Trading Futures | John McNichol | 9-9-19
Good. Morning everyone john McNichol here and welcome to another week of webcasts. And we're starting off today with trading, futures commodity. Futures options stick, around. You. Okay. Well good morning everyone whether you hear live or listening to the archive session do appreciate you being here good morning Pierre Paul and, everyone. Else that's logging, on today as well as listen to the archived, webcast - appreciate you being here hope you had a great weekend, let's, take care of her disclosures, and we'll get right into it. Meredith. On presentation, is for education, purposes only and is not a recommendation, or endorsement, of any particular investment, or investment strategy. Past. Performance, of any security or strategy does not indicate or guarantee future success, now. In order to demonstrate the functionality of the platform we will be used in actual symbols keeping, in mind TD Ameritrade does not make recommendations. Or determine, the suitability of, any security or strategy, for individual traders any, investment, decision you make in your self-directed, account, is solely, your, responsibility now. While this webcast discusses, technical analysis, other approaches. Include fundamental, analysis, may assert very different views and as, always all investing, involves, risk including the, risk of loss futures. And futures options trading. Is speculative, and it's not suitable for all investors please, read the risk disclosures that's provided, for you here at the bottom of the page as, well as futures and futures options train, services, are provided by TD Ameritrade, futures and Forex. LLC. Those, trading privileges are subject, to review and approval not, all clients will qualify, options. Are also not suitable for all investors as, the special risks inherent, to options trading may expose investors, potentially, rapid and substantial. Losses carefully. Read the previous body copy of characteristics. And risks of standardized options, spread, straddles, and the multi leg option strategies can entail substantial, transaction, costs also. Advanced option strategies, often involve greater and more complex risk than single leg option trades and, investors. Should also consider contacting, a tax advisor regarding. The tax treatment applicable. To spreads and other multi leg option transactions. And. Transactions, are certainly part of trades. Particularly. If you're an active trader those transaction, costs can add up and one. Needs to be, conscious of that also. We're, utilizing a demo account for our practice, trades it, looks like a real account but it is not you, have the ability to practice as well with the paper money software, which for educational, purposes and successful. Virtual training, of actual, funds during a later time period. Does. Not guarantee successful, investing of actual funds during a later time period as those market conditions, change, continuously. And. Since. We're looking at various asset, classes asset. Allocation and diversification, does. Not eliminate the risk of experiencing. Investment, losses. There's. My background for those you that are new I this. Class may, be a little, more advanced, if you, feel anything that we discuss here is over your head would, refer, you to our getting, started with futures with, Barbara Armstrong, that, is every, Tuesday at, 11:00, a.m. Eastern, time and you, can access, that on the same, trader. Talks webcast, in, fact when you're on the YouTube if, you click on subscribe, you'll be able to see not only this session but all of our other webcasts that, are associated with the trader to talk Channel. So. We're going to learn today what, we'll do is we'll take a look.
At The SMP, futures starting, things off in the morning see, how things are settling, out and then. We'll transition, into. Discussing, options, on, some, futures we'll take a look at crude. As well. As gold two, of the more widely traded, commodity. Contracts, that are out there we, try and hit some of the various widely traded contracts, each and every, week and so we'll focus on again. Both crude, and gold for today we'll look at some of the characteristics of those futures, we, will look. At the impact of economic and, government reports how we can pull those up we. Will utilize the fine risk, option, spreads, and position. Sizing then, we'll look to identify, potential entry, exit and trade, management, techniques your. Learning, objective, for today, after this session one, should be able to place a risk, define, spread. On a. Commodity, future. All. Right let's go ahead and we will go. To the platform first. And. Kind. Of a Murphy's. Law I, was. Actually. I was. Actually short. On this account an SP. Future. Overnight. And. Went. Ahead and closed it out just before the market opens usually when I teach these classes is to try, and be flat we're, trying to zoom in on the chart here and. We. Can see some of the overnight, price. Action. Going. From Friday. After. The market traded. Down at the opening, you, know a little more of a trending day although went back and forth, as. On. This 5-minute chart on the S&P futures prices, were making higher highs and higher lows. When. The, futures. Had opened, on. Sunday, night, that. Trend had continued, a bit of a pullback to. A daily. Pivot