Technically Speaking: Trading the Trend | James Boyd | 8-20-20 | The One Thing That Investors Forget
Hello and welcome to technically, speaking. We welcome you to trend. Thursday. On trading the trends, weeks to months. We welcome, everyone, here, uh just real quick as we're getting started like to, also welcome, maurice, jenny, kathy lewis, kanye. Ac. Dennis. Jim from florida radio wayne from texas conroe, texas. And also cube, q battle, charles, lewis, ander and many others, we welcome you here today, my name is james boyd today is in the chat we also have cameron, may. Uh. So we welcome. Everyone here also notice that you can find, cameron, may or myself. On twitter. Uh you can just go twitter.com. Type in cameramate, and or, myself, james boyd, just real quick as we're getting started this class is focusing, on stocks. And options, i'm going to probably spend equal time. On both. Okay. Now just real quick as we're getting started, remember if we talk about options remember that options are not suitable for all investors. Special, risk and heritage trading options. Make sure that you've read the previously, provided copy of the characteristics. And risk, of standardized. Options, also remember that any investment, decision you make in your self-directed, portfolio. Show your responsibility. We will demonstrate, the function of the platform, remember, we're going to use actual symbols, that does not mean the recommendations. They're examples, of how to use a platform. And the strategies. Now when we also bring up, options if we do, we have the option greeks. Know what these those are, and also what they really mean, now today what we're going to do is very simple talk about three main things number one we will talk about the indexes. And volatility. We're going to bring up the current portfolio. And what we kind of want to do is kind of take a sneak, peek on seeing that the paper money portfolio. Is really kind of, cutting, any corners. Someone asked me this last week and they said hey, i know you've been with that company td ameritrade, for a long time. What do you think the biggest. Mistake. Is. That investors. Continually. Make. I kind of thought about that. And i i i told the gentleman i think the biggest mistake that people actually make.
That Or the investors, might potentially. Succumb, to. Is not really following, any real routine. Getting comfortable. And then kind of cutting the corners. So today, for the paper money. Let's kind of look at this as we're going to kind of do a little potential, audit. Of really the paper money portfolio. And seeing if that paper money portfolio, is really kind of cutting any corners. And maybe, disobeying. Any routine. Of, exiting. And also, is how good is the paper money portfolio doing, in riding, the trend. Okay, so we're going to hit that head on i think it's very important i think it's probably the one main thing. That just people overlook. They just stop doing routine they get comfortable. And the volatility. Just kind of, puts people to sleep. And all of a sudden it breaks out and then all of a sudden they. Broke away from the routine. And now they kind of feel like they're out of the balance. And it happens. So. Then what we're going to do after that is we're going to go ahead and actually go down the last piece which is setting up new potential, traits. Stocks. And, options. Now first off let's bring up the nasdaq, first now by the way, i welcome, any questions, okay. Any questions, you got bring them on brother. Sister. Let's talk, okay, love the questions. Now if i don't know the answer i'll tell you. If cameron doesn't know we'll tell you we might have to say hey we let's get back to you on that one that's a great question. Let's do a little deeper dive inspection. Most of the questions we can handle right here and now, okay. Now when we take a look at let's say the nasdaq, you'll notice that nasdaq, is really up. It didn't touch the high. So far. But boy it's close, okay, you're gonna see yesterday. Ding ding ding ding, brand new high here on the nasdaq today, opens, up lower. And. I went on twitter to see how many bearish, investors, there were. And everyone was like calling the top calling the top markets coming down. And then all of a sudden the open was like nearly the low. And i haven't seen any more posts from anyone else who's a bearish investor. So what you're now going to notice is it's a bullish engulfing, candle, back to the upside. Just kind of interesting, and it kind of gives another, point. Where the investor, could kind of monitor. Trend. Really you're going to kind of see that today's open could be like a high or low. And then you're going to notice that about two days ago there's another higher low, and then this area right here that's another spot, so the technician.
