Longer Term Breakouts of Channels | Technically Speaking: Trading the Trend

Longer Term Breakouts of Channels | Technically Speaking: Trading the Trend

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[Music] hello welcome to trend thursday my name is james boyd welcome everyone here today to technically speaking on trading the trend weeks to months alongside with me my good friend michael fairborn in the chat and uh it's great to have him here hello bj sarah bill shu george texas lisa and others lisa how you doing my goodness gracious uh great to have you here helen uh as well uh maddie jeannette ganesh charles and many others hopefully you're doing well hopefully you're staying safe out there as covid rages on and uh yeah it's not a bad time to kind of just uh take some incoming deliveries from ups and fedex and stay safe out there all right just real quick as we're getting started this class really focuses really on intermediate longer term trends but it's not going to be blind to what's happening in the short term so we're going to talk about those different types of trends but we're going to really be focusing on weeks to months looking for those longer term trends where maybe investor wants to have maybe a longer holding period and try to ride those longer term trends now if we actually get started here today what we want to kind of focus on is the this content is intended for educational informational purposes only also remember not investment advice recommendation of any security strategy or account type options are not suitable for all investors special risk inherited trading options know what the rights are the obligations what the deal the option greeks are as well also remember if we talk about short options short options can be assigned any time up to the expiration regardless of the in the money amount uh remember the in the money option has a higher risk of being assigned early but you've got to remember is the investor would still get all of the premium if that were to happen so also remember when we talk about uh paper money examples we will be using the paid money platform here today for educational purposes and as we get started here today we really have two focuses okay number one focus that we're really gonna be talking about here today is we're gonna give a quiz on management okay so i have a number of positions some stocks some options and i'm gonna give you the stocks and i'm going to ask you what it is how do you manage the position stops targets everything and we're going to fast fire through those so be ready the last 25 minutes or so we're going to talk about all new positions i got about 10 stocks or so that we could pull from where we're going to take a look at these trends from a daily in a weekly perspective so let's just hop right in and the first talk i really want to kind of talk about just briefly now we know that we started this portfolio last week we started the margin and the ira over at zero what i want to kind of do let's kind of kind of warm up a little bit here i want to kind of take a look at the example of eog okay now i know you you might be used to me kind of talking about the markets we'll kind of interlace that as we go but our first agenda item is we're going to talk about these positions so what is this position on eog can anyone actually tell me what is going on here so we got looks like stock and it looks like you got a short call so what type of position do we have hello uh amanda and happy repairs so if we take a look at that what is that okay so be ready on your keys be watching and kind of say okay 500 shares of stock 500 delta short the 97.5 call with a negative 343 348 this look very covered call like now this has a february expiration okay the 97 50 strike stock price currently is at 103.24 how come someone's not taking the shares okay now remember is someone on the opposite side of this short call they could they're long they have the right to exercise that long call if they wanted to even prior to expiration so how do we manage the position well we want to kind of go back to this and kind of say what we need to really find out is we need to kind of do the math and what is the maximum gain well let's kind of run those numbers we'll bring them up stock was purchased where was that stock purchase at stock was purchased at 94 and you can see the date 94-68 the short strike is at 97.50 okay 97.50 so we need to find the stock appreciation and if we look at the option premium that option premium is three dollars and 30 cents so what is that stock appreciation well from 94.68 up to

[Music] 97.5 okay got to pull out my trusted calculator here so if we look at these numbers i want to actually kind of see how close are we to the maximum gain maybe might the investor consider taking the maximum gain and if we do that it's 2.82 now let's pull this up on a little sheet of paper here so we're good and what i'm going to do is i'm going to bring this up right there so if we take a look at this let's kind of zoom in and see what's going on and see about the management of the position the expiration for february that's not good enough to really kind of tell us is how we're going to manage it we might have a high percentage of those max gains already so if the stock were to go up to 97.50 it's 282 that's the stock appreciation 330 that's the option premium add those two together and it's gonna be about six dollars and twelve cents so we wanna ask ourselves this is for every hundred shares every hundred shares so if we had now by the way how many shares do we have well if we take a look at this we have five contracts okay so five contracts so if we take a look at this it would be six hundred twelve dollars for every hundred shares and we have five of them so that means that that maximum gain would probably be about how much yeah and i'm coming to the extrinsic value just a sec the maximum gain on 500 chairs would be 3 000 one three thousand sixty