and. That. Daily pivot had helped implying. More. Bullish. Bias on. The upside there and. Had. Traded all the way up to the. Next. Level of resistance, on the. Daily pivot. On. The opening prices. Have. Dropped, down, almost. Coming to that daily, pivot, although. There is a consensus, for various. Traders on looking for another, run, to. The. 3000. Mark we'll. See if that occurs. As. Far as with the opening, drop. Down, 5-minute. Chart trying to form more of a hammer some traders may look to trade in, between this range if there's a test of that pivot, and. See. If prices are able to reclaim some of those highs if, I go ahead and bring up, let's. Switch to a daily, chart. I'm. Gonna remove the studies here for, a moment. And. We'll bring up a. Daily. Chart. If. You follow us in some of our technical, analysis, a. Webcast. Technically, speaking which is later on today at. 2:00. P.m. Eastern Time, also. If you look at some of the various tweets, myself. As well as some of instructors, have put out over, the last couple of weeks you know a lot of talk of that. Rectangle. Triangle. That. Range, that the markets been in that, we did break out of I, believe. Last, Wednesday. Going into Thursday and there. Has been some follow-through. Expectation. Is that traders, may see, unless. We kind of zoom in on this one a little bit here I'll go to the go, to the big board on this one here I think. This is the first time utilizing. The big board for our futures. Here. So. A lot of talk of. The. Pattern, as far as resistance. This. Has been a little more of an ascending triangle as price, action has made some higher, lows throughout this period of time based. Off the size of that range. You. Know going from. Resistance. Down to support, some. Traders may look for an attempt, to reclaim some. Of those previous highs. Wouldn't. Be surprising. To see a little, bit of congestion which, we may be seeing as. Far as from the highs from the overnight. Looking. Back to this. Distribution, day. That. Occurred towards. The end of. Towards. The end of July believe that was around July 30th, they're kind, of one of the first big long-ranged, a sell-off days you know the midpoints. Of those candles, have a tendency, of actin. As, resistance. And you. Look at the high as, far as on today. On. The. SP futures is at around 29, 91, currently, and. That, three thousand, mark which is a psychological, area. Of. Support. And resistance it. Would essentially be bisecting. Into that range so we're, only about. 15. Points away from that there so. We'll see if we're able to get a break and hold above that 3,000, may, give an opportunity to, possibly retest, those highs, alright.
Let's Go ahead and get, back on with the show here. Good. Morning you Dianne Ashley. Raphael, Orlando, thanks for being with us. Go. Ahead and shoot back down to that 5 minute chart. And. As. Far as with the studies. That. We're sharing, here. We. Have an example of pivots. On both a daily, and a weekly. What. I'll do is I'll go ahead and, share, this chart. And. I'll put this over in the. Chat. Field here. Or. I should say the, scratchpad. So. If you want to practice utilizing. Some of these tools here, you're, more than welcome to and for some reason let's try it one more time. It's, a six character field there, and. What this is is a five-minute chart with. Daily. Pivots. Represented. By the purple. Line, and. So. Far that daily pivot is holding and on, the 5-minute you know possibly seeing a bounce. And then. Also the, weekly. Pivots. Representing. Ranges. From the previous week. Current. Weekly pivots down around 29, 53, so. We're quite, a few points above, kind. Of more of that weekly, support, there so, starting, off the week as far as bias being, above the daily pivot as. Well, as above the weekly pivot. May. Support some upward momentum, the. Inverse of that is looking. To see if this, range, breaks down and. The. Tests of those are attempt to test those highs may. Be short-lived. All. Right so kind of a brief overview there, on the. S&P. Futures there. We'll. See if we have some time possibly do a technical. Setup, on this I'll. Probably focus a little more on that in about two weeks, next. Week I'm a good friend, Mike. Follette we'll be covering this futures class as I will, be out, of town on military, duty for about a week looking. Forward it can be coming back and then what I'll do in, two weeks from now is. We, will go ahead and focus on, technical. Entries on some of the index futures on, utilizing. Tools such as pivot points as well, as Fibonacci. But. Our topic here today, is going to be on. Some. Of our various commodity, options, and. Here's. Kind of a general slide on, comparing. Options, on futures to, options, on equities, so, those are you that are already trading. Equity, options trading. Options, on futures is. Not a big stretch here in. Fact, they could probably even go ahead and focus on the big board here as well. Kind. Of a couple of things to keep. In mind is, some. Of the benefits of futures, options, are. The diversification. Not. Only can one trade. Options on equities, but in the futures market various. Other asset, classes. Everything. From not only indices, but energy, interest. Rate futures, metals. Currencies in agriculture. All of these are some, examples, that we try and cover each and every week they're.
