A Trade Well Played | Barbara Armstrong | 2-14-20 | Trading a Smaller Account

A Trade Well Played | Barbara Armstrong | 2-14-20 | Trading a Smaller Account

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Well. Hello, everyone, and welcome to trading a smaller account, my name is Barbara Armstrong, I'm delighted to be your coach, here today. We. Have a ton, to cover in today's class, I think we have a really interesting class. Lined up we, are going to be talking about the same types of trades that we talked about last week long. Haul verticals, and long, calls, so stick. Around lots, of great stuff coming up. All. Right, if you haven't done so already you, can see the Bluebird of happiness on, my screen you may want, to open. A Twitter account if you don't already have one and then, follow myself and the other coaches here at TD Ameritrade on, Twitter at B Armstrong, underscore, TDA we're. Posting interesting and informative, stuff. On the markets each and every day and you won't want to miss a thing so. Do yourself, a favor and put, that on your to do list if you haven't covered that already let's. Get right through our important information, so we can get to our agenda and, then get out to the trade tab and start, looking. At our current positions, and then looking at the charts hello, to Osborne and Charles, it is Valentine's. Day today so. Happy, Valentine's, Day to one, and all I hope, you're all are having a great day. Yeah, it's Friday the 14th, at 4:30. Eastern. So. I'm. Really impressed with all of you that are choosing, to join me here today live if you have any questions, don't hesitate to type, them into the chat the sooner you type them in the more likely I'll be able to answer them within our half hour together today, okay. First of all no options. Are not suitable for all investors as, there are special risks inherent to, options trading that may expose, investors, to potentially, wrap it in substantial, losses also. Know, that in order to demonstrate the functionality of the platform, we need to use actual symbols, and we do, however. That is it to be construed as a recommendation, I cannot. Begin to determine, the suitability of, any security, or strategy, for an individual, trader so, any decision, you make in your live account is on you. My friends, but I do encourage, you follow. Along place, these traits in paper-money it's really a great way to learn. Know. That a stop loss doesn't guarantee execution. At or near the activation. Price if it is a stop market, order it, can get filled at a different price know, that all investing, involves risk including the risk of loss, okay, so, what are we talking about today well, we have a long, position, that we put on last week, and I. Believe that was on, AMD. Ticker, symbol AMD, we're gonna look at that we, also have, several long, call vertical positions. On and, we're going to have a quick look at those and we're going to have a discussion today, on trade. Management, because it's one thing to understand, how to get into a trade and where, an interesting. Setup may present itself technically. It's, another thing altogether to. Learn how to manage, a trade, whether. It's profitable, or not so. Hello to rocky and Larry and Tim. Thank you guys all for being here and then, we're gonna place a couple of new trades so, if that sounds good to you sounds, good to me the objective. Is really to just deepen, our understanding of. How. To trade, both long calls, and long. Call verticals, okay. So let's. Get out to our our. Page, here and, I'm going to close, this for the moment so.

We, Have two types of trades currently, on actually. Three because, we, have one trend. Trading growth stock. One. Might also at. Least I thought we we, had AT&T. In here, oh. Maybe. We no longer do, we had AT&T. And. That was before Christmas, and then I I reset. The account okay. So we have a long call here on AMD. And, when. Did we place that call, well if we come out here and if you're not sure of when you've placed a trade. You can right click on it and then. Click view trade, and you can see that we put this in on, the, tenth now so we teed it up on Friday and, it, filled on Monday, and. We. Have a nice profit, in this I'm just going to close this so it's less distracting. So, at the moment you know how is this looking, well. We, got in this at a trade, price of 278. And often. When someone, when. When an investor. Or a trader, is long. A call, or they buy a call, they're, put they will, put a stop, in at, approximately. Half their entry, price so, in this case you, know if we're rounding if, we, had put a stop loss in on this it would have been somewhere in this neighborhood of, 140. Or. 139. And currently. It's, trading, at six dollars, and forty four cents so, we. Have a profit, an unrealized. Gain, of three. Hundred and sixty six dollars and 22 cents so. What. What. One of the challenges, is sometimes. With traders. Particularly. When they're new and less experienced. Is they see that kind of profit, and they, don't want to let it slip, through their fingers which, is wise. But. Often. With people, who are newer, to trading, what happens is they'll cut their runners, short. Their winters short and get, out when. The move isn't complete, yet and, then, they'll let their losers, run, so, if we look at this and. We come in and we look at our stop. Loss on this our, stop, was at one, forty six and, so. If we said well we were willing to risk you. Know a hundred and forty six dollars on this trade or a dollar forty six a share and if, we have a gain, on this of three hundred and sixty six dollars and that, gain, represents. A big move for us you. Know if you have a three thousand, dollar account, or a four thousand, dollar account, three, hundred and sixty six dollars is a ten percent move and we are talking you know trading, a smaller account, here now, our. Assumption. Is that this is a twenty, thousand, dollar account. But. If you take a twenty, thousand, dollar account. Four hundred dollars would represent a two percent move so, that's a big gain in a week, and, so, what, some investors, will do or traders.

