Potential Visual Stop Adjustments | Technically Speaking: Trading the Trend
hello and welcome to technically speaking trading the trend weeks to months my name is james boyd we welcome you here today hello uh annette call tm fez david a moon edward genquay schwenn pierre grace robert bill uh carlos grace many others wayne welcome to you now again thursday we call it really trend thursday and the question i always want you to ask yourself on thursday is what trends are you writing now if someone said i'm not writing any trends that might be a problem because you might have a certain financial goal that you need to reach and usually what the investor is trying to do is try to find really stocks that really can help them reach their financial goal for them okay now all of us here might maybe do stocks or maybe options maybe some but also there's different types of stocks and we'll talk about that here today and not everyone's going to invest in the same type of stocks now also real real quick as we get started remember you can follow me on twitter i do post throughout the day okay do post educational content on technical analysis fundamentals options things like that and also updates about certain classes that i've done and others will do now remember with what we talked about here today if we talk about options remember that options are not suitable for all investors special risk inherited trading options also we're going to demonstrate the functionality of the platform and i think that would be cool because there are some great functionality things we'll discuss here today remember that tv ameritrade does not make any recommendations determine suitability of any security or strategy the investor gets to decide for them what they want to invest in and if they want to invest now also remember when we talk about investing all investing involves risk and there's the option greeks and today we will cover ding ding ding well we're going to take a look at what indexes if any or sectors are really making some brand new highs are there any second we're going to talk about stop adjustments on stocks and i think this would be an interesting discussion because you know i think as the stocks have gone up some investors might want to say look i want to be able to kind of plan an exit point or have a plan in place and so let's talk about that i think we could just take probably five or seven minutes in that area third we're going to talk new stocking options examples fourth we need to talk about management of positions we've got a short put position on paypal that's pretty interesting right now let's take a look and see what happened post earnings when it dropped about four percent and then we're actually gonna go to your questions now just real quick as we're getting started let's go ahead and uh now bill mentioned for example is jax okay jax is my dog he's uh my yorkie dog my wife uh made a purchase and then i would she said send them the money okay so i i never really was in the full decision i just transferred money and uh she bought a yorkie but i actually watched her dog a lot so jax today will be in attendance all right all right a little fun jackson stay good down there will you all right here we go now let's go ahead and actually take a look at the spx now what i'm actually going to do is let's pull up the spx in our standard chart there we go and if i actually take a look at the spx we said actually really a couple days ago that really the spx was kind of still more in the upward end of this diagonal channel and what you'll notice is it hasn't the price has not fallen down really too uh below the 10 period moving average it has not now just because we're at the upper end of the diagonal resistance does not mean that the index cannot break out of resistance and we've seen that happen before okay and if you take a look at this we kind of have like a flag type of behavior where the price ran up and then we had a two-day pullback and if we look at this why do we have a green dot again well that actually right there would be what we call really close above the high of the low day okay so if you take a look at that we have actually a bullish bounce set up and that bounce is really happening up near resistance now the last time we were there up near an area of resistance we didn't see any green dots so this is kind of now increasing the potential probability could the spx break above okay that diagonal resistance and that's something we're going to continue to watch but overall what does this tell us this tells us that tech uh discretionaries higher beta type areas they're probably leading the market higher that's what it's we're speculating now if we actually look at the really the ndx we did not see really the ndx actually uh make a brand new high not yet these last two days have really been what's called inside days inside that lowest most recent red candle and they've been trading like a bullish army like a spinning top okay more neutral type of candles nevertheless it's trying to be in the process of really making actually a higher low dow jones now remember this is probably the index that might interest some investors we've been talking about the last couple of days about how the dow really looks like it's kind of creating a longer term ascending triangle okay now you can kind of see that on the daily chart but you could also see it on the weekly chart feel free now what you're going to notice is on the bottom here we can go back and say coho go hold go hold twink there's dots littered all over this chart and again that's just showing the potential to hold setup now if you'd actually take a look at this today actually being that whole day so far and then today what you'll notice is it's really touching that 20 55 day high again