Bullish/Neutral Trading Strategies | Trading a Smaller Account

Bullish/Neutral Trading Strategies | Trading a Smaller Account

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Well. Good morning, everyone. Welcome to 2022 Welcome to trading a smaller account. I missed all of you last week. Delighted to be with you all this morning, So we have a jam packed class lined up for you. So we are going to start by doing a little review of, um what we do in this class? How we do it. What are trading parameters are And then I hope everyone has a flexed their fingers because we are going to have a look at what's going on in the market and then play some trades that will take advantage of whatever happens to be in the market. And so there may be

periods during this year where the market or some particular stocks are down trending and we'll look at how one might be able to place trades to take advantage of that. If the markets up trade up trending or particular stocks are up, trending we'll look at how we can use the monies. We have To take advantage of that, and we'll look at. I think at the one of my favorite things to talk about is how the long term repercussions of what we do today and how that can have an impact on our future Selves. So if you're ready, type I'm ready into the chat. Um and let's get

ready to roll. I am so thrilled that so many of you get up to join me like pre dawn like the sun is just coming up here in Salt Lake City. To join me live each week, So good morning to Krishna and John and Mia and Nita and VJ and Red Solo cup in 85 14 and Doug and Krista and Lamar and Marcy and Frank and Kabuki and Ganache and Pete and Jack and saw and Ali and Blue and Michael and Catherine and Bill and Mansoor and the rest of the gang like too many for me to be able to acknowledge everyone personally, but know that I see you, rogue Dragon writer writer . I just have to say that because it just makes me smile your handle so Thank you. Thank you all for being here so and it looks like everybody is ready to roll which just warms my heart, guys. So if we've got Ken Rose

in the chat with us Ken Rose brings a wealth of experience. I can I continue to learn from Ken myself every time I have the privilege of watching one of his classes, So we are in such good company today, So if you've got questions, go ahead and type them into the chat. If you're one of the thousands that watch this in the archives, you, too, can ask questions. And or if you

love this You can type that into the comment section below you on YouTube. That's the first thing I do every morning is look at and respond to those comments. So the third way that you can interact with us and that we can connect with you outside of events like this is through Twitter. You can see above my head. My Twitter handle at

BArmstrong underscored. TV. A Kansas at Krose underscored at TD AHH. And you're missing a lot of valuable content. If you choose not to participate. It is

furry. So what more can I say? I hope you choose to take advantage of that. Okay So let's get through are important information because you know this is the first class of the year clean slate and I have a couple of things I want to share with you just because I'm in the driver's seat, and I can so I'm going to because these are things I wish someone had shown me a long time ago. And you can bet your sweet BEP I've sat down with my kids. And had some of these conversations because they're now young adults. Okay

so this content is for education and informational purposes only , um, this is not to be construed as investment advice or recommendation to trade any particular security or strategy in any particular way Now, given that this is an active trading class, and we place lots of trades, and we follow up on lots of trades No, However, we use predominantly options in this class options aren't necessarily suitable for all investors. There are special risks inherent to options trading. We discussed that with every trade that we place. If you are new to this class, could you just type of greeting into the chat so we can welcome you, but also know if you're new to tdameritrade, you have to apply for option trading privileges. We place all our trades on the paperMoney platform in think or swim, and that's a fantastic Resource that we have to hone our skills when we're looking at new trading strategies to us, right, Um but and it looks like smells like feels like we're trading a real money account. There are a few differences, and one of them is that with a short option, and we do a lot of short put verticals in this class a short vertical will or a short option will never be assigned ahead of time.