Will Do they'll come out and they'll look at the chart and. They'll. Say okay today AMD. Hit a new six month high. And. We. Have this hammer. Pattern. Setting up here which, might, indicate. That. We might, see, a pullback now tomorrow, it could continue to move up and sometimes, that, absolutely, does happen. But. We, have a number of choices we can make here so. What some, investors, will do is they'll take that stop and they'll move it up well how far will they move it up okay. So you have some choices and one of the things that, and Chuck you've got it exactly he, that Chuck has typed into the chat move. Up the straw so. You, know if we take a look at this where do we want to move it to so. Some, investors, will say well I haven't seen a, bearish. Candle, on the chart yet so I'm going to move it up to my entry, price so, that even if, I you. Know this profit, unrealized. Gain ends. Up you, know disappearing. I want, to be sure I'm not losing any money others. Will say well I said, I was willing to risk a, hundred, and forty six dollars or a dollar forty six so, what I'm going to do is say okay. If this is trading. At 6:44. I'm gonna subtract, a dollar forty six so I'm still, risking, willing, to risk a dollar forty six, but. This. Is now worth six dollars and forty four cents. Sebastien, we aren't going to talk futures, in this class. But. Outside, of standard. Trading, hours, if if a futures trades in the after-hours, if you, have a stop-loss it can be triggered so, there's. A question from Sebastian. About. Excuse. Me stop losses, and if they can be triggered outside of regular market, hours, and the, answer, is yes. If. Futures. Are trading, and you have a, stoploss, order in there it can be triggered okay. So back to our topic, at, hand. And. And. By the way if you have questions and. You know this is the last webcast of, the day we're not back until Tuesday, you, can call the trade desk and they. Can answer you you know any questions, you might have for you so, if we went with that idea of okay. 644. -, a dollar 46 I'm going to grab my handy-dandy calculator. 644. -. A dollar 46. I'm, going to move my stop up to 498. Because. I not, only want, to have. A degree, of confidence, that, I'm, not. Going. To end up in the, negative on this trade I'd also like, to attempt. To protect. Some. Of my profit, now is there a guarantee if, I put a stop in here, that says you know I'd like to get out if this, becomes, worth 4 dollars and 98 cents, no. I mean. If, this were to gap down when it opens, the market opens on Tuesday. You, know we could end up out, at, a lower price and, theta. Is working. Anytime, we are buying, an option or long an option, is time. Our friend or enemy if you're, with me live would you please type into, the chat is. Time. Our friend, or is time working against, us friend, or foe, and. I'll give you a minute. Because I know that there's a bit of a delay, so. Even. If the price on AMD doesn't, change what can we expect. When. We get. A log in and look at this on Monday, so. We're going to put this back in our long calls, we. Said we want to sell this if this call becomes, worth, it's a stop order that will trigger, a market, order if the, value of this option, goes down to four dollars and 98 cents. So. The, other thing that I want to talk about and Charles, and Sebastian, you're right. You, know this is working, against, us in in, what. Kind of way well if we come up here and. I've. Got my basic, option, chain example, and let's, go in and customize this. And let's, add theta, to that. I'm. Gonna add theta.