Also. As, far as capital, efficiency. Utilizes. Span margin, which evaluates, the trade based off of using a risk based model, takes. Advantage, of some of that leverage, there and. In, a, lot of cases one. Is able to control something of greater value with. Only putting up I believe typically, around a three to four percent of, the, value. Of the. Of. The, notional. Value of, those, contracts. Now. Also another benefit, is trading. Virtually twenty-four hours a day not. Only in the underlying contracts. But the options, as well can. Be traded now certainly, look, at things such as liquidity, as we do on any, instrument, that we practice. With is making. Sure the ability to get in and out of the trade is, there. Also. For those year they're very active there's a no pattern day trading, rule, that. Applies, for equities, trading as, well as on. The. Equity options there where. You, know one can only do four. Day, trades and a five day rotating, period if, their, account, is less than 25,000. Also. Looking, at expiration, now, the thing that keep in mind as far as expiration, that's different, on, commodities. Is that. A settlement. In. A, future. Option, may, result, in a, position, long or short of an, underlying, future, contract, which, would have to be managed, closed, out TD. Ameritrade does not allow the physical, delivery. Of, commodity. Futures, there so for instance if we were in our example today if we're, doing, trades on the. Energy, future, we. Would for, instance crude, we. Would not be able to take possession. Of crude, oil, if. One doesn't close out those, future positions, once, closer, to expiration there there, would typically, be a force liquidation, by, the, broker there so, that way there's, no physical delivery, whereas, on options, on equities, they, result in a position in the underlying stock or they, may be cash settle a lot. Of the in the indices, as well on futures, options are going. To be cash, settled, all. Right now. Let's go ahead and continue. On and. Let's. Have been go forward on our slide here. Now. A couple of things to consider here this, is the contract. For. Crude. Oil futures. /zl. As. With all of our other various. Commodities. There, there's, going to be a multiplier. So. Looking at a multiplier, is, the. Premium. Multiplied. By. That multiplier, in case of crude that's going to be a thousand, dollars. The. Tick size the dollar value. Tick. Size is a penny and since, it's a thousand multiplier that means each tick is going to be $10. There's. Your trading hours which is typically 24, hours a day, now. The other thing to consider as far as with, futures. Option, futures options is, the daily. Settlement they're. Not necessarily, going to be the same as the equities, settlement. Or the equities close in. The case of crude the settlement, is going to occur somewhere just. Shy up to about 1:30. P.m. Central. Time. Also. Understanding. When the end of trading, occurs. In. This case on crude trading, is going to terminate 3 business days before the, termination of, trading. In the underlying, futures. Contract. At 1:30. P.m. Central. Time now this is something important to note ok. The. Trading, terminates, three business day before, the termination, of the underlying, future, so, if there is a assignment. And one. Actually, takes. Possession, of a, underlying, futures contract, there's not a lot of time to. Close, out that position. So certainly. Would have to be actively, managed, if. You fall under, this. Settlement. Anacs expiration. Will result, in a position in the underlying futures, contract, and as mentioned, one. Would have to close out that futures, contract. Prior. To expiration. Otherwise. And. Certainly, if it's in the money would. Result. In a settlement. And again TD Ameritrade does not allow physical, settlements so that would be liquidated, prior to that. Some. News that impacts.
Crude. Futures. American. Petroleum Institute report, comes out every Tuesday at 3:30 p.m. Central Time. The, EIA. Petroleum, status report Wednesdays at 9:30, Central Time and the. Baker, Hughes, rig, count comes, out every Friday so, the first, two are going to be dealing with, the. Drawers. Kind. Of the supply. And demand. As. Far as with crude you. Know how much crude is available, as well as what's been drawn upon, kind. Of given that balance, as far as supply and demand. The. Implication. Is is if, there's more of a draw on. The. Availability. Of crude. And those stockpiles that. May put pressure to, the upside, whereas, if there's an increase in supply of, crude. And not. As much draw then. That may put some more downward, pressure, on those, prices, now. The Baker's Hughes. Rig count basically. Demonstrates, on how many rigs, are in operation and that may increase, as. There's increase, in demand on. Petroleum. Products and then you may see those rig counts drop, as there, is less, of a demand now, that's kind of a move, and target their implication. Is that if there's an increase in rig count, that. Ports ports points, towards more demand. However. It may get to a point that there could be an oversupply. Likewise. If, rig counts are being reduced, that implies that there may be less, demand, but, at some, point supply. May get to a point that, may. Be outstripped. By its, demand. All. Right now, what we can do is let's look at an example of. Crude. We'll look at the chart will look at some other tools that we can utilize on, the TD Ameritrade I think or swim platform there. And. If you have any questions or anything we're discussing, here today would certainly love to hear from you. And, SP future settling, in around that. 2983. Mark, I think. That was similar to the practice entry that we did last