dollars so when we look at this right there 1952 okay that's what the current p l is unrealized gain maximum gain was 3060 how much of the maximum gain do we have now well right now what's the maximum 1950 1900 of that 3 000 it's probably right around 64 of the maximum gain okay now if you were sitting in a position with 64 percent of the maximum gain might you consider holding it profit-taking on it right now let's kind of go back to what someone was saying let's go back to this let's we can kind of speed this up a little bit but if i were to look at eog and say i also want to see what the extrinsic value is and this is very wise to do this why does the investor want the extrinsic value okay so there's two sides of this trade number one whoever is long they want intrinsic value okay whoever is short wants extrinsic value that extrinsic value is the implied volatility and the time and if you take a look at that is how much more could you squeeze out of this option well it's two dollars and 34 cents okay if you had two dollars and 34 cents and there's five contracts there's right around the thousands so that's really how much more we can make okay so tell me should we just kind of keep this what should we really do tell me what to do okay now remember if we kind of take a look at this and say okay what's the trend of the stock is is still in the upward trend we also might kind of ask ourselves well how much of this would the investor maybe want to try to get and try to profit take now i'm going to kind of throw something out of here wonder if the investor said james i'm trying to get 80 of the maximum gain do you know what that would be well if if if that if that gain was 2400 which is 80 of 3 000 the investor might say i'm going to take it off because they're in a cap gain strategy okay now helen says exit vj says keep it medi says keep it okay so i got more saying keep it than not but i'm going to kind of put a little uh let's kind of put this out here that on eog if it goes to a unrealized gain of let's say twenty four hundred dollars it's gonna profit take on that position because it would be 80 of of the cover call okay does that make sense so this one right now coming really close probably want to put this in the calendar and say hey keep an eye on this and uh let's just kind of watch and see what it does here okay but it's coming closer to that 80 now let's go to for example gm just real quick tell me what type of strategy this is what do we got what type of strategy and i'll highlight this what do we got six contracts 64 days to expiration 18th of march is the expiration 60p for the pet and it's short okay now if we look at this delta in this position it's a delta of 215. that

positive delta is telling us we're in the fullest position and the stock if we kind of take a look at the unrealized profit loss it's really down dollars which says this is probably down about a dollar from where he was initially entered so this is a positive delta trade check theta positive and what you'll notice is in this account there's quite a bit of theta that's been kind of stacking up where we're trying to get that time decay we're not just trying to benefit from let's say uh direction trying to also have some potential gains from time decay now if we look at the position that's down we should get out no we wouldn't say that okay this is not it's down it's about it's down about a dollar okay now if we go back to the chart tell me what you see on this chart okay now here's where i'm going to kind of bring in the daily chart but i'm also going to bring in the weekly chart now what strike was that again the strike was the 60 so let me kind of draw this 60 and what you'll kind of notice is it's right there that's where the obligation is to buy the stock now that's what it looks like on the daily chart and if we look at the weekly chart this is what we see three year weekly that's what what it looks like so would you just say a you're down one dollar on the shares okay sell because you just want to avoid the loss or b handle the fluctuation be willing to take the ownership of the shares and just let it ride baby i know that's what some of you are thinking okay now that's not uh so if we take a look at this gm is just fluctuating it's only down about a dollar okay and if we look at this it kind of looks like it's trying to maybe bounce off that 10-week ema now when we take a look at the earnings right there on february 1st here we are about two weeks prior sometimes we like to look at the obviously the technicals of the stock itself which still look pretty bullish weekly chart probably stronger than daily chart but we also kind of look at like to look across the street and look at let's say it's twin cousin ford and if we look at let's say ford ford actually breached the 100 billion threshold here today and so this is where the industry group is actually kind of interesting where ford might try to help gm okay so a lot of you are actually saying james just let it ride okay and maybe try to potentially own those shares at the ste right price now let's kind of for example take one more and i want to go down to this one okay it's not necessarily the good ones it's the ones that are for example tough and and learning how to manage these positions i want to actually take two more okay this position right here let me just highlight the main piece of this it's a long call with a short put okay long call short put forget the upper line above that what is that strategy okay long call short put that is your classic long synthetic okay and in a long synthetic you have two bullish positions okay the long call and the short put in this position it's really down about fifteen hundred dollars the delta is about 184 okay now you could kind of take that loss fifteen hundred dollars and divide that by 184 to kind of see how much are you down per share from the where the entry was now if we go back to this chart we want to go