So. We can see. That. For. Our. $50. Strike. Here. That. We're losing three, cents a day. So. If we're losing three cents, a day you know we'll, have lost 10 cents in value, by Monday, because, if theta. Works, on Saturdays on, Sundays, on Mondays it doesn't care if the market, is. Open. Or not yes. So when we're buying and, you know Osbourne. And Marty, and Larry and Carlos, and all of you who typed in time. Is, not, our friend. When. We're when. We are buying, and this. Is why when. We put this trade on like, how many days do we have to exit to expiration, on this well, if we look at this long call we, can see that we still have 35, days to go and so, why did we buy something, within an option. With this much time because, we'd like it to be able to have time to make its move and then still be able to be out before time decay really, accelerates. So. You. Know this is why we're, we. Suggest. Buying more time now, I just want, to go over some of the guidelines. Last. Week we talked about trade management. On. Long. Call verticals. And our. Example, was Netflix, and we still have Netflix, in our account and we're going to go in and close that one out so. What, I wanted, to do, is. Just. Clear, this if you'd like to review. That, you can look at this, go, back and look, at last week's, class, and. I. Will put a link at the end of this class, into. Last week's class so you can go back and watch it also Scott, Thompson, has, a class on Tuesdays. At 3 o'clock Eastern. It is fantastic. And he. Has one. Class that he did a couple of weeks ago on, long, calls and some, of the things to think about so. I'm. Going to put a link into that class at the end of this webcast also so if you're watching in the archives to make sure you watch to the very end there will be a couple of links there on, complementary. Classes that I think you'll want to take advantage of, okay, so what. Are some of the. Exit. Guidelines. So. Here. I'm just gonna write exit, guidelines, and if. I make a couple of typos, forgive. Me but we're trying to cover a lot in a very short amount of time so. Sometimes. If you have a target, and we didn't set a target on this how do I know because. We didn't put in, an O CO order, and an, O CO one cancels, the other we would have had a target, so if we have a target. We. Might just program, our exit, in write out the target, so when it hits our target, we're out or. If it hits our stop, we're out we, also may, want to, exit. If there. Is a, support. Break so. If it breaks support, one of our rules might be hey if this breaks the support level we, would exit, this trade and then look to reenter if it comes back above. We. Would if the trend changes. If we, especially. If we have you. Know a longer. Term call, if we're trend trading a long call if the chant trend, changes. And we. Are seeing lower. Highs, and lower lows. We. Might want to accent. So. And, I'm just going to put up here. Consider. Exiting. If. So. There's our third fourth, and. This. Is where a lot of people really. Struggle. So. Dale you're right so if it hits your target, or. If. It hits your stop.