so this is leading us to believe that there's has to be some stocks in the dow that are pushing up and we said maybe before that sometimes the leaders might kind of become you know maybe not as hot like the nasdaq perhaps maybe it cools off and investors kind of go back in let's say the larger caps and we're kind of speculating that could we see a little rush into the dow and as the dow plays catch up to the nasdaq if it does and maybe the s p now from a sector perspective okay the top performing sector actually here today was discretionaries okay discretionary is kind of also in that maybe ascending triangle type pattern strong actually bounce here today and if you look at that it's not a hold yet because we're not above where we were two days ago but it's still never less than 20 to 55 day high today okay so discretion is leading the way can anyone actually tell me the two sectors we said to keep an eye on in terms of reversal candidates for a sector there's two of them okay go ahead and type those in and as i'm actually uh we are going to take whoop ixt i'm not poo pooing okay or bad-mouthing and i'm not i wouldn't do that but i don't want you to think that when we looked at the nasdaq we know that's 50 technology if you like technology here's what the sector looks like okay but if we kind of said which maybe is maybe as strong or maybe a little stronger it might be discretionaries the two sectors we said to really watch or keep an eye on probably monday or tuesday we really said basic materials okay that was one of the two that we've actually seen okay that went down and then whenever we see us a stock or a sector or market that has a support level and then for example the invest we we start that you see in this case that the price goes below the support like it did and the price is bought or the stock is bought below the support that's a little awkward and now what you see is this is really seated a pole okay now we've come back up to really these prior highs right and the idea is that if we go up that many days in a row what would probably be the next thing it might be one two three days down and maybe a potential bounce setup so basic materials is probably an area that investors are watching for bounces in or leadership in that sector last one we'll mention here real quick is financials and if you look at financial same type of idea maybe didn't go down below the support as much but when you actually look at financials we had a moving average crossover back on june 16th we have not had a crossover back to the upside the blue line greater or higher than the 30 period moving average and we're actually seeing that line cross and that is also above diagonal resistance now bill asked me does jax know about diagonal resistance he's my buddy of course he knows about those diagonal breakouts okay all right a little fun there now what you're going to see in this case is it there is also a hole there not hitting a 20-day high yet okay but we're going to uh that is in the same bucket as far as base materials last one i want to mention here is healthcare okay i mean you could just look at abbyy v look at abbott look at merck look at gilead look at uh my goodness alive uh bristol myers danaher right you're seeing some movement in that area mimicking that sector performance or driving that sector performance okay so that's kind of the backdrop of what we really see now this kind of creates an opportunity right so one of the things we probably have is we probably the investor might own stocks and when we talk about let's say setting stops i'm just going to kind of give you my frank opinion sometimes people say i don't know when to get out i haven't found in 20 years of doing this that i don't really think that's true i think it's more that they do know where to get out but they don't like and make they don't like to make decisions so they know kind of what that answer could be but they don't like to make that decision we we know people you know people in your life that they just struggle making decisions okay and selling or setting a stop and making that decision to say this is where i plan to get out if it gets at or below for some people that's just kind of hard okay now the biggest actually thing is if we go back and so let's kind of set this chart up and let's kind of talk about this we're going to actually look at probably about eight stocks and you might say wow that's going to take forever not how we do it okay so what i'm going to do is i'm going to go back to the monitor tab and what you're really going to notice in this case is here's a list of some of the stocks apple bristol myers disney exe uh gillian marion mickey d wasn't the double arches okay it was actually the breakout of the double arches square okay a couple stops now i'm just going to kind of start with on top and we're going to rapid fire now we actually know that when an investor for example set stops they might for example uh set stops based off a diagonal support which probably is the 10-day exponential moving average and then second or could be and then maybe the uh the other way to set a stop is maybe they actually say i'm going to set my stop below horizontal support level so they're visually looking at the chart and actually saying set a stop below support and or a higher low which could be another point on the support line now when we talk about breakouts we've talked about really 20-day highs which is like a one-month high at 55-day high okay uh maybe more intermediate so we talk about using day's highs to maybe consider a potential breakout entry well wonder if we flip that wonder if we actually said we're going to use days low to actually really establish a exit criteria okay now what you're going to notice is really on the chart we see two