Trading a Short Put Vertical with OCO | Connie Hill | 12-30-19 | Trading With thinkorswim
Good. Afternoon, appreciate. You joining me here today for our webcast, on trading, with thinkorswim, this. Particular, bright, webcast, is pretty short in nature will, show you how to do different trades on the thinkorswim platform and. Then. I'll answer any questions, that you might have this, will be the last in our series that we've been doing over the last quarter of showing, you how to place different trades, come. Next, January which. Is just a couple of days away next. Monday on January, 6th our new, our. New schedule, is going to take. Place, ok. And in this particular class, what we're going to do is. Rather. Than just showing you how to do a trade we're really going to focus on some. Of the elements in the thinkorswim trading, platform, some, piece of. Functionality. Or. How to use certain features or functions, of the thinkorswim. Platform and go into, a little bit more depth about it and also give you a chance to answer some questions as well so look for our new programming, to take place of course, the previous, sessions are all archived you can go back and take a look at if there's something you're trying to figure out how, to do a particular trade, on a certain strategy. All. Right. Tamela's. So we'll have the thirty-first tomorrow and then the holiday, so enjoy, the holiday and then beginning January, 2nd is when, our new schedule is going to kick into gear so. We're happy to have you along some classes we've consolidated there. Are other classes, that needed, more coverage and so we've created a couple of new classes, for you or repurposed. Classes, like we're going to do in this case all. Right hello, Jean from Washington, as well as everyone else joining, me here today let's, just go through some quick information and. We'll get down to the fun. Options. Are not suitable for all investors as, the special risks inherent option. Trading may. Expose investors, to potentially, wrap it in substantial, losses a. Stock. Market order will not guarantee an execution, at or rather the activation, price once, activated they compete with other incoming, market orders. With a stop limit your, wrists miskeen you risk missing the market altogether in a fast-moving market, it might be impossible to, execute, an, order at the stop limit price or better so, you might not have the protection you, saw it we will, be talking about stops a little bit today past, performance, of any security or strategy, does not guarantee any, future. Results or success. Today. Is trade, that we're going to demonstrate run.
And I demonstrate for you is a short. Put vertical which, we've done in the past but this time I'm going to do it with an O Co order, in terms. Of buying it back as well, as set up a template should you like that type of a setup all, right let's switch over here to our thinkorswim. And. Get, over here. We're. Going to go to our big board for just a moment now. What. If we what do we see here up at the top we see Apple right, we see Apple. Trendy. Really, bullish. Li and, quite nicely let's move that out of the way right. That 30-day moving average is headed up headed up headed up now. Then as you've been here so you can see a little bit closer. What's. Going, on right, now with, the stock the. 30-day is still moving up, however. Over, the last say three four days it's kind of going, a little bit sideways, meaning not making, as much progress upward. It's kind of in a bullish, slash neutral. Zone. That all right I just wanted to give you a little bit of backdrop, on that as we, get into the actual trade here now, I'm going to come over to the trade page, I've, already got Apple up those. Of you that are familiar with a short vertical know that we're going to use two legs same. Expiration date but different, strike prices when, we're gonna sell one we're gonna buy as a hedge, now. Generally. Speaking. Selling. 20, to 50 days worth of time is is, a range that many traders like, to do alright, and, we have a lot of choices here with Apple, our. Monthly expiration for January, only has 18 days so that's a little bit short okay. And so. We might look at out here to the February dates in fact that's what we're going to do for this one I'm. Going to start out here with my 280, strike, price I'm gonna do a right mouse click on, it and I'm, going to say sell. Vertical. And, it's going to queue up a short, put vertical trade for me using the 280, it'll be our short leg the to 275, that's going to be our long hedge leg now. After this and, you might be familiar with this and comfortable to this point now. Is, when we're going to change the order a little bit here what I'm going to do down here in the, advanced, orders area. I'm. Gonna change that single, order, to. A first. Triggers. OC, o OC. O stands for one cancels, other and, so, we're going to set up something where we have a target or and, we have a stop in whichever executes, first it'll, go cancel the other so it's not just sitting out there in your working orders you wouldn't want to have, that happen if, one, side gets executed you definitely want the other side down so. What I'm going to do here is I'm going to right mouse click I'm, going to say create opposite. Order I'm, going to do that twice, alright, so we have our one sell credit. Spread, here and to. What I'm going to call buy back orders, and we're going to put in the conditions, here. Now. We're. Not so this. More, likely than not what, it opens up tomorrow will be close to the buck 47, price and. Suppose. You wanted this to be a little, bit automated. Alright. And. In the, sense that you, know maybe when the price of that spread, shrinks. And you've been able to capitalize. Or. Lock in a certain. Majority, gain on the trade you're, thinking you know what let's just take the money, let's. Lock in those gains move on to another trade, alright. So I'm going to show you how somebody, might possibly do that we're, going to do that with this first order, here, alright we're going to consider it out our target, and. Our, place where we'd want to lock in gains now. Automatically. When I said create opposite, order we do have to here for a buck 47, we're going to change this from, link. Over, here that says man we're gonna change that to a trigger. And. I'm going to do this on both orders, because we're going to treat them similarly, they're going to be based on a condition and then. What you're going to notice here is it, says plus zero, zero in, both line, items, okay, now, when you've been able to get the.