You. Know and that's usually. We put these in at the same time or. So, and and this is where you. Know. If you put those in rate at the beginning and this, is where it's really easy it goes up and hit your target you're out if it comes back and hit your stop you're out but, what if it kind of wallows, in the middle, and I've, had people call, me back, you, know when we were doing one-to-one, coaching and saying you know I'm struggling, and, when we looked at it it was what I call the mid management. Strategies. That. People are sometimes less, disciplined. With so what do I mean by a mid management, strategy, so, here's an idea, if it doesn't, move. Fifty, percent like halfway. To. The target in half. The time. Then. Time, decay, will kill, us. Time. Decay. Can. Be brutal. You, know and it can start so even if the stock is going sideways the value, of our option, can, be decreasing, because of time decay. You, know it's chipping, away at our profits, so, maybe I should say time. Decay is chipping, away. Hmm. At our, options. Value, and. Then. The other rule. That, some, people employ is they'll say if it's, a long call and, we're expecting this to move bullish, ly. So. If, we see two down days in a row. If. One, is, well. I'm just going to say if two down, days, in. A. Row. Exit. And, some. Will say you know on the, first. Bearish. Candle. They. Will move their stop, to. One percent. Below. The low, of. That. Day, and. These. Are kind of mid, management. Guidelines, so Chuck if the stock doesn't move a certain percentage, and one, of the rules of thumb is if you have a target, you're expecting, this thing to move five dollars, in 50. Trading, days well. If it hasn't moved 250. In seven. And it's, just kind of languishing, and you know lollygagging. About then. You may want to accent. But. If you don't have a set of guidelines and. You're kind of trading, on hope or trading, on emotion, it isn't. A strong. Trading plan let me just say that and trust me I've tried trading, with a set of rules and I've tried. Trading. And ignoring, them ignoring. Them is not a strong strategy. Trust, me most things that don't work, I have, tried sometimes. Multiple, times, just. To be sure they didn't work so you know you you, can learn from my example if you so choose you know so so. Here are some of the guidelines now, let's go on and look at our long call verticals, and I. Just want to look at Netflix, we place. This order on Netflix, a couple of weeks ago so if we look at our trade, here we place this on January, 27th. And, we have only seven, days left to go now. Here's, another question, so get, your fingers on the keypad everyone. What. Is here's, my question. Why. Is this not. What. Is the absolute. Most. We. Can make on this. Netflix. Vertical, given. That we. Bought a call it 355. And soul. To call it 357. So. Our strike, width, is. Two. Dollars and fifty cents. So. We have a vertical that's, two dollars and fifty cents wide. And. If. We look at our mark. And here's. Our vertical, what. Is the highest this, number, here can possibly, be, we. Paid a dollar five to get in. So. What's the most we can make. Well. The most we can make is, a. Dollar. Forty five per. Share or a hundred, and forty five dollars a contract. So. The most we could make on this with, our max gain. Given. We have two contracts. Would. Be two. Hundred and ninety dollars. Now. We have a week to go. And. We're. At two hundred and seventy, one dollars. The. Most we can make is to ninety, yes. Dooney. I don't, know if I pronounced that Patel. You're, absolutely right, so the, highest, the mark can be on this is 250, and it's at 240. So. We've got you, know if. We get our handy-dandy calculator out. Again and, we, say okay, the. Most we can make on this let. Me get rid of my drawing, tools. Get. Rid of my watch list. And if, we come up here and say if the most we can make on this, is 250. And we've already got, 240. You. Know that's 96 percent, or if. The most we can make on this is a dollar forty, five and, we're, at a dollar 35, which might be a better way to look at it so a dollar 35. Divided. By a dollar 45. We've. Still got 93%. Of our profit, so, we're, going to take this example, and we. Are going to close it out because. We've got 90%, of our max gain and if we come to the charts, and we, look at Netflix we. Could say okay it's come up close to a previous. Resistance level, if we come out and look at a one-year chart on this, that. It's hit a couple of times and today, we have a candle. Indicating. That we. Might, be about to see a pull bot, this. Inverted. Hammer, or. We. May call it something different I don't know why we just don't call both of these things the same but, we. Have a candle, indicating, that there may be a a, pullback coming. You, know and so Tim is, typing.