Um, in your paperMoney account, but it can be In your live account. And have I seen it happen? Yes Was it a cause for celebration? Not necessarily. But once you know what to do with it. You know what to do with that? You know, so anyway, that's that. No that all investing involves risks, including the risk of loss. Okay so having said that, um You know what's on the menu for today? And, you know, this always looks like just kind of you know, vanilla, right, But this isn't a vanilla class. We're going to

have a look at what's going on in the markets. I want to start by kind of prophesying. What are trading parameters are here and then I want to also talk about what that can mean Foreign account long term Okay, So we've got a bunch of first timers. So all I can say is welcome. Welcome Welcome, and hopefully you'll be so jazzed at the end of this. She'll be like counting down the days like the little kids when I used to play soccer that loved it so much they cross off on the calendar. Five more

sleep, So I get to play again, You know, Um, but we're going to discuss a few different trading strategies. And while we're doing that, we're going to place a number, of example, trades. So that's what's on the docket for today. Okay so I want to start by coming over here and you can see I'm going to come over to our trading a smaller account account. It's now at 20,000. And

last year when I if you look at my Twitter feed, I showed you how to reset the account. Um you know, we were just shy of 30,000 . And last year we did even a little better than that. Um you know, I think we were 31 or 32,000. And is that typical to have a 50% return in a year? No.

Did we have a couple of like bases loaded home runs or grand slams? We did not. Um we had a couple of actually trades that went south where we took a bigger hit than we typically allow ourselves. Um but we had a lot of what we call base hits like little winds, little winds, which over time can be significant? And I wanted to take a minute to just go over. What are kind of ground rules are in this particular class. So first of all for trading, a smaller account or assumption as we have a $20,000 account size, so we reset the clock to 20,000. And in real life. You wouldn't

do that, right? You wouldn't reset the clock. You'd say. Okay this year we're starting with 30,000. But we have a bunch of new people. So you know, we do this, and it always breaks my heart a little bit because you know we had some positions in there that we're doing, really? Quite nicely. And you know, we probably had a couple that weren't doing so hot. But um,

are Max risk portrayed is 2% Now some might say whoa, back the truck up 2. Like why would I risk 2% on a single trade? Now This is a small account, So 2% is $400 if you have a million dollar account. You might say I'm only going to risk you know, a third of 1. Or half of 1. You

know, so the bigger the account , the smaller this number might be. But if we don't aren't willing to take proportionately , maybe a little bit more risk than there are so many trades that we can't even place. So that's the kind of thought process behind this and you get a lot of, you know, stream of consciousness by barbed, for better or worse in this class, and then again, our max position size 5000 You may be saying again, like are you knew that's 25% of our account size? Well, do we do this often? Not necessarily. But maybe we want to buy a heavily traded stock like afford. And it's under $50 this year, and we want to be able to use a protective part or to be able to sell a covered call on it. And so on occasion

we do do that. But our rule is it can't be over 5000 and often like throughout the year we had half of our money sitting in cash. Now you know, If this were alive account, you might choose to have some of that money in an index take fun like an E. T f. We don't talk about ETFs in that class for that. You go to Connie Hill on Mondays at three o'clock. Eastern is the only class in the whole offering. You

know that you have to attend live. Is it worth going? Live? Absolutely. Monday's three o'clock eastern, Um, but you know, so we leave that money sitting in cash in this account . Now here's what I want to talk about, because you know we could have a year where things went down. The last two years. You know, we have done well in this particular class, but it's possible that we might not have done well. But this is what I want to show you the power over time. So I'm just gone out to money. Chimp dot com Compound

interest calculator and if we take our 20,000 and let's say you're in your mid twenties, and I know many of us are not, but let's just play along with me. If this had 40 years to grow Um and you know, on average, the S and P 500 over the last 50 or 60 years. Actually, this may be going up a smidge because the last couple of years the S and P returns last year the S and P return was 26. You know which is

was extraordinary. So we have if we let that grow for 40 years without even adding anything additional What could that turn out to and sorry for all these ads coming in? So that would turn into a million dollars. In 40 years or it could now you know, we never know what could happen with the market There can be pulled back in time. But

let's say we had an extraordinary year last year and so we're now we're starting this year with 30,000. And now we have 39 years ago. Now we're looking at a million 4 58. It's another 400,000 by having that Goodyear and in fact, in this class, we've had two good years in a row. And the year before. Let's just say that you know was a 50% gain it which it was. Now

we're at 40,000 and 38 years. We're at a million seven. So the point is, you know, and then let's say in in years three, you know we had a bad year and we were down 5000 and so coming into the third year we're now at 35,000, and we've now got seven years. Let's say this year we

lost 5000. Do we intend to do that? Of course not. Million three. So at the beginning these little bits where you're thinking it's gonna take me forever. And you know, like, but