different lines the red highway strip line that is actually plotting the 10-day low and we could actually go back and see over time where the 10-day low was over time now what you're going to notice is right below this you're going to see in this case we've got a green line and just as you would expect a 20-day low would be lower than okay the 10-day low or typically will be now if the investor was going to set the stop and what we're going to show right now is just kind of more of a systematic way in terms of setting the stop now it's what you would expect right if the investor said james i'm going to set my stop using a 10-day low it's going to be tighter and that actually means that there's a greater chance of actually getting stomped out so in this example first off what i'm going to do i'm going to go to right click on apple create closing order and i'm going to say with stop now what we're going to show on this chart is we're going to actually set the stop right at where that 10 day low is now let's just practice four or five first okay and then we'll talk about adjustments okay but if i were to look at this and say okay i'm going to move my stop up to 141.97 day to gtc now where did you get that well i put my cursor right on that red line and it's showing that if if the price were to go to that price or less okay it's going to trigger this stock to be sold and it can fill at a lower point now let's kind of do this so if i go to confirmance in okay and it looks like i might have a stop in there i didn't see that initially but uh yeah actually seeing what could actually trip that up i might have a cover call and what i'm going to do is i'm going to get rid of uh i gotta get rid of one of these calls cause one of these calls is hanging this up it's making it where i can't uh no that's tough i might not be able to take that one all the way through because it looks like i might have a option position that's hanging that up but we'll show that anyway so all i'm going to do is on this one i'm going to right click create closing or set cell and i can do it with a stop too and we're just going to type in that price okay so that price is really about what i mean kind of messed it up by about 20 cents but one let's say 141. let's confirm that yeah 141.91 now what i want you to
notice is if the investor sets a stop that tight there's a greater chance of getting stomped out now the one thing i want to make sure you that you're clear of is if we go back and look at this if that red line is increasing over time the investor mechanically can move up that stop okay now is it going to be likely that every day the investor is moving up a stop well if the market is really bullish it could be possible okay but what you're going to notice is there's periods like on a 20-day low where there's periods where historically that line was completely flat which means there's no stop adjustment but now what you're going to notice is that green line goes up and if someone was using a looser stop they could have been more frequently adjusting up the stop okay so on apple that's what that stop is really going to look like now let's kind of take example number two okay so on bmy okay we're going to go bring up bristol myers i'm going to fast fire now explain it to you but let's kind of show you now one of the advantages of using let's say the thinkorswim platform and kind of having the ability to have scripts i'll send this to you in just a sec but the investor if they have a stop visually already they can just left click on where their stop is left click and then drag it up now what you're going to notice is the red and green line they're on top of each other they're right on top of each other so the investor could actually drag that up and say look i'm going to move up the stop to let's say right cheer now that's a little unusual per se that maybe the 10 the 20 are exactly the same as we'll see in just a sec but i'm just going to move up the stop now how many of you actually think that's not completely that hard how many of you think that's that's not overwhelming to move up a stop to one or either of those lines and you can left click and drag it up let's go to number two we said we're gonna fast fire okay now if i look at let's say a stock like disney okay now disney's actually down a little bit okay so all i'm going to do here is i want to practice this okay so if i actually go back and say james i want to set a stop based upon the 10-day low and where's the stop now it's sitting right here could that stop be moved up yeah it could because the red line is actually higher but the last three or four days it's been the same how we're gonna do it left click drag it up and i'm gonna put that line right on top of the red line now it's moved so it what the stop was at 169. now the stop is gonna be moved up to about 172. now again there's pros and cons here right if the investor actually sets a tighter stop greater chance of getting stomped out okay and we're going to show that in just a sec but i said we're going to fast fire so let's keep going exc okay that's utility stock pull it up okay now when we actually look at exe let's look and see where the stop is so when we actually look and see where the stop is it is well it's way down there it's down at 42. now the ambassador what they might