Who's, Really crafty, was looking at this or him or her, they can see where these support levels are as long as the price stays up above. These support, levels. What you're going to really going to be noticing, is, the price. Is still an upward trend. Now if you take a look at the s p what you are going to notice, a little different though on the s p. We're starting to see. Over the last couple days as there's been really, faint volume. On s p, okay. Bearish engulfing, yesterday on s p. Not a bullish engulfing, candle here no, not a piercing, line no. You're going to kind of see it's a little weaker and the price really staying below so far. Both moving averages, so the s p is softer. Okay, here we're talking about that mixture of 10 sectors. More than not, are kind of showing some softness. In the s p, dow jones. You are seeing that same. Thing. Where it kind of dripped down crossed, over. Okay. Price the last couple days, one. Oh they didn't touch it here, two days of touch. Pretty close to a three-day touch. So far the price on the dow, has not been able to really get back up above that shorter-term, moving average the 10-period moving average. So when you look at the dow in the s p a little softer it's kind of more showing, flagging, behavior. Pullback, or consolidation. And the nasdaq. That little. Philly. She's running to the upside. And she's staying, actually above. Those higher low markers. Okay, now, it can't all be good okay, well one thing that memory, we said the investor is going to be watching, okay. Is that daggum. Volatility. Now the volatility. That we're really watching. We're going to look at that downward. Slope. Of, resistance. Okay. Now i was kind of thinking about this when the, fix, level. Is staying, down let's say below the moving averages. And or. Staying. Below. The resistance, line. Investing. Can kind of seem. Easy. It can kind of seem easy. But it's not, necessarily. Easy. Because the investor, is actually, risking, capital. There's opportunity, cost could do other things with their money. And it kind of feels, easy. But there is risk. So we kind of need to be. Woken, up a little bit, that if that volatility. Were to let's say break out of resistance. Risk, is real. And if the investor, doesn't recognize, it, you could soon see it, and all of a sudden you realize it's not it's not easy anymore, and then now you kind of see, who has more experience. Than someone who, doesn't. So the risk that we actually kind of see here today that we want to kind of take note of, is we talked about last week and there was two of you that gave thumbs down on the video last week you gave thumbs down, and i think the two comments i saw was didn't like when he talked about the selling. Well remember, we said last week we want to kind of give practice. Of, what could happen if some of the trends were to break down we wanted to prepare. Okay. So the reason why we talked about selling last week is we said hey. Let's prepare. For a potential, sell-off. What would the investor do is there a plan. Okay, i'm not sure if those two individuals.
Understood, That completely. But uh, let's understand, that here today. Okay, so the risk here today, is we see that the volatility. Is really. Got above that 10-day moving average. That means, that. Probably, more, stocks, than less. Could be starting to get down below a support level, and we. Said the other days we didn't really like kind of the macd, kind of getting. Less. Well. It's not dropping, down as much. We're seeing that the macd, is actually starting to go up, and it's, staying up above the zero line and the macd, is about as high as it's been. In about the last two months. Now option number one i can tell you this after the volatility, breaks out and then someone's going to ask me hey what's the potential, plan. Option b. Let's run the plane before that potentially, happens. Okay. So we chose plan b there okay. Now let's kind of so that's a risk we're going to continue, to monitor, that, that probably means that when the investor looks at stocks. There might be less, setups, because remember if the vix breaks resistance. Stocks tend to actually break potential, support, now. Uh let's go to actually just real quick uh, when we take a look at let's say. Stocks. Now remember, when the investor. Is investing. And that. Volatility. Breaks, out. Well one of the major concerns, we said last week, we said one of the major, concerns. Is that. The investor, has, short. Put, positions. Now remember that that is because. Anything, that has short puts. Okay. What that really means in this case is those are potential. Obligations. To buy the stock, at the strike prices from now until expiration. And also, those, short put positions. Could be at risk. Of volatility. Increasing. Boo. Don't like that either. So you're going to notice that here today. Caterpillar. Dollar tree ross, zoom, there's only really four trades, left in short puts. But what other section of the portfolio, might be risk if that volatility, breaks out to the upside. What other section, now i want to kind of tell you where i'm going with this, i am not. I'm not, making this a. Bear market discussion i'm not. But i'm just talking about risk. Okay. So, what part of the portfolio. Might also be at risk what, trades. Or strategy. Really has the greatest, amount of risk, the most, capital, involved what is it. Five. Four. Three. Two. One, ding ding ding. It's, long stock positions. Now what i want to do remember i kind of said before, the person, asked me that question. What. What. Thing. Do you think investors, keep tripping, on. And they just kind of keep making the same mistakes. And i said to the person, i think they just stopped doing routines.
