looked at examples here in order to demonstrate the functioning, of the platform, we did look at actual symbols also. Want to give you a quick quick reminder, that. Ken. Rose to be coming up in just a moment talking about advanced option strategies very. Familiar, with verticals, and so, this calm these comments, of verticals, are selling, strategies, especially, with where TD Ameritrade, announced. That. Stocks. Commission transaction. Free and also, ops, and $0.65, very interesting, time to talk about strategies, with, that announcement. That you saw so, with that said thank you so much for your comments and your participation. Stay, tuned for ken rose coming up just. Shortly. Thank, you so much take care bye-bye.
2019-10-08 08:13