want to do is if they said james i am more of a trend investor and i would actually i don't want to set a stop at a 10-day low i want to set something let's say in this case on that 20-day low where the stock has to have a more severe correction to actually get stomped out so if we were to actually drag this up and this will lead us into our next comment but if i were to drag this up to the green line all i'm doing is i'm just left click drag it up we do not want to click on the x if you click on the x to the right of stp it cancels the order now if i left click and drag up it just moves up the stop to where that green line is and that green lot is plotting the 20-day low now we're visually going to show this but let's take one more okay now the one thing is what you're going to notice is this does not abandon the target price so the target price is still there all we're doing is we're kind of just moving up the stop behind us now if i were to just let's say well james let's hit the next one well in this case let me even take something in this case like marion okay if i were to take a stock like marriott the one thing i want to make sure you're a hundred percent clear of is sometimes if you get a stock that moves up aggressively in the short term you might not necessarily have those lows really closely with the current prices this was a stock that was just entered like three or four days ago okay and if you look at where that stock is now the investor might say well james the low is down to 127 they might have to say look this was a recent breakout my stop is really based upon the old diagonal resistance line well when could they change it from the diagonal resistance line to the 10 or the 20-day low well how about when those lines go above where that diagonal resistance line is so this has a little work to do so that stop on marriott is still based off 139.97 so let's kind of put that there and i'm going to go back and we're going to keep an eye on that we're going to say look if those 10 or 20 day lows gets at or below okay header below so we said 139 need my calculator i think it was 139.97 setting a stop less two to three percent that stop right now is going to be at 137.17 now over the next couple days if those 10 or 20 day lows starts getting higher than that resistance breakout point we could unhinge from that resistance and then start using those low points sure now i'm going to go ahead and confirm and send let's take one more send that order now remember how the stops are okay sell the stock if it goes to that price or less a stop is a market order but let's take one more here then we're going to hit questions and send it out now the other thing is also if we take a look at this this is in that same camp the 10 or 20 day low is and this was a recent entry just literally on the breakout about 237. this is actually a stock where we're still going to have to really use the old resistance 237 as the initial support area because that low and that low the 10 or the 20 has not moved up yet and we know that we just hit that let me actually take for example this one microsoft this is going to be kind of more on the example what we want to touch on last so if i were to go back and actually look at this chart and say okay let's say i said i'm a trend investor and i'm going to give you an option here okay option number one for somebody who's a little bit more active they actually might say i'm going to set my stop maybe on that 20-day low so giving it more room and they're going to set that on the daily chart okay now where where are you going to give me the second option so all i'm going to do is i'm going to right click right on that marriott no excuse me microsoft 200 shares and then what we're going to do in this case is we're going to say create a closing order with stop and all i'm going to do now is i'm going to go back to this and let's kind of look and see where that green line is the green line is actually right at 268.95
so we're going to go in and type in 268.95 data gtc now what we're showing is really we're looking at the 10 or the 20-day low on a one-year daily chart but what the investor could do and how it applies to this class is you could actually say well james i i really like to trade more let's say on the weekly charts how do we actually take this same type of idea and then just adjust to the weekly chart sure but let's actually put this in first and then see the difference if we go to confirm and send what you're going to notice is and that's actually doing that too i've got something hooking that but let's look at the differences 268.95 we're going to go back and say the weekly chart and let's kind of show you what this is doing the reason why we talk about trading really in this case trends and i want to show you the differences this actually back here was the covid bottom okay what you're going to notice is over time if someone said james i want to actually have a trend trading account imagine that and they said you know what i want to actually move up stops really off not a 10-day low but a 10-week low well what you're going to notice is really over time is that investor would have probably been nicked out right there probably not nicked out right there not right there so really if we said how many times in this big long upward trend did that stock touch a 10 week low uh we could probably say it was one time out of the last almost 15 months maybe 16 months i don't know how long how many times if the trend trader how many times would they have actually had a stop hit the 20 week low the answer zero okay so now you got to remember if the investor is going to use a tighter stop the 10-day low or the 10-week low and we're just saying the difference between the daily chart and weekly chart you need to understand if you set a tighter stop you need to know what for you constitutes a re-entry you have to understand that if you actually set a stop based upon a tighter uh parameter there's a more likelihood when we do have volatility to get stomped out be prepared that investor should be thinking of looking for re-entry signals okay so i gave you the option if you said james i'm more of a daily chart investor you might look at the 10 20 day low second you might