That, Vix. Kind of just puts him to sleep. And they think it's so easy. Until they realize it's not. Well, so, here, we're going to do together. We're going to check a couple stocks. So kind of think of this as a paper, money, audit. And we're going to look and see is the paper money, kind of cutting corners. Okay, because i think that would be nothing, unfair. Than really actually something that is kind of cheating. And really kind of not following, trend i just kind of think that would be cruddy, okay. Now what you're going to notice is some of this might just be visual, okay. Well if we take a look at this what you're going to see is crocs, has really been riding an upward. Trend. Okay. And what you're going to notice is that stock. Is still up above that diagonal, support. And the stop, is right underneath. That level. So if we were checking, this, would you say that crocs, has some type of, risk management, to it. Do you think it does. So if we actually take a look at that and say hey, you know if we kind of go up to the current, price level about, 38.25. And if the investor, said a stop three percent below, there. That stop is really actually set at about 37. 10-ish, right in that area. This number says 37, 16.. When we actually kind of do this paper money audit here. This looks just like it just kind of set a stop right below the support, level. And it just hasn't triggered yet so we don't see any discrepancy. Here. We go the next one we actually see a stock called dpz. Now one of the concerns, that is in this paper money portfolio. Is, this portfolio, only has 14, 000, of cash now, how many of you have ever seen that or do you know an investor. That it just kind of seems like they're always running out of cash. And what you're going to notice is dpz. Was actually picked up last, week or 10 days ago, 35, shares of stock but this is a big boy, okay, almost a 400. Dollar stock. Now if the investor, is thinking, they might need to raise cash for the potential. Obligations. Okay. Of those short puts if that investor does short puts. They might look for some stocks that might be up near. Prior highs. And try to sell. Into that price rally. Into, the resistance. Or the prior high. Now if you go take a look at dpz. What you're going to see is it's kind of copped. Back up near. And i think that stock was kind of purchased probably in 102, of those days right there entry was probably pretty solid. Then the stock has kind of run back up kind of made a pull. So when we say poll we're talking about a little, price rally more updates, than down days. And now what you're going to kind of see is the stock has really gone. Up into these. Upper shadows. This has been an area where investors. Have. Rang the register.
And Sold the stock. Now the stock is right up near those areas, again. Now remember, let's kind of say the paperworn, account doesn't really have that much money. Okay and it doesn't, okay. Not enough to cover those obligations. Could the investor, look to sell. The stock, up into that prior high, to raise, capital. Could they. Could they. Sure. Okay, why would they do that well to raise capital, okay, now if now by the way the other reason why the investor might consider doing that is, this is not a position of 100 shares, okay. So the investor, might say hey. They might keep the stock positions. That have greater, than 100 shares. Because they can protect, those, and the stocks that really have less than 100, shares, where they can't protect them, they could actually say in this case hey you know what. I'm going to try to sell those into strength. So from last week now when was this trade entered it was entered, on the 14th. So six, days ago. It entered, 35. Shares of stock, rallies up to the prior high this is where some technicians, take profit. And the paper money account is going to use the little six day rally. Liquidate, the position, in this case. And try to increase the cash balance for what purpose. Well number one you can't defend 35, shares it's going to be very difficult. Two, you're going to see that this cat this account needs to also have, a little bit more money. Just in case, some of those short puts were put to this account. In this case the pay money portfolio is going to try to sell at the mid price level. Confirm, and send. And see if that fills, now if that does actually fill in remember, zero, is the commission. Okay. Send the order, see if it will fill, it fills at 14. 4 14, 49. Now that one trade really freed up about 14, 000, which is nice because. The paper money has, obligations. Outstanding. Now i want to kind of touch on, one, more here okay. Now. There's a stock, okay. And it's this one right here, mar. Now mar, if you take a look at this you're gonna see that it has. The the old trade, price was really about, 90. Now, can anyone actually tell me why it was at ninety, dollars. Dot, zero zero. Can anyone actually tell me that this is very important. Where are they getting 90.00. So if you look at this, position. This position. They're coming, from an old strategy. Called, selling, puts. The stock. Was assigned. To this portfolio, so as a short put. The portfolio. Took ownership, of these shares. And the 35. There represent, the old strike price, the 90, there represent, the old strike price. So we're going to look at actually marriott, and we're going to ask the question, we're just kind of together. Seeing if this paper money account is kind of. Is there risk, mis risk management, or is it kind of cutting some corners. Well if we go to actually to the paper money portfolio. What do you see in terms of trend here. Now i'm going to for example, kind of go back to about right here. It was going up, looked. Stronger. And then all of a sudden if we kind of take it a day at a time kind of see two big red candles. A little sell-off, the higher that candle right the moving average comes back down. Bearish, engulfing. Right there, close. Or, was. Then the price actually stays below the upper moving average, not looking good, get the red color. Red might not be your favorite color. And now if you take a look at that the higher the day was at that. Closer moving average, that's not nice. And then now what you're going to see is it had one update. Trying to push back. So if you take a look at marriott, here. What type of strategy. Might the investor. Actually consider. And let's just start with the stop first.