take a look at let's say dollar tree briefly and say should this still be in the paper money portfolio and we also kind of want to make sure is there a stop on the position so if we go back to this and say okay is there a stop is there maybe a reason to alter this we're going to go back to the monitor and what you'll see is i don't see an order here the order would be like a target the order would be like a stop and if we go back and take a look at this we might say where is support to begin with well we see you're kind of maybe like 133 but this is just long right it's just long and it's wanting the stock to stay above 133 but wonder if it doesn't okay so now fayez is actually saying maybe the investor might sell a call against it okay so let's kind of look at that and see if that is possible okay so the investor really the long call the short put that's a long synthetic but the investor could also like a covered call they might try to sell a call to decrease the sensitivity to direction let's show how to do that and then we're going to set an alert for the stop we're going to go to trade tab okay what we're going to do is we're going to go look at the if we're talking about the february expiration and let's say the investor said and you've got to be very careful here what is the investor long they're long the 140 call okay so typically the investor is going to be selling the strike above that okay normally if the investor does that and we can see where it says pos right there we're going to sell the strike above that which has a lower delta has a premium of about a dollar 49. so this is very cover call like it just doesn't have the shares of stock if the investor wanted to they could sell a contract or two contracts and if they do that they're going to click on the bid of that option in the same expiration the february and sell the 145 calls now let's see if this could even actually do this we are in the ira account it's going to sell two of the calls now what's what's the probe about doing this well the pro about doing this is the premium the caught about doing this is it's going to raise the vega okay it's going to make the position more negative vegan meaning if followed to it he were to expand it would be a negative situation okay it would make the options more expensive to buy back guys and guess this is just like a cover call but the investor does not have the shares same idea now what we're going to actually take a look at this if we actually do this and we're going to go down to the mid 154 confirm and send let's see if it can fill and if we actually do that remember what the credit and the commission is and if that's okay i'm gonna send the order bills so now what you're gonna see is instead of the delta really being let's say uh 184 i believe it was the delta has now dropped down to a 138 who cares well what the investor is trying to really do is decrease if that stock goes down that they're going to be losing less they're going to try to slow down the pace of the loss if that stock were to go down now what we're going to do is going to go right back to the chart we're going to set an alert a hard stop would be where the investor sets a stop a soft stop would actually be where the investor maybe sets an alert and wants to evaluate what we're going to do is going to right click right below that support we're going to say create an alert an alert is not an entry to sell we're going to say create an alert and if we get an alert that that stock is going at or below we're going to even kind of get a note to ourself potential i'll abbreviate sell protect okay and we're going to talk about that question mark so this is not a stop this is not an exit it's just an alert okay so that's one that's definitely being a little softer phase we did that kind of because you were kind of mentioning that but i think that that's a nice alternative there if someone is long a call they don't have to always sell they can actually use a short call to try to offset as well that's really what this is now the other kind of perhaps pro about this is when you take a look at dollar tree what you're going to notice is the theta should be a little bit higher because the investor is short the call and the put okay so just keep that in mind all right any questions that you have now there's one more point that i really want to make i i said this year it's going to be a little different in terms of the paid money account is trying to pick positions that it can hold longer term and i want to kind of just verbally speak to this right now i just want to make sure that we are on the same page okay so example given i'm going to use the example of and this will be our last example we're going to talk about all new positions let's say the investor picks a stock like johnson and johnson okay and let's say they decided they they said that they were willing to risk fifteen hundred dollars in the position okay that's what the risk was okay so how much is it down now well it's down 700 of the 1500 okay so now what you're gonna see is if the investor were to pull up the chart they might say hey james might i consider using protection now the investor might say i'm going to consider using a caller something maybe where they're going to sell the call to create an income and the secondary point is to buy the put okay now let's say in this case example that this was uh we'll just say for our case uh 200 shares of stock okay well how many more dollars could this stock go down before it'd be stomped out and let's draw this up and i want to make sure that you understand this because i need to make sure that you get what this paper money account is going to do and this is different than last year and if you don't catch a subtlety you're going to you're going to miss it so this is actually down 700 of the 1500 that means that the risk budget remaining is 800 okay now how many shares does the stock have well it has 200 shares so how many