say james i'm more of a passive investor i i'm 65 66 67 70 like my dad and he might say look i'm long microsoft and i just want to ride it until that longer term trend breaks down breaks down to what point well they might say the 10-week low or the 20-week low okay now i'm going to go back to a question was asked now so first off so remember two different ways of setting stops right number one visually looking and seeing where's horizontal diagonal support second way main way is that the investor might use let's say days lows okay now could both of those really correlate to maybe moving average crossovers oh sure okay but those are really the two ways you visually look and see where the support is set to stop or you're just using day's lows to trigger a potential entry now comment came up in well where could i actually see this well again i'm just going to go back to right to the top of my twitter page if you said i have an interest to really be able to see these days lows well what you can actually do is i zoom in now okay right there it will if you can actually see visual of a 10 20 day lows on ch on the chart so that's going to be the code for if you want to see those actually really um well on the chart itself and you're absolutely right edward says the weekly gives you a clearer perspective from a chaos perspective uh hello edward exactly okay now i'm gonna go back so i'm gonna pick a different stock okay if someone said hey james let's actually not talk about paypal okay so let me give you an example of really if someone said james i'm in paypal again let's kind of see over time what would happen just real quick and we're going to talk about this trade but if we look at let's say march how many times would have paypal hit the 10-day low i'm visually looking to see on this really uh and actually it's a 10-week low because it's a weekly chart not yet not yet this one it was likely so there could have been a long time there where that actually over time the investor was still in the trend i don't think actually this one touch because we don't see the wicks coming down to that low but then again i'm just trying to show you perspective if someone said i set my stop off that 20-week low did it ever touch that green line over time it never did still hasn't okay now if we actually pull this up i want to go back why are we bringing this up well if we go back and actually take a look at one of these trades which we need to there was a position called really paypal and this was a stock actually that had a short put over the earnings okay what's the problem with that well the problem with that is we could have probably said there might have been some mismanagement of the position okay it's highly likely that this position probably had greater than a 65 uh potential return maybe it was 80. the stock is down almost about 18.
the option is still profitable but it's coming really close to where that strike is and it's starting to run out of time now if the investor identifies this was mismanaged and that the investor could have maybe profit took and not even had the risk of holding over earnings that investor might want to say you know what i could have made more it's not now and that investor might want to say based upon the price and how volatile that stock has been somewhat the investor might want to say you know what i'm going to exit with what is remaining or at least there is some profit remaining so we're going to address that we're going to right click on this chart create a closing order and it's just going to buy those options back okay this option probably had greater than 65 or 70 percent so that profit probably was up at a thousand yesterday and now it's given back a good chunk of that profit now maybe you don't care but for some investors who want to try to grow the account they might care if we click on this so we have two options here number one is the investor can later play out but some investors once they realize they made a mistake they try to realize that mistake and then get out and that's what this is showing it made the paid money account made a mistake it already had those profits that are probably already wanted it could have exited now it's late and now what you're gonna see is the account is not up as much as it could have been it's not reconciling that and saying okay we're late and now the investor is saying we're going to give some of the premium back pay that dollar 30 commission for the two contracts and now send the order okay now we're gonna we're gonna try to make sure that really fills and it does and there you go right there so we just wanted to kind of touch upon that okay so that's one that we needed to actually highlight in class and we're going to touch upon some others okay now let's kind of talk about some now that was kind of time sensitive okay remember all the trades are done in class okay so didn't do that this morning they had to wait till the class and that's why we brought it up first now the other thing we want to really bring up here is some positions and i'm going to bring up a couple stocks i'm going to bring up a stock you guys might have heard of it before uh and it's called tesla now my sister calls me up today and said well her husband who is a doctor and he was kind of like thinking about some other stuff they have one of those teslas where you know the doors open up like high right well he forgot to put the doors down and then backed out of the garage yeah it didn't really work so well okay so that's just kind of a little insight uh there's there's a little cons about owning those doors you do have to close them now when we actually take a look at let's say a stock like tesla as we zoom in this this is what we can see so we see a longer term upward trend we actually