If We're looking at a stop. The investor, might say the old. Resistance. Might have been in really that area of let's say 92, 19.. If the investor was let's say james i'm just going to set the stop. That stop, might be in the area, of about, 95. 24.. Okay. 95, 24.. Now with the stock getting down below both moving averages. Could the investor maybe consider. A protective, put strategy. Could the investor. Maybe consider, a caller strategy, was seeing a shorter term pullback, in the price. That's an option as well. If the investor, said you know what james. I'm a stock investor, only and i want to kind of talked about that. Setting a stop, making, sure that, risk. Is addressed. 95. 24., now remember the way this works. This is saying if the stock were to get at or below. 95. 24. Sell the stock. It could fill at 95, 24. And, or. Lower. Okay. Now what you're going to notice is if the investor, goes to data gtc. So it's ongoing. Confirm, and send. Now what you're going to notice in this case sell, marriott, if it goes to. 95, 24. That doesn't, look quite, right there and i actually it wasn't. 92. 19. Less let's kind of verify, that, yeah excuse me. 90. 39. Now this is why we listen to ray kimbrell. Read, the order, carefully. So 92. Ish. Is the support, level less two to three percent. It's going to get down to about, right there. And if it goes to that price or less, it triggers, to be sold. Okay. By re-reading, the order. Paper money account caught that okay, commission, zero there we talked about the stop there. Now the investor actually clicks on send. Now it's triggered. Now i want you to i want as an investor. Self reflect. If so if there was an investor, who is going to kind of take a look at some positions, of another investor hypothetical. Situation. And they were kind of taking a look and saying hey, the investor, as the investor, that investor doesn't have a stop. That investor doesn't have any option protection. Okay. Is the investor. Cutting, corners. So, this investor, this paperwork, account is spot, checking. For some areas. So when we actually look at crocs. Low g actually has a stop as well. Marriott, now actually has a stop. And you're going to see the last one that i'm going to address, real quick is this fun one, okay. Now does anybody remember, this last, trade. From uh. Let me no actually the one i want to actually uh, discuss. Is i'm going to go down to this one right there, yeah. This. As in zoom. Does anybody, remember, this, last week trade where we talked about zoom. The ticker, zm and i think jim asked. Hey could maybe, uh. Could you take a look at zoom, and actually, zoom was kind of a stock. That was kind of going, up down up down up down, and it started, to fall down below. Support. Now the paper money account at that time, had. A. Short put position. And and we talked about the risk. Right. And we said geez. The risk of that short put. Is, if that stock were to break 240, the risk is. That the stock could go all the way down to the next. Level support. That that's not a little drop there it's like, can you hear it, right as an echo, that's a pretty, deep, drop. Especially, when the investor, has. A short, put position. Okay. So we kind of talked about how an investor, might. Try to offset. That, or at least counter, it, now does anybody remember. What paper, trade was really done. Well we talked about what an investor, might consider, and we did this in the paper, money account. We said hey the delta, that time last week was 48, delta which meant greater chance expiring, the money. The paper money account, really actually decided. To short. The shares. Of stock. Which is, not a bullish, trade. It's a bearish, trade. And that, portfolio. And i'm bringing it up here, it shorted, the stock, at 246.. The intention. Was. That if the stock actually went down the short boat would be losing money. And that short could offset. Some. Of the money. Now. But what happened. Stay tuned for next time no, we're going to talk about that right now, well what you're going to see is from last week to this week. Since it knew this paper money account had that short stock position which is bears. The stock. Violently. Went to the upside. And now again we're looking for a discretion. Here okay, the stock actually goes up and the paper, money account, said hey. If it's going to do a short example. The paper money account, wants to have a stop. So as we're checking, the trades, here, okay. What you're going to notice is there was a stop. And that stop was at, 273. Okay, oh six. So let's just kind of give you the updated, numbers here okay. So that, short, position. Lost. About. Seven well actually let me kind of fill it out on this side so you can see it. The. That, bearish, protection. Lost. Twelve hundred and seventy six dollars, okay. That was a realized. Loss. That's, now affected, the balance, that's already been entered. And exited.