more dollars can the stock drop before it hit the budget of 1500 loss well it should be that it could only go down about four more dollars because you have 200 shares and if it went down four more dollars from 200 shares you would be losing an additional 800 and the loss therefore would be 1500. you with me we good you read my mail okay now let's all of a sudden say the investor decided that they were going to do a caller a typical caller has what type of delta to it what type of delta does it have now remember a caller is a stock position the investor sells the call sell call they're actually long the put and i'll say here it says sell call i'll just say short call and a typical caller might have a delta of about 30 ish per 100 shares so what i need you guys and gals to understand is when the investor sets a stop only the stock tends to be very close to where the current stock price is and what does that do it increases the chances of being stomped out okay now what you have to understand here is that this position okay if we look at this is a caller has about really 30 uh about 30 delta if we said well james we have 200 shares what would be the delta for 200 shares of stock if we were going to apply a caller well james you mentioned that it was 30 delta for every 100 chairs and if you had 200 chairs because i could do basic math you say it you're laughing well it'd be 60 okay okay and i would totally agree with you you'd be about 60. so what is the what what loss how much more could johnson johnson lose well we said 800 okay so let's kind of go back to that it can lose 800 more it could lose that more and the delta would be about 60. so how much could the stock drop from here if the paid money account did a caller on this it could lose another 800 it's gonna apply a caller it can now drop before it could only drop about four dollars and now the stock can really drop about 13 down so remember what i kind of said to you before is the paper money account is going to not just let stocks hit out on stops if those stocks start to drop and if we get about halfway to the acceptable loss example example given let's say 1500 the paid one account is going to use defense provided it has more than 100 shares and what it's going to do is it's going to open up it's going to allow the stock to drop more without fully realizing the loss how many of you have ever been in a position where the stock drops and then it comes right back up all the time what the payment account is going to try to do is get about halfway to what the max loss is if it does use the color strategy to open up how far that stock can drop and ultimately what that should try to do is it's going to decrease the chances of realizing a loss okay and have an increased probability of actually staying in the trend if it were to bounce back up so this is the point on this so on this is the last one we're going to take new examples on johnson johnson it is about at half of that max loss if we're choosing 1500 paid money accounts going to come right back in and say you know what it's going to go out to the march expiration and i'm telling you at the end of this year you're going to know you could probably close one eye and actually consider a caller you got to think about caller is really a cover call with downside protection paid money account is going to sell two contracts this is the strike with a delta 30 to 40 and it's going to buy the put with a delta of let's say 30 to 40. the one we're going to really look at is the 160 okay on that put side and when we do that it's now going to come back and we're going to change that 175 and the 160.

okay now you're going to see this paper money account do this a lot this year okay they call this a zero cost caller but that's kind of true in terms of the debit but you gotta understand there's an opportunity cost if this stock goes to 175 there is a maximum gain okay so this paper money account is gonna be willing to take let's say hypothetically fifteen hundred dollars if these losses on the stocks get to about half that it's gonna try to protect the remaining budget left and what that's going to do is it's going to widen out how far the stock can go down and what that should do is it's going to increase the chances of not getting stomped out at the worst possible moment only to see the stock sometimes go back up all right now guys and gals are going to tell you this i think if we're in a market environment that has been more volatile i think many investments this year are probably going to be sick of stops okay when you get choppy price action it becomes very frustrating and the investor might consider using things like protection to widen out the stops or decrease position size and set wider stops okay because when you look at the vix or the vixen you need to understand that the markets have started this year a little bit more volatile okay so to account for that we're kind of coming up with a defensive strategy of how to handle that volatility i canceled the stop to put this in we don't necessarily need the stop and the long put together okay short call long put cost plus commission if that's what the investor wants to do gonna send the order okay now this won't be the only time you see me do this okay you're gonna see it quite a bit all throughout the year and we'll talk about that uh as we go now i want to kind of go back to a stock sometimes what happens is we're going to actually pull up a stock i'm going to pull up a stock like uh verizon one of the questions i've actually gotten a lot about lately okay we're going to our second agenda item is going to spend the next 20 minutes all on new positions but you need to understand was when there's higher volatility there is a greater need for understanding how to manage positions and if you're not comfortable with what the strategies are how much of the maximum gain are you at where are you planning on getting out or if it goes down what is your kind