see kind of like a recent downward slope of resistance now when we actually take a look at this what i want you to recognize is kind of had like a breakout in this area and it actually kind of pulled back a little bit and then got like a little potential bounce now the investor might want to say in this case well and by the way you also kind of notice that we have like a low and a low again and by the way this longer term chart can really be like just like a flag okay what i'm drawing here to the right is really the flag portion this upward move that's really just the pole now if we take a look at this the stock is up 33 points 5 that's the weekly chart go back to the daily chart and if we go to the one-year daily chart this is what we're really seeing now when we look at the stock that's really been up and down up and down the investor might want to say there's different strategies that could try to benefit from different types of trends example given the investor might say i might consider maybe a short vertical put trade okay now why well it's nearly a 700 stock why the capital requirement right now if the investor said i want to go to the 17th of september i'm going to go a little bit farther out okay if we go to the 17th of september okay something a little farther and i'm going to look at let's say in this case the delta column i'm going to put that back we're going to look to say what we want to kind of maybe potentially try to be a little bit let's say more conservative now what's interesting on this is we don't see strikes every ten dollars we might want to go look at the weeklies to see if there are every 10 these are every actually there are 10 but you have to go a little bit further out and that's fine maybe we'll actually look at that one let's start with really the 590 but remember is the strike below that is 580. i'm just checking something out here yes i'm just now those are too wide so we're not going to look at the weeklies we're going to look at really though the september 17th of september with 50 days left now could you do a 620 600 yeah just a bigger max loss okay less contracts but if the investor said i want to really stick with the contracts that are really more ten dollars wide and also make sure that it's not really in this case too much as far as max loss so we actually see in this case the selling the 590 wanting the price to stay up above okay wanting the stock to really stay up above 590 the protection below is 580 okay now when we actually look at the max loss on this it's going to be this spread width 10 minus the max profit in this case of 1.95 this will only well we could actually do in this case one contract in the margin one and in the ira account it could really do two contracts okay so when we actually come down we're going to say multiple accounts we're going to say sell one contract in the margin and then two contracts and why are we doing a different amount well because the the margin account is 181 000 the ira is at 556 is just different amounts of acceptable loss now if the investor were to let's say send this order this is now going to take into account three contracts max loss for the three contracts and that 390 is really for the three contracts okay so the strikes that we're looking at here is the 590 580 and the comment that came in if you if the investor says look i want to be a little bit more aggressive the second option there not a huge difference but it's another option if someone wants to go a little bit more aggressive could sell the 600s and then buy the 590s okay so we're just trying to kind of stay where there was ten dollar increments okay now we're going to go ahead and send that order we're going to put that right in the vertical section so that way when we talk about management we know it's a vertical send that order now when we actually send that order there goes right there and we're going to actually see if that order fills now next what we're going to do is we're going to go back and i just kind of want to give a quick update on the golden arches now the other day we actually talked about let's say mickey d's kind of running up pulling back and maybe getting a little bounce and we actually did an order i believe is at 241 we did a vertical example that trade did fill yesterday and that order you're gonna see it was really this one right there it was selling the 240 the 230 put that order did fill that's where that order stands about 190 for those two contracts so far so that one actually did kind of play into that we did a pending order if the price were to go at or below and it fell it failed and the stock kind of bounced back up kind of looking to see if it can't continue to go up even more okay now let's actually switch and talk about cucumber okay now cucumbers actually had a very interesting little day here now if you're let's say unaware uh i posted i post really throughout the day and i really uh showed a couple examples of really kind of maybe how some investors might be looking i posted earlier today about some of the volume in the open interest regarding qcom the picture on the left was really what the open interest was yesterday the picture on the right is what the open interest is today been some unusual option activity on that one i post about that you're going to also see that uh i also actually bring up the example of marion okay talking about that and so i show for example like talk about tesla earlier on talking about the volume in open interest and there was some unusual activity on that one too so i post about fundamental analysis stock stock examples option examples they're not recommendations that's why on all my posts i always put not in recommendation they're just examples educational purposes only so make sure you're checking those