Done. Now what you're going to notice is there is. 790. What was. Probably a thousand dollar loss last week. Has, swung. Back, up, about. 790. Dollars. So last week when this position was down about a thousand. Okay. It's now down about, 500. So far, and. Has, about, potential. 890. More to go so last week it was down a thousand. This week down about 500. But if that stock could go up and continue, higher. This trade could actually swing to positive. But needs to stay up above support. Now how many of you besides, this paper money account. Have ever had what you call the dumb trade of the week. How many of you have ever had one of those or know somebody. Who has had that, now as i self-reflected. On that, this morning on this trade. There was a trophy, nearby, me. And i would like to start really, a ritual. That if this paper money account, really actually has. Just, a trade where we would have to self-reflect, and say wow. That was, really. Dumb. Or that was incredibly. Volatile. The entry or the protection, wasn't bad. But it just. Ripped, the opposite. Direction. So i would like to kind of set up the first. Gold trophy. Of the stupid, trade of the week. For really, zoom. Okay. Now it's down 500. Is it horrible, no. But this is a trade that kind of it looked like it it was. Logical. But it just, really went, volatile. The opposite, direction. If that stock, could go, up. And stay up above this resistance. It could actually end up making money. But when you take a look at this and say but what was the good part of this, the good part of this is the paper money account admitted. Where. It, was, wrong. And it stopped. The trade remember what i said before when the investor, asked. What do you think one common thing of where investors. Keep making the same mistakes. They never, kind of audit. Or check what they're doing, to see if they're cutting corners. Even though this was really, the dumb trade of the week. Even though you actually kind of take a look at this it at least admitted. Where is wrong. And, exited. And if that stock can keep going up, it might even turn positive, and that might make all the difference. To admit. That it's wrong, okay, and why was the stop at 273. The reason why the stop was at 273. Is we said if that stock broke. Resistance. It's going to exit the bears trade and that stock, poked. Okay, poked. To the upside. And you're going to see that was taken down, okay. Now. Why does this paper money account. Track the trades. Remember what i said before it's one thing to kind of talk about a watch list it's a one thing to talk about an entry, it's another thing to talk about position sizing. But from an instructor, point of view that's the easiest, stuff to talk about it's the easiest. The hard stuff, is to talk about the trade management. And the emotion. And the logic, the strategy. Behind, it, okay. And that's really the cutting end. Of really what happens, over time, okay. So i want to include, that today. In our discussion. Okay, because i want you to kind of see how the whole. Thing works. And sometimes, trading, is not necessarily. Just. That was easy it's not easy, sometimes, it can be emotional, and hard, to admit. When that trade is going against you we're telling you that, okay. So sometimes. The investor needs to recognize, that, and say what is the plan for exit, now, let's take a look okay, got a couple of examples, here today. Now, one of the examples, i'm going to show you a couple stocks. And we're going to demonstrate. Some trades now we got, probably 15, solid minutes here. And so what i want to do is i want to kind of take a look at a couple stocks, okay. So one of the thoughts that's kind of going through the paper money accounts mind. Is. Don't have a lot of capital, okay, so. You're going to see there's only 28, 000 but remember that doesn't. Kind of that money, might be earmarked, for selling puts. And so when there is lower, capital. Okay, there might be two strategies, that really kind of come to play number one. Maybe, short put spreads, okay if it's a bullish trade, number two it might be a long, call, vertical. Some people call that the poor man's, cover call never liked that term poor man's cover call, okay. And the other thing is maybe a long, synthetic. Which is. Long a call and selling a put, those trades are typically, not as, capital, intensive.
Okay. So if we go take a look at let's say microsoft. And someone said hey james, took a look at let's say the three year weekly chart on microsoft. And that stock believe it or not is kind of really ran up. Pull back ran up pull back, ran up, pulled back. Ran up, and kind of last week was a little hammer. And what you'll notice is those little red hash marks. Represent. Higher lows on the chart now i can tell you that doesn't mean that the investors, are in there okay. They could be watching it. But, there's not really any money to watch it okay, so the thing is, some trend investors, they're in. The paper money account is going to look and see what, if the investor, was, bullish. What type of trade could that investor, do well. One of the trades we're going to talk about. Considering, the account. Restraints. Cash wise. Is going to for example, like a long. Call. Vertical. Now a long call vertical, is just, as follows. A long, call. Where the investor, is actually buying. The call. And that call if the investor, chose something let's say, 30, stays out or in a window. Of 20 to 50 days, well that would really be the 18th september, okay. Now we say, 20 to 50 days. And not just 30. Because. There might not be. 30 days to expiration. The investor, might have to kind of look around, and see. What options, are available. And which ones are liquid, again it's not that easy. Now, in a stock like microsoft. There might. There might be more, options, available, where some are, let's say there's more selection, than others. Well now if you take a look at this we're going to go look down at let's say the option, that is the first strike in the money. The foundational. Concept, behind that is, that that option, has, some, intrinsic. Value. Okay. So if the stock's at 214. And the strike is at 210. That means there's four dollars, of intrinsic, value. Think of intrinsic, value like equity. Okay. Now. So, four of those nine dollars. Is intrinsic, value. What's, the other, five. What is it. Fluff. Puff. Okay, yeah you could say that, it's extrinsic. Value. There's five dollars on this option. That is just. Time. It's really actually the payment, really for, the implied volatility. Over the next number of days, okay, 500. Is just fluff. Four dollars of