of plan are you going to alter that by selling cover calls or collaring you you tend to kind of just be dear in the headlines you want to be very familiar with this as a longer-term investor maybe intermediate to longer term you want to be aware of defensive strategies okay and it's not that they're that complicated we just need practice doing them now i'm going to give the example let's say a stock like verizon it's been going straight down to say the least we actually see on the weekly chart a three year weekly this is what it looks like and it looks horrible now i'm going to bring this up for an example okay sometimes investors want to buy stocks that have been going down and they might want to actually buy them because maybe the dividends look attractive now we have this discussion the other day regarding buying stocks maybe into the face of earnings maybe inside two weeks but then looking maybe for stocks that have lower volatility okay you know what's so interesting about that well if you pick a stock that has lower implied volatility that means that those pets actually could be maybe not that expensive what's so interesting about that well because when the implied volatility is lower the investor could buy the put closer to the current strike price current stock price i should say and if that stock price and the strike price are closer together that means the investor is taking risks now i haven't talked about verizon it's been at least a year maybe longer but one of the stocks that was kind of interesting from a reward to risk standpoint might be an example like verizon example given now when someone buys the asset let's say the stock they're just buying the shares of the stock step one step one step two they're going right down to where it says single order and then first triggers seq okay so that's not that bad they're just first buying the asset they're saying look once i buy the asset i want to buy the protection now we know as we come into earnings people are sometimes a little fearful kind of like well the next month i'm going to take off because uh there's lots of earnings out there okay well there's all the strategies out there we realize that right there's other ways we can handle that and all stocks don't have the same volatility not every stock is going to announce on friday okay so if we look at this if the investor bought the put with about 36 days of expiration that put is about 1 of the current stock price now let's take a quick timeout here okay let's take a quick timeout if we were buying that put for 67 cents and the stock is like 53 dollars are we all good that that's the put premium is about one percent of the stock price now the lower that percentage is the kind of more interesting it is okay now let's go back to kind of the little sheet of paper here if the investor buys a stock at 53.63 and they have a right to sell those shares at 52.50 the risk per share is a dollar 13 plus 67 cents so for every 100 shares of stock the risk is let's go back to this there it is for every 100 shares it's a dollar 13.

that's the stock risk okay stock risk this is the option premium okay if we add these up what's the risk for every 100 shares survey says dollar 80. now this is kind of interesting because in the next let's say 36 days if it were to go up this is defined risk not theoretical data 52.50 is the right to sell at that strike price okay now if the paper money account said look noted that trend has not been very nice maybe the paid money account says i'm not going to take a full position maybe it's only going to take a half position because that trend has not been as strong as other names out there noted but when you're only risking and i'm going to go back to this when you look at risk i always like to kind of take a look at risk as it's risking 1.80

out of an investment of 53.68 what percent is that and guys and gals this is where a lot of investors they always talk about the upside forget about the upside you want to look at the downside first okay if we take a look at this this means that the risk dollar 80 this is the investment it's 3.3 percent it's going to be very very very very very hard to find risk where it's only 3.3 percent of the current stock price find me those you're not going to find them very much now what's interesting about that is a small risk but if that stock were to go up there's no ceiling okay there's no cap there's only a right to sell the strike price many investors like to take trades that have smaller risk and a higher potential upside okay now uh emj says what does it mean your limit is significantly higher well uh on this trade we don't have a cap there is no obligation to sell okay the long put since there is a long put on this there is a max loss and that max loss when you look at total is 1.80 or in other and words dollars okay that's what it is if we look at this and said what is that dollar eighty relative to what the investment is per share and we're talking about per share it's only three point three percent so if this stock really goes up more than three point three percent you have a greater than a one to one reward rate ratio the lower that number is just the better the setup was okay very hard to actually get a trade that actually has that type of reward risk the long put is different than a stop okay it's the right to sell it's not going to sell okay especially if we're talking about before expiration now let's go back to the paid money account let's set this up what kind of is making this kind of interesting is it's a low implied volatility okay with lower implied volatility it can allow the investor to buy puts that are potentially cheaper relative to the current stock price plus with a lower implied volatility the investor could buy the puts or buy a put strike closer to the current stock price which makes the risk less now we can actually see the prop max profit is infinite because there's no cap there's no ceiling okay