night. I'm. Going to type in /c, l. And. What. We'll do is we'll go ahead and start off with a daily chart. Now. Notice when I switch to a daily chart if you have tools like pivot points on there you know these tools are more for intraday. Periods, of time such. As hourlies. Half hours, 5 minutes sharts. We. Can go ahead and right click on the chart. Go. To studies, and, remove. All studies. If. We take a look. We're, looking at a one-year chart at, the moment here. And. You know just applying some of the similar, technical, analysis, that we may apply on other, instruments. Technical, analysis, is universal. Regardless. Of the instrument, there, I'm. Gonna clear out the drawing set. And. They, look to compare some of the highs and lows that may be in the trend. Now. If one struggles, as far as identifying some, of those highs and lows another, tool that we bring up in our technically speaking under. The pattern tool, will. Select. Patterns, this is in the upper right of the chart. And. It's. Part of the candlestick. Area. Here. And. I'll go ahead and type in. Williams. Fractal. Williams fractal, we'll double click and add that. Default. Settings are sufficient, and we'll click apply and ok and, you'll go ahead and see these little fractal, points on the, chart now. If we look at it from a standpoint of, over. The, course of going back to the spring, we'll. Take our drawing tools and. Kind. Of connect the dots. Now. You may see some penetration, on, different. Areas there you know what technicians, have a density of doing is trying to incorporate, you, know the majority, of the, price action. And. Looking. At some. Of these declining, highs. Focusing. On more recency. Looking. At the lows lows. Have been rising. Form. In more of a triangle. And. If, we take a look at. So. Try and get that to stick there, we go. And. Potentially a break, of the, downward, trend. Over. The shorter term you. Know traders may be looking at these. More, recent, highs here and. A. Breakout of that range now. This is just today prices. Can certainly fade, back into this pattern here. Some. Traders also may look at volume, to. Accompany a breakout. And. Looks. Like the last volume was. Testing. Down off. Of some of those lows and come and offer them with, a reversal. The next day. Volume. Has been, steadily. Increasing. As. Get, up to that resistance, there, now. That could be both buying, and selling occurring as prices have pushed off of that so. Currently. Downward. Trend price, rallying, up to that resistance, potentially. Breaking. Getting. Above some of the more, recent highs, over, the last month. Now. If we go ahead and take a look you know what can impact, some of this price action for, the rest of the week we. Can go ahead and go to our market watch tab and. Go. Ahead and look at calendar. And. A couple of things we can pick up here on. Futures. One I, mentioned. Earlier about the. Assignment. Of an underlying futures, contract, well there's a calendar here, for futures. Liquidation. Futures, liquidation, and, I. Can go ahead and plug in. /c. L4 crude.
And. Look. At a monthly view and. For. September. Thursday. September, 19th, this. Would be the futures. Liquidation, date for. The. Underlying contract, for Ford /v, 19. Like. So if I go to the trade tab. Essentially. These, contracts. The. Ones that expire on September, 4th as well. As the one. For. October, 19th, if one. Takes. Possession, now. Notice keep, in mind even though it says October, when, does this expire. Expires. In eight days. If, one, ends, up having an assignment. Into this underlying, contract, it, would have to be liquidated, no, later than September. 19th. Now. If we look some of the examples that we may be looking at today or possibly, going to be further out in time. That's. Going to the next contract, /c. LX. And. If. We wanted to see when that contract needed, to be liquidated, we. Can go back up to market watch and. That. Would probably be in the next, month in. October. And. Let's go ahead forward one month, and. If, we do a, spread. And. For. Some reason there, is an assignment. The. And the underlying position, would have to be closed, out no later than October. 21st. And. So if you learn something new on that as. Far as with futures, liquidation. Let's. Go ahead and also take a look at. Account. Of day events, these. Are kind of more of the new, events. Now. These may not be tied to the individual. Future. Symbol there so we'll clear out that, information. There so. Make. Sure there's no symbol and then. Looking. At, various. Weeks. So. Try and go back here back, in September again. Clicking. On a Tuesday, there. We. Should see some information. On. Some of, the energy. And. Here on Wednesday, we, have on, wrong. Date late let's actually go back one. Let's. Go make sure we're looking at September, and let's, look at the current week. We'll. Take a weekly, view. And. Go. Out to, September. 