intrinsic, value, now let's say the investor said geez i don't really like that what could the investor do, right click on that option, okay. Go to buy, the investor, then could go over right to where it says vertical. And the vertical, so instead what the cover calls buying the stock selling the call. But with a long vertical, call instead. Of buying the shares. Okay instead of buying the shares. The investor, is really, buying, a long call. Which is the right, to buy the shares. So someone who's a trend investor. Maybe historically, said i can't do bigger dollar stocks, that's not true. If they know about options are willing to do options. Long call verticals, could be a way they might try to benefit, from higher price dollar stocks. Where there's a maximum, gain and a maximum, loss, the investor, buys the 210. And sells the 215.. That's kind of like a covered call, just don't have the shares. Now what comes out of the pocket. Well what comes out of the pocket here. Is really a debit here of 283. Dollars. Okay, now whenever you think debit. That is probably, the amount let's click on confirm and send. You're now going to see whatever, the debit, is. That is the amount, the investor. Could. Lose. The investor, knows that up front that's the risk. Okay. Now remember this is a five dollar wide, spread. Five dollars. Minus. 283. There's what you see is the max profit. So now what you're going to see in this, case. Is we see a break even. Now that's what you'd expect. If the investor, has a right to buy it 210. The stock, would need to go up so think about what the investor, paid, for this, is 2.83. Cents. So the investor, needs the stock to be at. 212.83. To. Break. Even. Now, it should be kind of saying wait wait, wait wait, the stock is already above that right now, that's, true. This is just like a covered call what does the investor, want the stock to do, they want the stock, not only to be above the 210. But they want the stock also to be up, up above, the 215. Where they're in that maximum. Gain. Land. Okay does that make sense. Now so if the paper money account. Can risk. A thousand, dollars. Each contract. Really representing.
About 300, ish dollars of risk. It would allow the paper money portfolio, to really risk, about 300 bucks. If you take a look at this you're going to see that we see the. Max profit, for three contracts. Max, loss. 849. And what is the buying, power, the buying power is just going to be what the loss is, okay. And you're going to see that because this paper money portfolio, is doing three dollars, three contracts. And the investor, is buying and selling. That's what it is for the entry three dollars ninety cents, for the commission. Now if the investor, actually says okay i'm gonna send that order. Click on send. And now what you're gonna see is it's a really, a long. Vertical. Trade. Not, hogging, up as much capital. And if that stock were let's say to break out and stay, north. Above, 215. How much was that again well let's bring it up what was that maximum, gain let's just double check. Three contracts. If that stock were to stay, up above 215. It's a max profit, really in this case, of 636. Dollars, okay. Remember, on, probability. Type trades. You're not going to see it where the maximum, profit. Tends to be. Is, or greater than, the max loss. So you know if the max profit, is showing less than max loss. This, must, be, a, probability. Base train. Does that make sense. All right. Good. Now what i'm going to do in this case we're going to actually go back and click on uh just delete, just kind of showing you that maximum, gain. Maximum, loss, okay. Now i'm going to go down to one other one now there was a stock. That was discussed, we've talked about historically. Examples, of financials. The area finances, we've talked about not it hasn't necessarily, been. Banks. It's really been more, cards. And we brought up examples, like paypal. And square. And mastercard. And the example, that we've been watching really over time, has really been visa. Okay, now the example, we kind of talked about we said look. There's probably something where investors, might be missing, it, meaning. The stock actually had support at 190. It runs up pulls back and creates a higher, level, support. At 195. And then what you're going to look at from a candlestick. Analysis. Perspective, okay. Learn, to read, the candles. If you take a look at this this is really more like an inverted, hammer. This day right here is more of a close above the high the low day. This candle, actually right there is a hammer, candle. If you actually think that stock is going to go through resistance, if you think that's resistance. That would be a hanging man. The very next actually day you're seeing this is a bullish engulfing. Candle. And, close, above the high the low day so when you go back the last four days. There's been, an inverted hammer. A close above the high of the low day. And even if you said this candle is bearish, if you did. There's, more, bullish, candles. Than bearish candles. Now if there's more bullish than bears. The odds could be that the stock might try to break up through. Resistance. Okay. Now let's kind of go back and take a look at this let's say the investor. If, the stock, broke resistance. Okay now i haven't said it yet here day and i just don't feel like it would be right, to actually have a james boyd webcast, and not say what i'm about to say it just wouldn't be right. If the stock broke out of resistance. Okay. If it broke out of resistance. Now you're gonna see now what do you think i'm gonna say. If that stock had an old support right there and it kind of had a gap down, and you're going to kind of see that this is where it gapped down from i'll label it as number one, and you're going to see really number, two. Okay, well if that stock actually broke the resistance, and this line if we kind of carried all the way over. That number two. Old resistance. If it broke, resistance. Well the path of least resistance. Could potentially. Be. Really that actually, that it actually could, try to go up to, about 210. To 14.. Okay. Now. How many of you have had how many of you know someone who has more trade ideas than money, okay. Now sometimes, that can happen, in. Longer. Trends. Okay. So if that stock broke resistance, the path of least resistance. Might be. That the stock might try to go up and fill in. This, old gap, area. Now again let's make an assumption the paper money account does not have. A ton of money to buy shares. And the investor, says well, verticals. Or in this case let's say they decide, to do a long, synthetic.