I encourage you. This is a freed just come out and plug in your own numbers and some different levels of returns and etcetera. You know, it's you know, it's quite fascinating. And you know, when I showed this to my kids, it was a pretty powerful way to get them to start. You know, adding something annually If you just said okay, if even I just added an extra $1000 a year. What could that mean over time? You know another 400,000 by adding 1000 a year Now, this is a 10% return. You know, maybe

you're saying I want to have more balance. Maybe it's going to end up being seven. You know , but so play with it. Okay, so a little bit kind of outside of the typical conversation we have in this class, But have you guys all seen this before? You know, go ahead and type into the check because I think this is just very powerful stuff. Now. I also want to say this is an intermediate level class, but we've got Brent wars in the chat. Sorry we did. I thought we had can Okay. Yeah So we now

have Brent Moors in the chat and Brent Moors. He's a friend. He's a great guy and Yeah. So awesome to have Brent with us and grants Twitter handle. You'll want to follow. Brand is at the Moors

Underscore T d A. Okay, so let's have a quick look at the markets. Um and in you know, as we go to the SPX-- sorry as we go to the SPX-- Um I just want to point out this is an intermediate level class. Okay So you know this. I tend to move quickly here. And so if you feel

like you're drinking out of a fire hose, that's okay. And what I'll do is when we come to these trading strategies. If you're not familiar with that strategy , please type it into the chat. I'll take 20 seconds and give you a brief overview and then I'll put a link in the top corner to a getting started with options. Um class on that

trading strategy, Okay, so that's how we're going to run with this. But for the SPX-- I mean last year if you want to see how much it was up by if we come to this pattern, and it was Brent Moors that showed me this, So thank you, Brent for that if we look at the SPX-- over the last year, you know, we can see you know up about 26. And then if we come in, you know when it's now the sex, So you know we're shy a few days, but it's come down to the 30 Day moving average. We had a candle pattern that indicated it may be moving now to the upside. It may have

found support there. And today we've got you know a hammer on this 30 day moving average. Indicating you know that this support may hold but overall over the last year pretty significant uptrend and then for those technicians in the crowd. You know, they'd say, Well, I see a bit of a double bottom here, and it's broken to the upside. What's given some people

caused a kind of hold their breath a bit is that it came back down below this line. So people will feel I think some people might feel better when it crosses back above. But today, you know, starting out on the upside. Who knows where we'll be by. You know the time the day

ends. So the NASDAQ pretty similar. Only this, you know, and again over the last year, you know, just a little bit less than the S and P, um, but again over 20% and I've just shown you how a couple of good years like that you know, can really help us in the long term. Um and I

can get rid of this line. But when we come in up close and personal, you know, some might say, Oh, is this a triple top? That's the pessimists in the crowd the optimists might be looking at. Could this be setting up a triple bottom? And once again, it looks like it's finding support here around this 15 6 70 ish. Level Okay, So that's the NASDAQ. How about the gal? Well the Dow was actually looking the strongest of those three in that, you know, it came up and just two days ago so on Wednesday hit a new intraday high pulling back and some might say looks like a bit of a both flag here, But you know, as of this morning, it's down just a smidge. So you know, is it You know, setting up this bull flag or, you know, is it going to come back to this support level? The jury is still out. It's kind