8th through the 14th. There. Go is it go through the week here. Here's. The I petroleum, status report. Which. Should be coming out around the 8:00 a.m. hour I'm gonna go ahead and close this out a little bit looks like it's still a little truncated, there with, my fonts, here. Sometimes. You may not see the whole times there so that everyone can see it but for, some of the information gets blocked off if. You go to the far right. You. Can bring up the show, event details. And. You can see what some of the previous. Reports. Were as, far as inventories, weekly change a negative, number is more of a draw. So. For a previous week there has been more of a draw which, may imply crude. Prices as far as going higher, if. We're. Seeing those supplies increasing. That. May point towards more supply and they may put some more, downward pressure. You. Can also go ahead and review. Some of the descriptions here as far. As how petroleum. Prices, may be. Impacted, by supply and demand. If. You go to Friday. Here's. The Baker's Hugh's. Rig count. If. I click on the information for that one show. Event details you can also typically double click and I'll bring that up. You. Can see the rig. What that, did not like that let's try it one more time. And. We're. Having a little bit of an issue here. Look. At the computer it computers. A little, bit ahead of me here, you. Can see some of the previous rig, counts for North, America, US, Gulf of Mexico, and Canada there so it's broken down as far, as total and then, within the North American region. And. Then. Once the report, comes out later on this week traders may compare, these. Numbers as far, as those counts being up and down. You. Know we are in hurricane, season as well that, can also have a near-term, impact. On. Crude prices. So. That's how we can go and bring up some of the news another, thing we can also look at too is seasonality. And. If. I go ahead and on, this chart we can right click. Go. Down. To. On. The. Chart itself. We. Have style, and. Chart. Mode on, the. Chart mode we can change this to seasonality. And. What that's going to do currently, what it is showing is. In. Green, is the, current, future, contract, we're looking at. And. Let me say I can actually do this on the big board. If. Some limitations, on some of the, drawing. Tools still trying to master. On utilize, it on the chart but on this seasonality, chart, in green. This. Is actually, currently the. Forward. Slash CL, that we're looking at right now the current crude contract, that current price action you can see that pattern that. We already identified, the. Other line. Represents. The. Five-year. Average. Of. What. Crude has been doing at this, time. Over. The last five years on average so, as we look at this example from a seasonality, standpoint. The. Implication, is that crude. Has, a tendency, historically. Of rising. As we, go into, you October. Now. There's, also a, drop, that, seems to occur towards the end of October, and continue decline now that's on average, that's nut doesn't necessarily happen every year nor, is it a guarantee, that it will continue, to happen but it's looking at that average.
Now If we want we, can change this, chart let's see if we can do it here. By. Changing and seeing the breakdown, of that 5-year average I'm going to click on the gear, on the. Chart. This. Falls under, appearance. This. Is where you can bring up your candles, you hike annachi you, can also change, the chart mode which, notice it currently does say seasonality, you, can go ahead and change it back to a standard, chart which, would be your candles, go. Here click on seasonality, and. In. The. Display, its default. Into the average. Now if I want I can bring up the yearly. Bring up each of those years along, with that 5-year average we'll. Click OK here and we. Can see look at some of the trends. That may, occur, over. Different, periods, of time I'm, going to just try and zoom in on this one a little bit here. And. We'll, bring this down in now, lines may be a little bit fine for. Your viewing pleasure here, but I'm gonna go ahead and highlight a couple of these as, far as with different years. You. Know this year. Or. That's the average right they're kind, of flat to up. Let's. Go ahead and use a little more green there. Looking. At other years, we've. Seen some. Upward moves. We've. Seen an example of it being flat a. Little. More up. You. Know with one example seem. To been dropping, down or two examples of dropping down towards the latter part of October an, example. Of it going up so you, know going at least, into, possibly. The early part of October. You know the implication, the average, has been more. Up again, no guarantee that that will occur some, traders may speculate, that those same patterns, may. Occur again and again now, if we want to go ahead and change our chart back we. Can do this whether do a right-click and, go back to that, chart. Mode or we click on the gear on the chart go. Back to appearance and. Change. Seasonality, back, to a standard chart. All. Right there we go alright as we can see we're, still pushing, up up at around that resistance, there. Now. If we wanted to go ahead and, do an example. Of. A spread. Trade will do a define risk trade well, apply some of the print same principles, that one can learn. In. Our options, course. If. I go ahead and go to the education tab and. On. The left-hand margin where it says options, select options. The. Trading, options, course, has. Some, of the very, similar. Define. Risk spreads that, we're talking about here today. For, example a. Vertical. Option. Where. A long vertical or a short vertical, can. Be applied to commodities. As, they can be applied to, equity. Options so. Whether it's futures options or equity options can. Be applied the, same way. However. Understanding, things such as multipliers, and settlements, and all that would. Be some distinguishing, factors. So. Let's, say in the case of crude. We. Go out and look at, going. A little further out in October. You. Look at about 25, days out on the. Sell. Side if one's looking at selling options you know they may be looking at selling. Upwards of you know 20 to 50 days out to try and take advantage of some of that time decay. And. If I go about 25, let's, bring up some of our deltas, here under, the layout. And. Looking. For an example of. If. We're looking at a matter of the bullish trade that price is breaking out and holding. That support, we. May be looking at, strikes.