Into The chat and he's saying his role is to close if he has 90%, of his profit, so, if this was, his, trade, in a live account he, would be choosing to exit, this and so we're going to use the example of we've. Got 90% of our profit, and even. Though we have a week to go we're going to put in an order to. Close this out and, to. To. Exit, this trade so. We. Can see that we are we want to sell the two verticals, that we bought at. 2:42, close this position. And. So. We're going to tee that up now. When we just quickly, look. At the others. We. Have AMD. Which. We're up by two hundred and thirty nine dollars on and again. If we come and we look at AMD, you know we did both a long call and a. Long call vertical so, AMD. Is trading, at 55. We, have 35. Days to go, as long, as it stays above. 50. To 50, we'll end up with our max gain so. We already, have something that we pay $2 for that, we could exit. For a dollar, 80 so. How much, and. You know what's our max gain, on this would be, 250. Right. So. If we look at this and we say well our max net, gain on this would be a dollar 50, we've. Already got half of it and we're, only, this. Went, in on Monday four days into the trade and, so. You, know if we look at this because this one went in Monday, also so. This is a case where you're saying okay I've only got half, of my max gain but. If I were to look at the charts, and. Again. We ended, up with AMD, hitting, an all-time high but, if it looks like it's going to pull back. Maybe. I'd like to take that 50%. Profit in a week, so. I had a 50%. Gain, four days on, a trade. That I was, willing to be in. For. How long for, 35. Days. So. Sometimes, people will say well if I've got 80 or 90% of my max gain I'm going to get out sometimes. People will say wow this has really moved and I've got 50. Percent of my max gain in a. Tenth, of the time four. Days out of 40, I was, willing to be in this trade for for, 39, days and, in four days I've got half my profit, I'll take, it. So. You know we're we, aren't. Going to exit, this trade today but. That is a thought process that. I'm just, I want to plant ideas. So. That's, AMD, now. With Costco. You. Know we see we pay $2 30 it's up to $2. 3, 12 3 15, it's already above that and we, only have one week, left in this trade so when, again our max, here is 250. We've, got you. Know over, half of our max gain so, in that case some might come out and choose to come out and look at the charts and say how, does Costco. How did the charts, look well. It looks, like it may be pulling, back and. So. Some might say you know what I'm going to put an order in to. Exit, this because. If I have, you, know whether you have a small account or not, you've. Got a hundred, and forty five dollar. Profit, here, on a. $20,000. Account that's, close to one percent 200, would be one percent and. So. You might say yes this is heading in the right direction but. If it pulls back and, if, it were to come below, this 312. I. Could, end up taking a, profitable. Trade and, turning. It into a losing trade how, many people want to do that, how. Many people want to take a profitable. Trade and end. Meeting market money to the market instead I don't, think I'm gonna see a lot of hands going up on that and so, what some people might say is well how much does, Costco. Move in an average day well. That's an excellent, question. Exit. Can I show the exit guidelines again. Absolutely. So. These are just some example, exit guidelines, and I can leave them up here and this. Is for a long call so. With this, we, could look at this and say how much does target or does. Costco, move in an average day and so, what I added, here was something called average true. Range, so. What does that tell me it's telling, me the. Average. Range. Of this stock over the course of a day, so, today. The. Range from, the, time it opened, its, movement, back and forth throughout, the day and where. It closed was about three dollars to 86. But. It's average, range over. The last how long over. The last 14, days that's what that 14, means that's, four dollars. So. If we're saying it's at 3:19. And where, are our, hour. Strikes. Well. If it if it pulled back for, two days and pulled back that average, amount it could easily it. Wouldn't, be you. Know considered a wild, move for Costco, at its. Current, range. To. Move either, up or down eight, dollars and, this. Candlestick, is saying we may may. Not a guarantee, we. May be looking at a pullback so. Well. When we come and we look at this and say okay 318. And, when, we look at our monitor tab, and say this is 315. Is our top strike, where we'd see our max gain I'm. Going, to use the example of exiting, this. Trade also. So. Rocky he, he, would prefer not, to take a winning, trade and turning it in to a losing trade and and Tim, feels the same way rocky, and Tim I'm totally with you. Yeah, so, let's. Create a closing, order for this so. We're you know we're looking to sell it at 202, and. What. Price did we get in at 130. So. If you look at that and you say what kind of return is that well.