of cross back below this line. You know, so we'll just have to see Um, and then I'm going to go to the VIX, and we're going to go to the rut last because that's going to be our first trade. Um And so when we look at the VIX, it's pulling back today , so it's back under the 20. And

it spent a lot of time in this 15 to 20 range with, you know, official You know the occasional jaunt to the upside. Um but it's back in this 15 to 20 range. So the last two days the VIX has been falling, meaning you know, after that initial fed announcement, um are people you know, calming down a bit and feeling a little better. Okay So now we're going to come to the rut and this is something that we started trading in this class because you know you can. There

are trades that are designed To take advantage of something when it's moving sideways, 85 14 you ? You're reading my mind. Well you know, we've done this if you've been with us for a while, we've done this several times. So really in you know, February of last year, the rut had had a great run. So this is small caps

and had come back into came back up hit a new all time high back in March. And then continue to, you know, started to go sideways and then had this. You know, John and you know, typically, the small caps do pretty well in December and January or November , December and January, you know , broke out to the upside, and then it was like, Oh, you thought this was a breakout? Oh, it's a fake up. Yeah and came right back down to the bottom of this range. And where is it

sitting now, while it came down the last two days. And it's bouncing. And so if we look at an iron Condor, is there anyone that's not familiar with what an iron Condor is. Because what that is a short Call vertical Up at the top where we're saying OK? We believe that for the next 20 to 50 days, and we tend to do these in around that three week time range because we really want to take advantage of time decay, so the advantage of being closer to the 20 end of the range is that time decay works in our favor more quickly.

What's the downside is that if things don't go according to plan, we have less time to recover. So we've got this shortcut vertical at the top and then a short vertical at the bottom Now on occasion, seeing as it's closer to the bottom, then the top. What we might do is leg in And say, You know what ? We'll put the short put vertical on today and then you know next week if it continues to move to the upside will add the short call vertical and you know what we may just be able to add both but some people when they place this, they look just at the probabilities. What we have chosen to do in this chart. Is in this class is we look at where support and resistance have been and has been around this 23 60 level and so that's really where we want our strike to be as above that 23 you know we could maybe even go to 23 50, But you know we want to be. We

don't want to put it here. Because this midpoint it's often come to the midpoint and then going above that. Okay So if we look at the bottom, the 21 30 ish level. Come to the trade and

we come out, say this 21 days. Ah and we're going to need a pile of strikes. So let's go to 50 strikes. So if we come to this 21-30. And say, Could we sell the 21-30? And then by the strike underneath we'll we'll get a dollar 10 for that, so that's over. 25% return. How do I know that? Well, if we bring our calculator when you start doing a lot of these, you kind of get More reasonable at the math, but it's you know if we can get paid a dollar five and we're risking 3 95. What's that

return on our risk? It's 26% And if our guideline on a vertical is, you know that we want, you know at least a 1% for each day. We're in the trade to try and make the time frame. Um palatable and it doesn't mean we're expecting a 1% gain every day. It's just a way of trying to make a more apples to apples comparison on the timeframe, So if we get a dollar on that side But dad on the call side. We want to come up to this like 23 60 ish level. Or at least this, you know, that's this is right now The odds are like 10% so well, we would make very, very little on that now if we said Well, what if we went to this? 23 50 level that's pretty close to where that was. So if we sell

a vertical there, see, we're getting half as much. And so if we think the Russell may go up for a few days, what we may choose to do today is just put the short put vertical side on. So this is called legging in.