That Are out of the money on the put side to. Sell on, a short put vertical. Example. The 30 Delta has a strike, of about. 55. Now. Just, as we've made discuss, in, our. Verticals. Class which, is every Wednesday. At, 3. P.m. Eastern Time. Ideally. Is looking for a strike that is at, or below a. Support. Area so. The 55, would, be right here which is actually right inside the pattern kind of more of a mid price so. The assumption is if price is breaking, out, that. This broken, resistance, becomes new support, and price would. Potentially, hold this, area. If. I go ahead and look, a little farther out we. May increase our probabilities. But may not have as. Much of a. Return. On risk. Let's. Go and look at a couple examples here if I right-click on. This. One here and I select. Sell. Vertical. Knows. It's showing at a 50, cent a. 50. Cent spread but. Remember there is a multiplier. And. There's. That thousand, multiplier, it's shown in the, option itself here. So. It's not 13, cents, it's. Going to be 13 cents, or. 12 cents times, a thousand, so. That should if I click on the confirm and said. Should. Be somewhere at around 120, 130 dollars no, some maximum loss is going to be the spread. -. The credit received. That. Would also translate, into return. On risk we. Take the 130, divided by 370. That'll, give us our return. On wrist and let's go ahead and. Do. That but. We're able to do. 130. Divided, by. 370. That'd, be a return on risk with 35% now. Some traders on the sell side may be looking for you, know a minimum, return on risk let's. Say for some of our examples we're looking for a minimum of 30%. Now. If I go ahead and look. At a little more of an, out of the money option. Let's. Say we go ahead and go to, trade. Tab here. And. We're, gonna go ahead and take a look at a little, further out let's say, is. A 20, Delta, so, if I go ahead and right-click on the 20 Delta. And. Go. Ahead and select sell, vertical. On this one. Notice. It's less of a credit. Even. Though our probabilities. May be greater and also, the return on risk would. Be less, in this case 90. Divided by 4 10. There's. One other thing we could potentially do here if one was. A little more. Neutral. On. This. Chart. May. Be expected, that price may be a bit more range, bound, we. Can possibly go ahead and look to do two. Verticals, sell. A call vertical and sell a put vertical that would be called an iron Condor. And. That's. Actually an example of one that we had done, for. Those who have been following when, we did our interest, rates believe. We did this one. We, had done this on. The. Treasury's. You. Were looking for Treasuries potentially, stay in. A, bit, of a range there. And. We'll actually have to take a closer look at that and, what's currently showing some profit there we'll have to see where we're at on that let's. Hope we do the same thing on crude. I'm. Gonna go ahead we're going to go to the trade tab once again. And. On. A condor, one, may typically go a little further out, on this. Since, we're doing both a a bullish. Trade and a, bearish trade at the same time. Well. You know one trade would have a maximum gain the, other trade potentially, could have a maximum loss both, of them would not have maximum. Losses, if. Price kind of stays in a range, then. Both, of these positions, are potentially profitable let's. Say we can figure something out on this one. Let's. Go ahead and look at some of the price ranges, here. So. If we're able to identify, a. Spread that, may stay. Kind. Of a little within. The. Range that we saw. Over. The last month or so there's no guarantee, that we may find a spread. That's going to give that. Same type. Of profit target. So. We'll go ahead and look on the. Trade tab on the put side. Around. A 20 Delta that would be at around 53 and a half I'm, gonna go ahead and select sell. And. What. We can do is select, that vertical. And. Then. Go on the call, side and do, the same thing. Look. At one that's a little closer to that 20 Delta this is around 61. I'm. Gonna hold down the control key and I'ma, select. Sell. After. Right clicking. Vertical. And that'll. Go ahead and construct that, Condor, there. Now. If we wanted we can also widen. The. Strikes, as well and. That. May. Give. A little more of a credit, however. It is also going. To potentially increase the risk, as, well. Let's. See if we can get a balance, on here. Trying. To change this fifty three and a half and. We got a little bit of lag here. Nope. Actually wrong one let's do. Fifty. Four, and a half. Go, back to trade tab make sure I didn't, click on all right yeah fifty fifty.