Okay. Now remember a long synthetic, is really the buying of a call. Unlimited. Upside. And number two with that is, they're selling. A put. Okay. Now what it's really trying to do is, two things. Num time decay. And lower. The break, even. So if the investor, actually came to this ask price, okay. And looking at the money and again what's the foundational, understanding, of going, maybe one strike in the money or at the money. The idea is when the investor is buying an option. That, some of the ask price, has. Intrinsic. Value. That, that ask price, is not all just, extrinsic. Value. Which is really just the payment for the time and the volatility. Okay. So that's why this paper money account is saying hey, could some by going in the money. Some of that 760. Is intrinsic. Value. Now if the investor, said right click on that ask go to buy. Go right to where it says caller, synthetic. Now what you're going to see is it's really the 200. Call, the 200. Put. The debit here, is, 3.76. If you add those two together. The 200. Plus. 373. You get the break even, just add them up, it'd be, 203.73. Guess what you notice. It's already at 203.73. Anything. Above where this paper money account is here. Or this visa trade. Is potential, profit. But at expiration, the stock would need to be at, 203.73. Or. Higher. Now, let's talk about that target, and the stop. Well the investor, might be able to see. Maybe what that maybe, maybe the investor wants to set the stop right underneath the moving average, okay. The if the investor, sets a stop right underneath the moving average, less two to three percent. Well that would really in this case be about. 195. 94. And that, resistance. Would really in this case be about. 214. Ish. So if the investor, actually said i want to set a conditional. Order. Conditional. Order, each time we get together we talk about conditional, orders. Does not change market gtc. Gonna hit the gear. I'm gonna actually set the, target, price first greater or equal to, 214.. We just saw that on the chart. Number two, visa, mark. Less than or equal to. 195. Okay. 195. 94.. So, it's going to be one of two things but not both. What you're now going to notice is if that stock goes to 214. Or higher. Okay. Targets out and then by the way that would be about a 10, up move on the stock with 100 delta. The stock were to go up to that target it's about a thousand dollars.