And we're going to put it in the iron Condor bucket instead of the, um instead of the short put vertical bucket because we you know our It reminds us that our intention is to add this other piece. Okay And so, yes, we don't have scads of volume here, but this is a pretty heavily traded index. But liquidity you know somebody's typed into the chart liquidity is very important and options trading and some will have a general rule of thumb that they want to have at least 20 times the number of contracts that are, um that you're planning on trading Now, in this case, how many are we going to do what we're risking $390. How much can we make or can we risk We can risk 400. Okay, so we're just doing

the first side. Okay, so confirm and sand. And we're going to put this in our iron Condor group. There we go, and we're going to put a note in here We are legging in. Ah with the expectation that right will continue to move to the upside and will add short call vertical. Peace early next week

, Okay? Okay. So, Scott, um. I'm going to post something on Twitter on how to create those buckets today, So if you go and look on Twitter there will be, uh There will be an easy you know, step by step, but basically when we have something , you know I can come here and say, Oops, I put this in the wrong category. Oh, It's not filled yet, so I can't move it.

Um, I'd have to come to another account. So if I come to this one. So in I was going to talk to you mentioned this to you guys. So a lot of you, I know have much larger accounts and you're looking, you know, to trade actively trade a small piece of it. Well if you're interested in perspectives on, you know what one might do with a larger portfolio. I do teach Portfolio management basics on Thursdays at three o'clock e starting. You're welcome to join

me for that. We added four trades to our account. So if we looked at this one And we said We want to put this in a different group. You can just come down to move it to group and add a group and then name it whatever you want, But I will post something on that on Twitter today for you, Okay, a step by step on how to do that. Okay so that's our trade number one done. Where on that? So

let's see what's happening with the Fang today with Fang and this is one that we did a trade on in the other account yesterday. And um, we bought 100 shares of the stock and then we sold a covered call. But what if we looked at this and said, you know, the energy sector has been totally crushing it this week. Been way up, Take a look at that and has broken above the support level. And is it would we be shocked to see it? Pull back for a couple of days? You know, we would not, but when we come and we look at the Fang, um at this particular stock. And we say,

Okay? Here we are. Um could we sell do a short put vertical thinking, even if it pulls back that it's likely to stay above this all resistance becoming new support lines, So could we sell a short vertical at, say, 1 15. And would there be enough? You know, juice for it to be worth the squeeze. So you know, this one only has monthly's and some might go. Oh you know, Is there

going to be enough volume? Well if we look at the 1 15 we have 115 contracts. We aren't the first person to buy or sell a put on this at 1 15 today, Where is it trading while its trading $8 above that. And so if we looked at this and said, okay, 1 15. Now the volatility is really high on this, so I don't want to come out and say, Hmm, When is earnings? February 24th. Okay

well, you know, would we be out of this before that? So, yes, we would. Um And the only other option we have here is to do a 14 day trade and there may not be enough money in that for us. So if we looked at this, and we can come back to you know what This was so we could look at this. They could We do the 1 15. Now if this goes south again, very little time to recover, and we're looking at risking $4.20

to make 80 where if we come out here 45 days, which is longer than we typically, um, will do a trade in this class for a short put vertical But if we looked at that, and we said okay, A dollar 50 were risking 3 50 because it's a $5 widespread and that's our only choice. If I take 1 50 divided by 3 50 that smells like about a 30, some percent return. Well actually, it's 42.8. So if

we round up it just meats are one of like what some people might have as a guideline, saying, I want to get at least a 42% return if I'm in it for 42 days. And so if it meets that we say, Okay, we're good with that . We're going to come in. We're going to put our exit in break when we place the order because we do only get to meet for 45 minutes every week, and that's not a ton of time Is it? Okay? Yeah So, John, once you figured it out like I post little tips on think or swim two or three times a week on Twitter and stuff like that. On the other thing, I will say because John has just asked a question put a comment in the chat, saying it took me forever to figure out how to add a group. It took me two forever to figure out a lot of this stuff, too. So I tend to post on Twitter. These little

tips like things that were like revelations for me. Um and with a Here's how to the other thing . If you're stuck, and you know you, you don't have access to me. But you can place you know, just ask a question on Twitter. That's a great way for, uh You to reach out to us, Um and I'll post something for you. But you can also call the trade desk and they're really great for questions like that, I'd say after the market hours is probably better. But we're going to put an exit in here and say You know what? When we've got 80% of our Max Caine, we're going to call it a day. We're