If We take our 202. -. A dollar 30, a, 72%. Return, this is if we can get out for this credit you. Know we bought something for a dollar thirty and four. Days later if we had put this trade through today we. Got out for two dollars and two cents and made seventy, two cents that's, got to be about a 50% return, so. 72. Divided, by a dollar thirty. 55%. So. You know some investors, might consider that not a bad return. And. So. We're going to tee that up to close it out now on Tuesday. When the market opens, you, might want to go in and just make sure that this has not, changed. Like. Maybe it's worth two dollars and. And, if you want to get out you want to be sure you're getting out okay. Now. By, the way, these. Are, some. Example, guidelines, in the, interests, of time I want. You to be aware that, if. You go to Scott Thompson's, class he's going to talk, about some other things, that. Aren't on this list that are really worth adding. But. In the context, of our class we just are not going to have time to cover all of those things today but please. Do, yourself, a favor if you're interested, in a long call strategy, go. And watch the, webcast that I'm teeing up for you to see of Scott, Thompson's, at the end of this because. You'll have another four or five things added, to this list and they're, really important, and the number one thing is if your position sized, properly. Then. You're, way, more comfortable, at managing. A potential. Loss and managing, your risk, Howie, talks, about how am horton it is to get your risk right. So. Guys man. It's 301. So. What, I'm going to do is. Look. At just, super, quick a. Potential. Setup on Microsoft. And. We. Were going to look at doing both a long haul and a long haul vertical, but, we'll just set up an at the money long, call and then. Next. Week we'll discuss, you know our accent, on that and and, on, Tuesday. We'll look at adding. I will, go in and add a, long, call vertical also. In the, interest of time though we are just running short, on time so if we went out our 35, days and looked. At adding, and, at, the money long call, our rule, of thumb in this class is to risk not more than $400, which is 2%, on any, one trade so, if we bought one, long call. Here. Not, ten. One. If we, don't have a stop on this we're still under, that $400. So we'll tee that up for. Monday in the long calls and then, the second, one that I wanted, to show you was. Oracle. And Oracle. When we look at a one-year, chart we're, seeing a pennant, pattern, that's been you, know building, up for, a long, period, of time and it's just starting, to break above but, when we come in really up close and personal we can see some, tug-of-war. Kind of between. The Bulls and the Bears and so, we would put perhaps, a conditional, order on this saying hey if, this goes and just, as an example 20. Cents above today's high, of 55, 84, so, that would be 50 604, we. Might consider getting in on this one so 50 604, would be our conditional. Entry, to. Buy a long call and next. Week we'll talk about our target, on that. You. Know Chuck we could do a short put vertical, and next, week we may talk about short, what verticals. So. You know when you're looking at a bullish strategy, it can be a long call it can be a long call vertical it could, be a short put vertical or, it could be a short put all of these are bullish strategies, all of these trades, have different characteristics. You, know so we're. Looking, at this as saying hey if this goes up yes. It is closed on Monday did I say Monday, sorry. Folks, I intend, to be skiing on Monday, so, as much as I love all of you Scott. Thompson's, class is Tuesdays. At 3 o'clock Eastern. And they, are archived. In at the end of this I will put a link in so ok lickety-split, here, we go March. Oracle. 81. Cents so, we would do. 3, contracts, so, we want to buy a single how, many we. Want to do 3. And. We, don't know exactly what it's going to be in the interest of time I'm going to make these a market, order and we, only want to get in if, Oracle. Goes above, today's high, by.

How Much and just, using the example, for, today a buy at least 20 cents 50 604. And then. Next week, we'll put the stops in. And. We'll, put our target. In so to be, continued. Just, because we're out of, time today and I know you guys have Valentines. You want to see and things you want to do so we're looking to buy 3. Calls only, if the mark goes above 60, 50. 604. Otherwise. We won't end up in this trade and. Um. You, know we can go back and we put this in as a day order, we, could make this good till cancelled. Also. So we're going to do that so we've teed up two trades. Have. We done what we said we were going to do okay, so we, went in and reviewed our position, on AMD, we. Looked at the long call positions, we have and, we placed X's, on two of them we. Discussed, some trade management, particularly, on long, calls, which, was our focus last, week or this, week and next, week we'll talk a little more about long haul verticals, and then, we added not, one but two new trades so that is a jam-packed half, hour my friends appreciate. You being here appreciate all. Of, this stuff in the chat. It, just shows how much you are engaged, and last. Thing I think if you scroll up there was a survey, posted, if you click on that little big link, five, questions, it'll take you about 20, seconds to fill it out would, love your feedback so, as. I. Promised. I would do if you come back to the archives, right. Above my head you will see a link, to. Subscribe. To our channel you won't want to miss the thing so if you haven't subscribed you want to do that, there will be links to a couple of classes, you'll want to catch those also know, that options are not suitable for all investing, for. All investors know, that all trading has risk know that these examples are for, example only, and not a recommendation and, with, that my friends enjoy, the long weekend, enjoy President's, Day and I will see all of you back here next week take care everyone bye for now.

2020-02-17 12:14

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