out because you kind of might be saying huh it's some great content especially when it relates back to what's in the uh the courses now if we take a look at this this was actually a stock that kind of had like a longer term base now let's go back to our standard type of chart so if you look at the standard type of chart what you're going to really notice is kind of a longer term base boy was it ever and then if we kind of really zoom in today it was really about four days ago where you see that green dot okay but what you're gonna notice is we did see the i mean that's like three days before earnings so it's maybe doubtful that someone's gonna buy the stock two days before they totally could but you just have gap risk so now we get past the earnings and the stock has a nice little gap so closed here opens up here rallies and then what you're going to notice is it hits those day's highs remember the green line is just plotting the 20-day high the yellow line really the 55 day high and that's why those lines are overlapped because it's hitting both criteria okay now i'm gonna imagine that someone says james i got like a fifteen thousand dollar account i'm just getting started okay what could an investor do from a strategy perspective to try to maybe play a basing pattern reversal in qcon what could they actually do now by the way every stock doesn't have to be a stock hitting an all-time high sometimes the investor might really find stocks okay that are maybe something like this where the stock runs up in price pulls back chop chop chop chop chop chop and then breaks out and then tries to go above the prior high and maybe extend or the investor might say look i like those stocks that might have the ascending triangle pattern okay or a pennant pattern some investors when that stock actually breaks out a new high sometimes they're uncomfortable with that they like those ones that kind of had more of a pullback more of a consolidation breaks out of the basement pattern and then attempts to actually take out that new high it's just two different setups okay both of them though are you know longer term upward trend okay so let's go back to the chart no need to get really upset here james okay i'm gonna pull myself back now what you're gonna see in this case is the investor says you know what i couldn't buy a long call right they could go along the call the long call depending upon what the multiplying volatility is might be pretty expensive and that's going to raise up the break even the other thing you could actually do is could you do like a long call and sell a call kind of like a cover call you just don't own the shares and that's going to be into that vertical type of trade okay now in this case let's say the paypal account when they go long an option they decide they want to go at the money or in the money why well because it's safer uh because there's a group when i say safer what do you mean by that it's safer because there's a higher probability of the stock to be above the strike price at expiration why do we care well because the options become worth their intrinsic value at expiration that does not mean that there's no probability that can't be below we said probability they're saying a 51 chance the stop would be above that strike by a penny okay if the investor buys the 55 there's only a 37 chance that the stock would be above that strike at expiration that might not be a high odd trade that you like okay now if we take a look at this if the investor said i'm gonna do the at the money or in the money well what they could do is say i'm gonna buy that 150 call and then fund it or try to sell something above that to try to actually get in this case some premium back which lowers the break even which increases the odds of the stock being above the break even at expiration which is not a bad thing now what you're going to notice is it's going to go along the call to 150 selling the 155 call and now what you're going to see in this case there's the debit now remember the investor has the right to buy the shares at 150 but the right ain't free they paid 218. 152 18. break even survey says
well 152 15. now what you're going to notice is on both sides of this trade is we don't have up to infinity you're going to see that this is capped okay and it's capped because like in a cover called trade the investor is short the 155 call okay now what you're going to notice is we have a maximum profit we have a maximum loss and per contract now what we're going to show in this case we're going to go single account in the margin account typically are taking probably about a risk of about 800 so the paid one account in this case is gonna buy four contracts in the margin which would be about a risk of well safely okay we could do three okay which is below that 800 threshold if we actually said well what about that ira which can typically handle about a fifteen hundred dollar forecasted loss well that's gonna be about seven contracts now sometimes people say well margin ira those are different look i think if someone is a bullish investor trends or trends stocks or stocks options or options right and as long as they're liquid in an upward trend above support what's the difference especially if we're talking about verticals okay i'm not talking about buying the stock and capital differences here this is the same type of trade for both now what you're gonna and it's not changing the collateral either both of them are gonna be whatever the match loss is when we really look at that buying power effect it's position sizing for the max loss okay now we're going to go ahead and actually say send that order now remember that this max profit now is for the 10 contracts cumulatively three for the margin count seven for the ira the thirteen dollars