good to go and we're going to take our risk off the table and we're doing one contract because that's how many we are allowed to do without risking more than $400. Confirm and send. We're going to put this in our short put vertical bucket. And you know, as a note, we might say, um, uh, 42 days. Two expiration , maybe longer than usual for class. But um, a 42. Max Gain

potential, You know? So these are just notes. You write from you to you. Yeah. Okay? So fire in the hole on that one. All right. Two I wanted to look at builder today. So you know, the

building industry has been doing really well. This particular stock I think we had in, um, our portfolio and it did really, really nicely for us. Um in the portfolio management basics class. I mean, we were up 40 or 50% on that last year. Um you know, and there were other stocks that you know, were a negative investment, And that's the way things go sometimes.

Right, But what you want to end up having is war winners than losers is the idea When you're wrong, You want to exit quickly . So with this one is pulling back today when I looked at this yesterday. I thought, Oh, here's an opportunity for us to do a short put vertical under the 80 mark. But given that it's pulling back today, that would be considered a more aggressive entry so we could look at it. But then you know for those that are new to this strategy. Like if I come back to Fang, and the concept is the same here, so we're gonna zone in So we have put a short put vertical at 1 15. So I'm going to get rid of

this drawing. Alright. Should have just moved it, Um. And so the idea is. And I'll just move this and we're going to call this 1 15. Change that. And so we've done this short put vertical that expires February, 18th. Um 1, 15 1 10. February, 18th. So the idea here is as

long as Fang stays above, we have a profitable trade. So if it keeps going up, we're you know, happy campers if it starts going sideways. We're still fine . We're still happy. The only you know where we get into non profitable trade is if it goes below 1 15, but it's currently trading at 1 23. So it's $8

above our strike so we can even kind of be a little bit wrong and still have a profitable trade. And so some investors or traders would say, looking at builder, you know, I just want to be sure and I would wait for the bounce. And so we could look at this again Monday, but we're not together Monday. So if we

say okay, old resistance, I think this new support will hold. Um and again entering today more aggressive as it's pulling back a bit after the hammer candle yesterday, But if we said if we come out to and again, this is one of these Dang monthly's So have we had you know some action here today? Well 140 contracts. At the end, and this is one where we may want to give it more time, because if we only give ourselves 14 days, if it does dip below, not much time to recover, so if we looked at this and said, Well, could we sell that 80 and the 75 we get a dollar 70. So we're risking 3 20

. That was, I think, even juicier than the other one. Now you know, So how much could we lose on this? That's a 50% return on our risk. Um you know , but we could lose the entire We could lose $330 on this. That's over 1% of our account.

You know, so we've got to, you know, be mindful. And so we're going to come in place our exit at you know we could make it. Um 80% of our max gain. We could make it 90% So if we're saying, you know when it gets to the point where it's worth about 35 cents, you know, we've we've done well on this. Um and we

would like to accept So we're going to go ahead. Put that in. We're going to do one. Yeah and guys, there's a lot I want to cover. I know Brent is doing his

best to answer all the questions in the chat. What I will do is, um, you know, ask your question if it didn't get answered when it's archived going and ask your question in the archive. And then I can answer at length there. You know, And don't think there are any bad questions. My challenges, sometimes a time constraint. You know, it's just a It's a time constraint. And so

we might say here more aggressive entry given it is a red candle right now. Okay but general trend. Is strong and, um , short, bad a resistance. Support we're anticipating will become a support level. Okay? So Fire in the hole on that one. Okay There's one last one. Are

you ready to do one more? Because we've got like seven minutes. We could do another one. Okay so, Devin last year and you know if you come out to my Twitter feed Um, I try and host yesterday I missed because I was covering for some other instructors. We have a lot of people not feeling well this week. Um well, they're just downright. There's a nasty,