If The stock went from 203. Ish. Down to about 196. Ish. It's really, seven dollars down. On a delt of a hundred and that would be a potential. Loss. Of seven hundred dollars so if it goes to the target. A thousand. If it goes down to actually that exit area, about a 700, loss, assuming. That that stock actually fills near, 195.94. But remember, it's going to sell it to sell the options, at their current, market, prices. So what we're talking about is a projection. Okay not actually. Got to see where it feels. If that's okay for the investor. Save that confirm, and send. Now what you're going to see in this case is, what's the what's the uh debit of the trade 373. What is the commission, of the trade a dollar thirty sixty-five, cents times two. Some of the money for the obligation, to buy the stock potentially, at the strike from now into expiration. Some of the money is set aside, because, this is a margin, account, okay. And where does that number come from it typically, is going to take about a third. Of what the obligation. Is. Typically, not always, about a third. And set about a third of that obligation. On the side. So if you said well i have an ira i don't have a margin account, and i like to actually consider. How do i actually, potentially, try to put up less well that's one of the benefits, of using a margin account, okay, maybe you talk to td ameritrade, and ask them. Could i maybe actually have a margin account, what are some of the pros and cons of that. This paper money account is using a margin account okay, different type of an account than an ira, okay. Now if that's okay for the investor, the investor can now come down and say, send, the order, and if that investor. Sends that order. Now you're going to see it enter that long call it's bullish, has a target, there, with a stop. Okay. All right. So, now what i want to do is i just kind of want to go and see. If there's any questions, so, dale, asked, okay. Now, dale, i got to always tell you, dale, has historically. Said. Yeah i kind of think if there's one thing i think, uh dale where he talks about technical analysis, and when stocks. Maybe uh, are going up or maybe there's a consolidation. And no one's selling. He says those greedy, buggers. Okay. And sometimes that's true, so, just something funny he always says. 214. Is that price target okay. 195.94. Is if it gets, that price, or less. Okay. Now notice, actually here today. The paper money account was really kind of doing really more or less. Verticals. And or long synthetics, with the full understanding. The paper money account just doesn't have unlimited, amount of funds it's not backed up by the fed, okay. There's a certain amount of funds. And the investor, is also trying to understand what is the obligation. And setting aside some money for those potential, obligations. Okay. Other. Questions. That you had, just want to kind of make sure we got to all those, and i know uh. Cameron's been working actually hard on that, okay good amy you nailed that path of least resistance. Good. Uh so i look i think we're good on the questions, here okay. Now the one thing that you will actually notice. I'm going to mention one other stock. And i'm going to kind of just state one principle, okay, and or some might call it a practice. As a technician, i think it's important to really watch stocks when they run up and pull back run up and pull back. Run up and pull back run up and pull back. When the investor, starts to see more and more, and more, touches, over a period of time. And they really actually start to see where the macd, over time, is getting, shallower. On the bottom. And all of a sudden when that actually stock touches that support level more and more. It starts to build. The pressure, of breaking up through resistance. And when you take a look at let's say most of the touches here like on a stock like adobe. The stock really actually had about four to five touches, at right about, the area of about 424. 425. And the stock now kind of putting the pressure on the resistance. And now the stock is actually kind of more of a, continuation. Setup. And actually the stock today actually doing more of a bullish engulfing, candle. Closing, above the high of the low. Day. If it were to close here, so i want the investor's. Eyes. To be watching. Is the stock. Making, higher, levels of support, if it is. Watch the resistance. When the stock goes up to resistance. What type of candles, do you see. Do all those candles are they more bearish candles more bullish candles if there's more bullish candles.
The Investor, could start to watch and see if there's a potential, breakout. That could happen, imminently. Okay, so keep an eye on that i want that to be a practice, of the investor, focuses, on, so today we actually did some uh. Kind of checking on the paper money portfolio, to kind of make sure that it had exits. Okay. We also talked about, uh. What we called. The stupid, trade of the week. And it was zoom. And the paper money account, ate the humble, pie. Okay it did. And so, now if the stock could actually go back up to all-time, highs. It doesn't look like the stupid trade of the week, but it really got whip sawed, in that whip side. Whip saw of the price action. Shows that investing, sometimes is not easy. Sometimes, it could be financially, hurtful. And emotionally. Kind of swing the opposite direction, and that's what i'm trying to really show. And also, the paperwork account emit what happened okay, and we discussed, that, now remember that coming up in just a little bit, we're going to have uh have a class, let's kind of go back, and so uh john mcnichol, will be doing a class on long verticals, and diagonals, coming up right after this, so if you said james i'm kind of interested in some of the things you talked about on the verticals. John, nichol, is your man, okay, he'll be coming up right at the top of the hour so stay tuned for that. If you enjoyed today's webcast, and said you know james you brought a little fun today, okay, you kind of brought the stupid trade of the week, the paper money account admitted when it was wrong, and we kind of also realized that sometimes, the best thing is not always easy because it's not. And then we kind of also try to have an honest candid discussion. Man-to-man. Man to woman. That sometimes, the investor needs to monitor. Risk. And then we kind of had that discussion, he said i like that, well give me a thumbs up for this video. That's what i want to really do and try to make this paper money account. Really where we can kind of talk about trends. Paper, trades. And really how an investor might consider, in trading, trends. So with that said i'm out of my time here today, also remember, we demonstrated, the function of the platform. We also wanted to make sure that we. Needed to realize that also any investment, decision you make in your self-directed, account, so your responsibility. And also remember that all involve, all investing involves, risk. And make sure that you go out and practice some paper money, so you can find out what that risk is and also what your style of investing, is, so with that said thank you so much for your comments and your participation. Stay tuned for john. Mcnichol. Coming, up next. As he talks about long verticals, and diagonals. Thank you so much take care. Bye. You.
2020-08-27 04:57