Three And a half to fifty four and a half. Notice. As we go further out not much of a as much. Of a credit. Here a. Little. Bit of a spread as well, I'm. Gonna have to go ahead and let's say bring this back in. Let's. Go to 54. Now, some traders may also go ahead and skew, one. Side. Versus. The other as well. I'm. Gonna go ahead and try and keep this the same. I think part of problem here as well is I. Think. I had a buck and a half on the one side there nope. That one's not adding up either. Okay. Let's just leave it at the. 50. Cent's here. On. The, call side I'm gonna go ahead and let's, make these both the same. So. Right now it's showing upwards of about 80 cent credit times a multiplier if I have to confirm and send, this. Will give us our maximum. Profit along with our maximum loss, we. Can figure out a return on risk it's. Gonna be 180, divided. By 320. 180. Divided. By 3. Xx. That's. Gonna be about a 56%, return. On risk, now. Keep in mind there's. Also a bit of a spread here we may not be able to get that 22. Cents also. With. A try. That again. Also. Keep in mind with. An. Iron, condors, these are multi, Multi, legs spread, there. Are going to be transaction, fees associated with that both. On the end in the out I'm, going to position size this to a maximum, loss. Based. Off the size of our account, I'm. Gonna position size this, will. Do, I'll. Do one percent. Which. Should equate out to being about 3,500. If you have a smaller, account it would be based off of whatever the. Size whatever you're willing to risk on that, next tray so, I'm going to edit this and we'll. Increase, that. If, I do 10 as an example the, maximum loss on this is gonna be 3200. So. I'm gonna go ahead and click. Send. We'll see if this gets filled. And. Looks. Like we did get a fill your results may vary with this Oh looks. Like there's an expiration that was not available to trade that is interesting. May. Have been the. 61, let's go back and take a closer look on why there's. Not a quote coming through on that. Maybe. In the 61 quote not given a price there. Let's. See if, I can do that with the. Hmm. You. Know happen, in real time here so let's see if we can figure out what's going on with that. Which. One it rejected. There. And. We'll go and we'll try and wrap things up missing. Out on gold here. Des. 261. C. 1/2 53. Okay, 61, has a quote. If. We're looking at 54. I'm. Not sure why. Well. Maybe because we're looking at the know. Enough. To go in troubleshoot, that and see if I can go ahead and figure it out I want to take anyone's more time on that on.
Why It's being rejected I must. Be missing something on that let's, take a quick look at gold. Good. /gc. In. The case of the gold contract. Different. Multiplier, we. Got a hundred, times. The premium. Tick. Size is going to be ten dollars and, you. Can see the remaining. Contracts, right here a, lot, of the impact on gold is interest, rates and the Fed and, certainly. With the Fed taking a dovish tone gold. Has had more of an upward momentum there. So. We go ahead and go back to the platform. Gold's. Kind of showing right at a potential. Area of support. And. As we're trying to identify. That. Level. All, right we had a little bit of lag going on transcend. Get caught up on that. Now. Prices may hold support they may break below there if. There's a if. There's less of a concern for inflationary, then. You know goal may continue, fall. In there if we're looking anticipating, some support. Let's. Go ahead and we'll do a simple. Vertical. Trade, on this one, we'll look at a. Put. Vertical I'm. Going to go out a little bit further out to 49 days. And. We'll. Look for a delta. Closer to 30. In. This example 1485. If. I right-click on 1485. And we'll select sell, vertical. This. Is a $5 wide with. A buck 80 credit, keep in mind the multiplier. Over. On the, left. Here is 100 so, that should be a, hundred. And eighty. Dollars. There's. The maximum loss, 320. And. Looking. At the price levels. For. That 14. For. This objective the, trade, would have to stay above that, short strike for a maximum, game. Looking. At the chart for, 1485. That. Spread, would be at, or, below. At. Least a current support, no. Guarantee, that that level will hold. But. Essentially looking to see if gold is able to stay above that level, over the next forty. Nine days. We. Can also position size this, as. Well. With. The maximum loss of being 330. I can. Determine what percentage I'm willing to risk. If. I did one percent that, would be approximately about ten contracts, on this, example on our, practice account. Or. If I want to look at kind of more of scaling, in on. Upon. A position. We can go ahead and reduce that let's say make it half. Some. Traders may also use this as part of legging into maybe an iron condor if. There's a bounce in a rally and then gold backs off may, look to sell possibly, a call, spread so. I'm gonna go ahead and do this we adjusted our maximum loss to about 1600. There's, our commissions and, we'll. Go ahead and we'll click send. Alright, so that one got filled off to, go ahead and, take, a another, look. At. Why. Our. Condor didn't get filled but, I'll just see if I can troubleshoot that and reinitiate. That so we can follow up with it next week so, there's some of your considerations. For commodity, futures options if you're. Already trading options. If. You're already trading options. You. Can use the same strategies, for options as we demonstrated, here today. After. All an option is an option although. What happens, on assignment. Or at expiration, may, differ so we just need to understand, those, underlying contracts. Reviewing. The economic, calendar for government, reports as we did in the case of, for. The energy, contract, on crude now, in the case of gold, one. Should be keeping an eye on some of the other government reports, what the Fed has to say. Also. Possibly comparing against other instruments, like Treasuries, I can. Look at those relationships. There now. Most, commodity options are american-style, which can be exercised, or assigned any time for expiration, much like some of the equity options.