Majority Gain, out of your. Spread, some, people might consider that sixty percent seventy. Eighty you. Know eighty five percent something, that's a majority that's. When they might consider, locking. In their gains for. Our purposes, today what I'm going to do is. I'm, going to change. This to. Let's. See here. Let's. Say we want to get seventy, five percent. So. I clicked, on that little icon twice, to give us our percent as opposed to the plus or minus and, I'm. Going to put a minus sign here I'm going to say minus, seventy, five point zero zero and, basically. What that is saying is if, the price of the spread is down, 75%. From, this execution, price right above it you get that back for the block forty seven then. Trigger. A limit, order get, me out of the trade that's. What that means let's. Come over here set this good till cancelled now. The bottom part the other order what, if things don't always a planned right sometimes that happens well. We. Could set this up in a similar manner we could say you, know if, the, price of this spread, if. I get to be down on it a buck. Forty seven, alright, if I get to be down on it that much let's. Go ahead and close out the trade and it doesn't have to be a hundred percent people, will use different ranges, I'm trying to use some numbers that are very simple, and easy to work with here today so. Here I'm going to again, we're gonna change it to a percentage, we still have it on the trigger and we're, going to say if the price. Here, goes above, the initial, credit a hundred percent so, I'm going to leave that plus sign there and type, in a hundred. Then. Let's. Execute let's get out of the trade, all. Right I'm. Gonna make this good till cancelled as well now. One thing about this if, somebody, wanted to they, could, calculate. 75%. Or 80% of. Whatever this order is here and manually. Type it in you, could do it that way although, you'd have to change that back to the. Plus and minus okay. However. What it would be the advantage, here, of just doing. It this way well. The advantage is, going to be the next step I'm going to show you and that is, that we can set it up as a template.
And Use it over and over again, all right so a little. Book the little icon right here just to the left. Of the delete sign is the icon we're going to select on it's. Going to come up and it says under, a custom, template. Name it. Kind of kind of spells out some stuff with us or. For us here, first. Trigger is O CO and vertical cell 1 vertical. Trigger. Plus. 75%. I mean it tries to say sort of an English what you're trying to do and you could do that or you you can keep it or you could just call it your own name, for example, you might say. First. Triggers, Oh Co. 1. You. Might say like short, put vertical if you, want it right just you could just abbreviate. That and then. Put in whatever parameters, help you remember what that template, is alright, I am, going to call it. First. Triggers. 1. SP V I'm, going to call it that because I want you to see how you can use it in the future I'm, gonna go ahead and save that, at. This point you're, ready to submit the order all. Right I'm, gonna hit confirm. Review. It make sure it represents, what you want we're. Only doing one contract, here so transaction. Fees are fairly small that. You want to acknowledge what they are be aware of it and then, go ahead and hit Send now, at this moment the. Market is closed so. This is just going to be out here in, our monitor, tab out here in our working orders, sitting. Right here at. The top ok. That's, where our little order is sitting. Now. I imagine. You might have some questions because this one's a little bit different in terms of what we do what. I've shown you to do instead, of just executing. One strategy, we've also put, on how, to get out of the trade and put it in there automatically, now. Go. Ahead and chat your questions and, I'll answer those as they. Start coming in one. Of the questions, that you. Might have is. Okay. Connie you said that I was a up as a template, when might I use it again all. Right so. What we're going to do is I'm going to pick another stock. Here, and it's, not so important, what the trend is at the exact, moment for, it but, I'm gonna pick for, example. I'm. Gonna pick Amazon, it's pretty expensive stock, but most of you have heard of Amazon, has. Pretty, decent liquidity. Actually it's not as liquid as I wanted. Let's. Go with. Let's. Go with Pepsi. It's. Not as liquid as I thought either dang I, should have been more prepared with, my second, example we'll. Just use Apple again okay, we'll use Apple again but. This, is how you would use it you. Would say. Suppose. You were going to do in, this case as short call vertical so we're not overlapping. Strike prices here, suppose. You were bearish on it although when we looked at the technical, analysis, it didn't really look like a bear setup but, just for the purposes, of using the Apple, options. Here I'm, going to do it again a right mouse-click and I'm, going to say sell, vertical. The. Short legged Scott setup for me here is the 3:05, call the long leg the 310, call and jari it's a very fairly similar, credit, here now, what you could do. It. That's, what our intent would be we could do right mouse click and, then. We'd come down here, and say. Sell. Come. Back so. Go. Down one more sorry sell custom. All. Right custom, is where you go down and you choose, what, you named that last, setup remember. I called, it first triggers, Oh Co one, SPV. Remember, I put that in then, I would come and select it, right. Here and you'll. Notice Shazam. It, sets, it up in the same way that. We had set up the, other order, okay. That's, a template that you can use for that now. Let me see what kind of questions you have here, I'll. Try my best to answer them. All. Right, Sandeep, happy, that we taught you something new today that's, great, let's. See what Ann says here. And. It says in the past couple of weeks you have done a jade lizard and a. Back ratio, spread in this class do you have time to show us some trade management. The. Intent, of this class isn't so much on the trade management, side of things and. Is. More. On. Demonstration. Of how to do the trades now, in the Jade lizard I, believe Brent Mohr's did that for me and so, he did it in his, account.