the max loss here this is not true because it's not taking into account that the investor is buying the long put we already came up with it's 180 for every 100 shares times four so you're talking about 720 dollars of risk on this trade okay now the comment from rhonda is do you do you need a target exit no but now that you're asking rondo let's kind of go back and take a look at before we look at trade number two trade phils could there be a target on this trade so if i were to ask the class is there a target on this trade what would you guys and gals say what would you say target now when we actually go back and kind of look at maybe old support i kind of have something right maybe right there 55 54 and a half if that stock broke inside that old channel if it did let's say 58.35 now if that stock went to so rhonda let's say example given the stock breaks to the upside and goes to this area that's going to be about four dollars okay so four dollars times about 400 shares it's really about sixteen hundred dollars now what was the risk the risk was about 720 so if that stock broke inside that old channel if it did if so it would be about 1600 ish and if the stock were to go down max loss would be about 720 okay now the other thing is james you did not amanda mentions james come on brother don't forget about the dividend well when is the dividend the ex-dividend date was that was the first day it traded without the claim to the dividend that was on january 7th which was just recently that that's a quarterly dividend 64 cents okay but if we were saying a target i'm going to go ahead and kind of set an alert right there alert right click we're going to drop down to where it says create an alert and we're just going to put an alert right around that resistance area we're going to kind of question question mark rhonda asked for target okay so we're going to put that there and if it goes to that price or higher it's going to pop and say rhonda asked for target question mark potential sell okay we're gonna put it right there create now remember an alert is not in order to sell it's just an alert now let's go look at the next one now if we go take a look at a stock and i'm gonna pull up just i'm gonna flash a couple stocks here okay one of the stocks that some investors have been watching is a small company called walmart okay now i have noticed here locally when i go to local businesses i've seen a lot i just saw one where the store said because of inflation we're raising prices that was the whole idea behind dollar tree that was the whole idea behind the walmart trade now walmart has kind of been in a prolonged downward sloping resistance upward sloping support and it's trying to maybe break out it kind of broke out around this area right around 12 31 december 31st and it's kind of created a support now it's taking forever to bounce maybe is it doing a bullish engulfing go back to a weekly chart on this sometimes we kind of see it a little different if it's actually breaking out and i saw it sorry for that kind of order right in the way but if this actually broke out it might try to go to the top now the pink one account is already long okay all right but i'm just bringing this back up just to kind of review what the trend is okay now so paid money account has walmart has dollar tree that's kind of with it the idea of the inflation type trades consumers becoming a little bit more uh maybe cost sensitive when you look at a stock like american power this is also another one that's kind of been down but it's kind of going right back up near the area of resistance not going to do this as a paper trade but this is kind of something where the investor might watch and see could it break out of resistance what's interesting about this from a kind of a intermediate to a longer term trend it has a width of about ten dollars if that stock were to break out maybe it tries to go from 90 to 100. paper money count

is going to keep its eyes on that one another one i'm going to kind of go back to just real quick is ford okay now ford has kind of had this like moving average crossover and that shorter term blue line has been above the red line and you should know by now when that blue line is above the red god those trends tend to be nicer when that blue line is below the 30 period moving yeah i don't want to see that but if that blue line was below the 30 period moving average it can be very hurtful on that profit loss okay now is that guaranteeing that the stock is going to go up no but it just is kind of showing at that point in time is there bullish momentum and is there a stronger trend let's go back to this now has the paper money account missed the entry i mean is this the top can you can an investor not get in anymore and if the investor were to get in what type of strategy might the investor consider talk to me here now i know this is not just me that's thought this or michael fairborn has taught this have you ever kind of felt like you missed the boot okay that the boat was and you're on the beach watching the boat cruise away to the upside right well the biggest actually thing is we might go back and say look at ford and kind of say is there an opportunity to maybe even try to buy the stock at a slight discount from where it is now well if the investor were to go a little bit farther out could there be pets that could be sold the puts that are sold now this class again is trading the trend weeks to months no one ever says you have to buy the stock or do a long call not everyone's going to try to get dollar for dollar exposure sometimes investors just want a portion of what that trend is now number one is jrtr says you could buy the stuff that's true could buy the stock uh dave says cash secured put yolen says sell put tim says cover call okay well let's say the investor says look james i think the support level in which the stock might try to hold is right about 23.50 another area might be right around