Contract. Specifications, will vary on those contracts, as we've shared with you here today there, is a link on the TD Ameritrade website as well as with the CME Group com if, you want to learn more although we try and provide you some of the latest and greatest in. These webcasts, as well. And. Let's go ahead and, wrap things up on the day let's, see if we have any questions. Jose, says. John. If. You have time for a question why, does TD Ameritrade start out with. Covered, calls and cash secured puts when, trading regular calls and puts is significantly easier is, it. The margin. I, you. Know as far as you know where it starts. You. Know. One. Can start anywhere when, it comes to trading options. Jose. One. Of the aspects, is with, cover, calls and cash secured puts many. Investors, may, have already owned, stock, or, potentially, want, to own stock and so, strategies, like a covered, call and or cash occurred put our ways, for, one to potentially, manage, a stock, position, whether, to potentially get out of the trade or to potentially, get into a stock by utilizing, those options, while also, possibly, generating, some income a great, follow up for you on that would. Be attending, Ben Watson's. Cover. Calls and cash secured puts which is after might technically speaking today his. Session will be at 3 p.m. Eastern Time, so, as. Far as easier, or not easier, you. Know I guess, I maybe in the eyes of beholder there but we do teach all these various strategies there thanks for that question there. All. Right and I don't see any other pending questions here. So. Let's go ahead and we'll wrap. Things up for today. So. Today we learned about some of the characteristics, of various, options on commodity futures we just focused. A bit more on crude, today touched, on gold but we'll continue to go over these, contracts, and play some practice trades along the line, we've. Looked at some of the impact of government reports, as well, as seasonality. We. Did a defined, risk option, trade on. Gold, did a short, put vertical and we'll. Go ahead and we'll see what we can do about the iron Condor practice trade for crude and. Looking. At identifying potential. Entry exit and, trade management techniques, and we focused on the entry, today, as. Far as the exits, a 1 may be looking at a potential. Maximum. Game, determining, what, gain. You're, looking to get in. The case of our short. Verticals, we're, looking to try and capture at least, 50%, of. The maximum, game so I'm target may be targeting, closer to 70. - 80 % there. So. For instance on our. Zn. Trade. Which. Is we, did a Condor on the Treasuries, if.
I Go ahead and, right-click. To. Create. A close in position. Originally. On our, call, spread. The. Call spread we, had sold. 26. 30 seconds, and. Or. 64 and bought. 19. So that's a net. Credit. Believe. 26, - 19, that, should be about. Seven. About. Seven points. There. Now. If I go ahead and look to take. That. On. This. Order here, on the, call side. That. Spread is only worth a. 64th. Right now which, is about. $62.50. So. The original. Trade. Had. A maximum gain. If. I do the math right. 6250. Times. Seven. That. Would be four. Hundred and thirty, seven, dollars and fifty, cents. That, would be the maximum, gain now, if I went ahead and multiplied. That by. 0.2. That would be an eighty percent maximum, game. That. Would be about eighty seven dollars and fifty cents so, I'm actually at a profit, target, for, this side of the spread so I can go ahead and close this out for. Our, price. Target there and. We'll. Go ahead and attempt to close that out. There's. A little bit of a, spread. There so it may not fill right away may have to go back and close it for two. Ticks there and. Likewise. Looking at on the put side. This, was a a net, of about. C26. About. Eight ticks. Or. About. 864. Ser if. I go ahead and attempt to close, out the, put side of this. Notice. That one is a little more on the negative there. So. We're, gonna have to just wait and sit, to, see if we're able to lock in a game but overall that. Position, is showing, some gains and we'll. Continue managing that and. Actually. Says is there a minimum, to. Purchase. A futures, option. One. Would just have to have the equity, to. Place. That trade, as far, as the the minimum. For. An. Account, I, should. Have that information in front of me I get dyslexic, on it so if. You go to the TD Ameritrade website. Which. I do have on the page here. One. Can, go ahead and. Go. To client. Services, and under. General information. One. Can go ahead and, apply. For. A futures, account through here all. Right well, we're out of time folks. Remember. In order to demonstrate the function of the platform we have use actual symbols keep in mind TD Ameritrade does not make recommendations, or, determine, suitability of any security or strategies, through the use of our tools any, investment, decision you make in your self-directed account, is solely, your, responsibility so. John McNichol signing out folks coming up at the top of the hour Cameron, may with. Getting started with technical analysis, so see you soon bye. You.
2019-09-12 21:48