is for all of those contracts going to go ahead and actually send this order now if we do that that order is actually going to try to fill now the one thing i also want to kind of make sure is in this case is when we also go back and i'm going to switch now to the margin account speaking of verticals there might be a couple of verticals we might need to address one being catskill okay now my my friend always says well my daughter my friend actually works at costco and she said to me the other night she goes it is really like the end of the world every day okay at least in utah now what you're gonna notice when we actually look at let's say costco short of the 380 bought the 370. this is at 98 percent of the maximum gain that the paperwork account hasn't made anything realized until it closed out so if the investment said james i want to close this down we're just going to go ahead and right click on those lines create a closing order shut it down okay now if the investor thought that that trend might continue they might roll that option if they actually said i i think that stock is more likely to consolidate or and or pull back they might not necessarily roll that option they might just accent the paper money account is just gonna exit now the last one i'm gonna just bring up just real quick before we do a quick little fast fire is if we go to let's say in this case to let's say more of what we just talked about with q-com a long call vertical remember with the long call vertical you got a short you got the long option which is the lower the lower strike think of that as the driver the short call is the strike that is above us that is giving us the ceiling and what you'll notice is when you look at this trade this is a trade that really has 80 percent of the maximum gain so the investor might say that doesn't really make a whole lot of sense now you're risking the 80 plus max loss to get the last 20 percent so that investor might say you know what hard thing to do if the investor thought i i don't want to roll the position i want to close it okay create a closing order sell it six hundred dollars trying to take that down confirm and send now remember if the investor thought no no i think nike keep going they might just roll that position this is the august expiration so if we talk about rolling this most likely would be going out to september now if someone was going to look at rolling send the order now i want to kind of also just mention so we talked about cucumber today we did an example of cucumber we did the example with tesla okay we also really looked at the re example of let's say mickey d's we also brought up the example of really talking about marriott as well and we also talked about some unusual kind of if you look at the option activity whether you look at cucumber tesla both are really showing some unusual activity from the option volume and the open interest okay so when we actually pull these up keep an eye on for example these and i'll bring up the volume we've got to close here but if we take actually look at this you're going to see kind and i post about this earlier on twitter okay so but if you take a look at this this isn't some kind of unusual activity and the open interest numbers are actually for the most part they're higher than where they were yesterday which is leading us to believe that people are setting up new positions long and or short so we're going to keep an eye on really q com keep an eye on tesla we're seeing unusual option volume and open interest uh and that is also on tesla as well and that is for the august expiration the monthly options i'm out of my time here today but remember coming up right after this we got barbara actually doing a class on managing a portfolio we did about three trades here today also talked about some management at least three of them and then what we also did with this is we really talked about in this case as far as uh adjusting stops and we said well wonder if someone could actually use maybe a secondary means to actually adjust stops based on lows now if you said i would like that well if you go right to my twitter page and you click right on that first picture right like what it says on the bottom it will say if you want like the visual 10-day low 20-day low it's it's right there right in the front of my twitter page all those scripts we actually use in class are right there at the top so have at it now also i want to give you a quick reminder that i'd like you to go back and practice putting those on your chart and i'd like you to see for you a daily perspective would you consider a 10 or 20 day low or would you for example consider let's say using the weekly chart as far as moving up the stops that's your takeaway so that's what i want to do i want you to do a little due diligence on that and see what what you might consider setting the stop on a daily chart on a 10 or 20 day low you consider or if you said james i'm more of a passive investor i'm going to actually consider using the weekly chart and i'd like you to pull up various stocks and kind of see how that would have worked over time so stay tuned for barbara armstrong coming up next remember with what we discussed we talked about demonstrating the function of the platform we needed to use actual symbols we did uh thank you so much for your comments and your participation if you enjoyed today's session reach out and just smash that like button also when i actually when the twitch tv uh recording is up i will also post it on my twitter page so that way you know this off and i'll post where you can actually get that recording as well and i did see that question thank you michael kealy for answering those questions in chat as well and with that said i wish you a great day take care goodbye