nasty bug coming around. Um. Going around, But I will post things on different stocks and I tend to post one or two things a day. This was an inverted head and shoulders on visa. Um, this one we put in our Portfolio Management Basics Signature bank yesterday breaking out, you think or swim tips, But Devin was one of them that the s and P was up over 27% Last year. Devin was the number one stop. And I think I had posted something on Devon and Fang was in the top 10 also, and so we just did a trade on Fang. These are both energy

stocks. Um and then I think I posted a chart on Devon. Also here was Devin. And um, you know, When we looked at this, I just said Hey, you know, inverted. Could this be an inverted head and shoulders? And you know what might the expectation beyond the move? Um And so that was a couple of days ago. So let's go and see what Devon is doing now. Given that

you know, I joined the markets when you do so we're seeing it. It's you know, kind of hovering . So this was another one. Where in the class Yesterday we did a buy right covered. Colin I think it would be cool to do that in this class and this is in the right snap bracket for us, even though it was up phenomenally last year. You know when the number one stock in the S and P 500 You know if I come out, and we look at the year on it You know, up from $16 to 48 so and what we've seen many times with this start. You know when we come in, and we look at it. Is you know, it'll have a move to the upside, and then it kind of consolidates, and then it moves to the upside and then kind of consolidates. And then it moves

to the upside. What was it doing here? Kind of consolidating that, you know, inverted hadn't shoulders pattern. And now it's kind of moving again. So if we look at this and say OK, it's treating at you know, 48 39.

Could we come in here to the trade? TOB I just want to show you some different trading strategy, So I thought this might be an interesting way to start the year with three different trading strategies. But could we come in, you know and sell the 50. And you know we could come out just 14 days here. You know, there's 55,000 contracts at the 50. And if we were in this for just 14 days, we could do that. Or we could

come out. You know, we could do weeklies. Now. Weeklies don't tend to have the same kind of volume right? But this is such a heavily traded stocks. Still

even on the weeklies. The berus spread is last Um, you know, or we could come out to February. If we sell the 50. We get to 63 for it, so we get twice as much , but we'd be in it, you know? Three times as long So if we looked at it, and we said, if we wanted to do this as a short term strategy We come in, and this is called buying covered? Stop So the idea here is, you know for the stock to go through our strike. And to end up being called out, so one can do this as a way of saying, Well, I like the stock, but I'm afraid it's going to pull back. And so if I sell the call, then it helps offset the price. You know, I'm

not saying this is how your account would look at it. I'm saying this is the conversation you might be having in your own head. OK but some might say, Well, I'm going to work at this. And my goal given that I think this is going to continue to go up is The goal is for it to go right through here and for me to end up having to sell it. And

you know, the first time I heard of this strategy. I thought it was the dumbest thing I've ever heard of. Like, Why would you buy a stock You were bullish on and then sell a covered call at the same time, which is kind of more of a neutral. Strategy or

short term barrier strategy. So if we buy it, and we sell the call, and it goes through, how much can what's the most we can make, and we're going to do that calculation. Well, what if it pulls back to here? Well if it comes back to this, like 45 ish dollar level than this call would be worth less. We could just buy it back. We made a little bit. We've had to pay that 65 Cent transaction fee to get in and out And then if it bounces and goes back up, we can sell another call. You know, and

if it breaks below here, we might say if it breaks below here, not going in the right direction We're going to accept if it goes 3% below there, so that's kind of how the thought process on the trade. And how we look at it. So if we come back here and we say Okay, 47 45 So the most we can make on this trade that we might only be in for how long 14 days. 14 days.