On. The ratio spread I'm, trying to remember what the ticker symbol was, on that and maybe you can help me by telling me what that is. Or. I can, come over here, and. Look. In, our class, portfolio, if. It actually made it there. Trading. With thinkorswim. Let's. Just see what it might have been I can't. Remember off the top of my head what we use for that ratio spread. Was. It. Was. At Home Depot. 12. 3. December. 3rd that could, have been its let's, see the trade though it. Looks like we've just got to put here, on that. One let's look at microcell. That's shares. These. Are, all out of a different. Portfolio. Let's. Go down to my unallocated. Oops. Wrong way, let. Me scroll, down to, my unallocated, now, let me see if something just jars a memory. Franklin. Says this is something that's new for you it. Could be that the platform. Is new to you wouldn't, doubt that whatsoever. But, in terms of our trays let's see, I think this is the Apple trade we're trying to do right now and, anything. That has a quantity. Here that's blank typically, that means there. Are options, inside, so. Say like this Microsoft, let's open at. It. Says 0, we. Must have an old order sitting, out there an old, sell order, so IRA cleaning this account up which I'm going to do for the new year probably, want to do some cleaning there. Wouldn't. Have been that let's. See if it was Target. Okay. It was Target I think. December. 10th was. That that. Sounds like that was a couple of weeks ago doesn't it today's, the 30th. We're. Doing probably. What it kicked in in the next day the next trading day alright, so what have we got here we've got a short, I'm gonna have to reacquaint, myself with the trait that we did we've gone a short one 25 call too, long 1 30 calls. Looks. Like overall in the trade were down a little, bit the cost for the vertical or, the back ratio was 470. Right, now it's gone against us a little bit let's just quickly look at the chart, of. Target. And. I'm afraid I took a ton of time just actually trying to find that ratio spread. More. Than anything this, was, a long haul vertical, with, an. Extra. Pretty. Sure that the one we went with here was an extra. Yeah. So we've got the two long calls and then, just one short, call acting, as the hedge so, it's kind of like a long haul vertical, with an extra long leg on it so it certainly, as straight, now. It doesn't look like that was we put that in on the 10th and boy it looks like this thing has done not. A whole lot since then we. Got in on this day and that. Was about 126, right now it's about 128, something moved like two and a half dollars so, that explains why we're down a little bit but this is a bullish trade we, would, want it to move but you do have a hedge on there. You. Would want to keep an eye on it if it continues, to go like this and you're continuing, to see the, value of that spread, decrease decrease, decrease, due, to time, decay because. You've got two Long's, options. There that might be of concern to, you think you might just say that this thing isn't moving I need it to move and wrap up the trade all right so somebody could consider doing that. All. Right, perfect. Well I appreciate, you guys joining me here today so. I could show you one, last trade, before. Next. Week when, we start looking at functionality. At the thinkorswim platform I really, think you're going to like it a lot we've done this class that class in the past we're, gonna approach, it a little bit differently and give you the opportunity to ask questions, and so, I think you really are going to enjoy that quite a bit now what would I want you to do all, right go. To the trade tab and, set this up practice.
It Go create your own custom. Template or, if you're not quite ready for that at least set up these steps, okay. Where, you're locking in the gain when the credit has shrunk whatever, percent, you you. Know you like to walk in out whether it's 75 80 what-have-you. And, set, the other side so. That if it goes against, you whatever. That percent, is I just made the percents easy today whatever. You're comfortable with to go buy that trade, back you, want to go implement, that and paper treat it right practice, it so. You get better at it, all. Right. Coming. Up next we've got Barbara Armstrong she's gonna start here at the top of the hour so you get a little, break to go grab a snack and, a drink whatever you need and barb. Is going to help us out she's, going to be talking about training, in, a. Smaller, account. All right trading in a smaller account she'd love to see you there and again, I'd love to see you here next week I may even put a little. Teaser. In, my Twitter account if you want to follow me i'm i am, at chill. CH. I ll underscore. T da love. To have you follow me we as coaches we put out insights that we see throughout the day that we think might be helpful to you or to explain. In educational, concepts alright, hey get, appreciate, it we'll see you next week buh bye. You. You.