that 22.70 so these might be marks here okay let's say the investor tries to sell the 23 where they think that stock could stay above well if we go back to the trade tab giving this some more time for it to work if we did this and said sell the 23 we always like to kind of look and see what is the option premium relative to the current stock price okay and i like to call this premium yield okay 107 okay 107 and the current stock price is 25 16. okay and that option yield if you kind of think of this is like it's 4.2 now that's a little higher but you gotta remember there is 64 days and you also have to remember is it does have a little higher implied volatility which is helping that yield now if we take a look at this if the investor were to sell this we also want to kind of keep in mind that this is lower dollar stock so it's not going to fully position size 40 000 of stock it's only going to probably do about half of that so if we actually did about in this paper money account about maybe nine now i'm thinking nine because for example if you had 900 shares of stock on a 23 stock that's gonna be about right about half okay then if the investor were to buy the shares of stock okay the forty thousand dollar typical mark for this account it's gonna do about half those nine contracts remember there's a good side of this of the premium the bad side about this is it's short vega volatility expands it can make these options more expensive to buy back in a volatile expanse it kind of neutralizes that theta decay boo don't like that okay don't want to see the volatility expand now if we go to confirm and send the paper money account is going to sell nine contracts of the 23 puts it's trying to go a little bit farther past the earnings and the max loss is really saying here that the stock if it goes to zero okay the break even being the strike price minus the premium okay now melissa says and i can kind of tell melissa's kind of laughing a little bit hopefully you're laughing okay i miss the boat way more frequently than i like to okay well here's the deal if you feel like that is that you do that it's not a bad idea at night look at some charts okay if you watch tv at night during the commercials which you know there are during the commercials look at some charts and right click set the alert time number of these stocks that way you're alerted to the ones that are breaking the resistance levels okay now if we send those or that position that order it does fill so melissa i would say setting orders and or buy stops okay but specifically alerts that might be uh pretty helpful now i want to kind of fast fire through got about three or four minutes i want to kind of just fast fire through some other stocks that some investors might be looking at now we know we've kind of been hit with a lot of this omri kron okay covid stuff okay they're talking about shipping a lot right maybe people kind of trying to buy themselves some time and go through some sickness etc we're going to keep an eye on fedex okay we're also going to keep an eye on ups as well a lot of discussion on shipping lately if we go back to a stock like u.s bank

that is one that's been violent when i say violent i just mean that it's gone almost it looks like it's gone straight up okay and it's not just on a daily chart we can also see this on the weekly chart that three year weekly chart as well and that's what we're seeing this looks very much like kind of a cup and handle matter of fact it had like two handles okay now the other one that we're also going to keep an eye on is kroger i used to live in kentucky and we would always say we're going down to kroger okay loved it now uh if we take a look at this kroger had a prior high okay here kind of broke out just recently fell down to that support area someone bought it that way and then popped it right back to the upside so kroger is getting a little push the other one maybe from an intermediate to longer term perspective last one that might be trying to reverse have a downtrend and some investors like reversals which is molten cores has been kind of beaten down build a level support that's a horizontal resistance and maybe trying to get a little bounce too so just because someone's training the trend maybe from an intermediate to a longer term trend they don't always have to be buying stocks and highs they might also be looking for some stocks like kroger or tap that are maybe just kind of getting out of these little pockets of consolidation and maybe just starting the trip so some good stocks here today we talked about verizon walmart ap ford gm fedex we also brought up kroger okay tap many others some of these in different parts of the trend cycle but uh many of the stocks here kind of look interesting even many of them are showing relative strength and they're showing kind of things that we're seeing on the daily chart but also the weekly chart as well do not forget to look at the weekly chart now we want to do two things here today number one is we want to talk about kind of management of current positions and kind of do that in the quiz form we did do that we also want to talk about some new positions from a stock perspective and an option perspective we did that as well if you enjoyed today's class if you said geez i like this this wasn't just like a boring class talking about something about the stock market if you liked it just go ahead smash that like okay and just know that when we come to have this class we're not just going to talk about one example the whole time i just think to me that's just too slow we can absorb more than that okay and so that's how well we like to kind of talk about different stocks and different strategies and really because we know that not everyone is going to be investing the type of same strategies so thank you so much for your comments and your participation stay tuned for our next

2022-01-17 13:59

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