If we did the January 21, so the most we can make is $2.53 sets. Well, what does that represent? As a percentage? Well we're going to come here and say Okay , I could make $2.53. On an investment of 47 49. Per share. So that's a 5% return, potentially potentially 5.3%

return in 14 days. So if you're having this conversation with yourself and saying, you know self, this could be like what Barb refers to as a base hit. You know you're not drinking something out of a coconut and Tahiti, you know, but it's 250 to add to my bucket that I can continue to invest. Okay, So if we did that we said, okay, we'd be cool with that. Now What if it goes 3% below this $45 level , and we say, you know what? We've got to define our risk. So

if it goes 3% below that we're going to exit this trade. So if it hits 43 65 were out 43 65. We're going to call it a day. So

how much are we risking wolf? 43 65. I'm going to subtract 47 47 . Now, Of course with this accent. There's not a guarantee We're going to get out at exactly that price. But are we

within this $5000 Max? Position size parameter check. Are we in the realm of the $400 Max? Loss Check. So check check. How I got the percentage number was I took . How much can we make on this? Well, the most we can make we get called out. If it goes above

50, we get called out at 50 bucks a share. We're getting in at 47 47. So then the most we can make is the difference between the strike which is 50. And 47 47. Well, it's now 47 50.

So when I subtract one from the other 2 50, then to get that that as a percentage I take 2 50. To get as a as a return on my rest, and I'm dividing it by 47 50 or a return. It's actually return on investment because my risk is In the neighborhood of 400. So I'm risking 400 to

potentially make 2 50. Is the idea. Okay, So how do we put that accident? Single order? First sugar sequence, Right Click opposite order. We're

going to make this a market order because we don't know exactly what that call is going to be worth that we have to buy back. But we're going to say Hey, if Devin goes out or below 43 65 not going in the right direction, and we're going to call it a day. You want to make sure that this shows up down here if it's less than or equal to make sure you got your signs, right? Or else you'll get in and you'll end up out right away. Confirm and sand. We're going to put this in our by right bucket.

There we go. Okay so, guys, I will make sure that feels there we go, King. Um I will make sure that that feels so it's filled. I want to thank you for joining me today. If you were new Know that you have the option of this just being something that you attended, and you can like happy having a beer with some friends six months down the road and say, Yeah, I did this thing the first week of January. I really

should have kept going. Or you can choose to link arms with us. I think we have a lot of fun. Um and we're figuring this out together. So if there are new

strategies that these are new for you, I'm going to post when we talked about the by right cover call, I will post a link in the top corner to the by right covered call class. I'll also put it in the comments section in the archives a link to the long getting started with options series are also put a link. When we talked about the first short put vertical to the That Okay, So if you enjoyed this hit the like button, please subscribe to this channel. Turn

on notifications. And then you'll know when this class is coming up like as if you'd forget. At least I don't forget . I look forward to it every week. So, guys, that's a wrap for today. Um just coming back, You know, Keep in mind. I think

we did what we set out to do and a little bit more. We placed several trades today. We got four on the book. So now we have some stuff to follow up. With

next week. But keep in mind that, you know, and I hope you placing these in your paperMoney account but know that all of this is for education and informational purposes only, um , know that options carry a certain set of risks with them. We need to be aware of that. Okay so and make sure that you manage those accordingly. If you haven't had enough of me today, I'm filling in for Connie Hill on getting started with stock investing in a couple of hours at noon Eastern I think it is so Hope you choose to join us for that. But thank you, Um, a year. Future self will be so glad that you've chosen to participate in these huge Thank you to Brent Moors also, um, can't wait for next week. So guys have an

absolutely awesome weekend. Stay safe, hugged the ones you love and I'll see you by the way Monday. Okay Sorry. I didn't mean to digress, but Monday. I

teach long options at noon Eastern and I'm going to make that a companion class with this class, so I will try every Monday to add at least one long option trade to our portfolio. The other classes I teach throughout the week like Conte's class at noon. I won't add those to our portfolio. But the Monday long options class I'm going to treat as a campaign yin class in a sense to this one, so that we can meet a couple of times a week, So hope everybody's cool with that. I took a little vote the last class of the year. You

guys were all on board. So yeah , that's what we're doing. Okay, Take care everyone by for now.

2022-01-09 21:04

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