Trading a Smaller Account | 6-4-21 | Barbara Armstrong | Bullish Trades
all right good morning everyone welcome to trading a smaller account my name is barbara armstrong and i am a coach with tda and delighted to be starting off my friday with all of you i'm always impressed with how many of you are here ahead of time you know ready to rock and roll so who does this class appeal to trading a smaller account what is that about anyway our assumption is that we have a 20 000 account we don't want to risk more than four hundred dollars on any one trade and so if you have a smaller account and you are looking for strategies that might be helpful this is a great place to learn those strategies be able to practice those in paper money we place lots of trades in this class and then we manage those example trades on an ongoing basis the other type of person that might be interested in this is maybe somebody with a large account maybe some of it they manage very conservatively maybe some of it they delegate the management of but there's a portion of it that they would like to perhaps more actively um manage and trade so that's a an appealing audience as well so wherever you fit on the spectrum we're delighted you're here stick around lots of great stuff about to come your way [Music] right now if you're watching this in the archives and you have questions it is easy to ask them just go down to the comment section and you can put a question in there i will get back to you promptly the other way to reach out to us is on twitter so at b armstrong underscore tda is my twitter handle ken rose typically accompanies me on friday mornings his twitter handle at k rose underscore tda so let's get to our important information so that we can get right down to business just let me pull this down a little bit all right oh somehow i skipped over one and we don't want to do that so first of all we trade a lot of options in this class and know that options aren't suitable for all investors there are special risks inherent to options trading that may expose investors to potentially rapid and substantial losses also know if you're new to td ameritrade and you've just opened an account you have to apply for option trading privileges with td ameritrade you can do whatever you like in your paper money account but when you get to your live account that is something you have to apply for and it's the same thing with futures those are subject to review and approval and not all clients will qualify in addition everything we do in this class is for educational purposes only so in order to demonstrate the functionality of the platform we need to use actual symbols and we use a lot of them however that isn't to be construed as a recommendation on the part of td ameritrade or myself we cannot begin to know what's appropriate for you and your account what your goals are et cetera any investment decision you make in your self-directed account that is on you my friends also know that all investing involves risk including the potential risk of loss and we've had many trades in this class that have not turned out to be profitable and in this class we talk about those that work out according to plan and those that don't and i think we can learn from both because both if you become an active trader both are part of trading my friends okay so what are we going to do today well we're going to start with a market overview as we always do we're going to have a look at the major indices and see what's going on there and then we are going to look at our current positions because part of being a successful trader isn't always just adding new trades it's also managing what you've got so we've got about 10 positions and if you're saying oh do i really want to stick around for that because you know i this is the first time i've ever caught this class you can learn a lot from trade management whether you have that position in your paper money portfolio or not trust me i started as a client who took advantage of this education and and as always we will be adding some new trades to our example portfolio as well so that's what's on the docket for today uh let me just get rid of that and actually let me just bring something up here and just manage that and i've got one other quick thing to do just so that we don't get interrupted by things sliding across my screen um i'm just gonna pause my notifications okay there we have it okay so let's get over to the thinkorswim platform where as i like to say the magic happens so let us start by looking at the s p 500 and so when we look at this there is a study and it's called the market forecast study if you haven't seen it before i do have it the the script for that in a tweet that is pinned to the top of my feed but the idea here when we look at the s p 500 and we only look at this in the context of the s p 500 is you know we're looking at this and this is a six month chart if we back it up and we look at a one-year chart we can see that this is an index that has been up trending correct and then we've seen in the last couple of weeks since it hit a new all-time high back on may 7th that we have a little bit of a pennant pattern that was setting up looks like it's breaking above that today but that we've just seen a little slow down in the move to the upside but it's continuing to uptrend and so you know some might even take this off now when we come to the market forecast line this is um you know when we're looking at the intermediate term line we just want confirmation of this bullish uptrend and what we're looking at is this green line to say you know is it up trending in the 20 to 80 zone or is it above the 80 and if so that would indicate that this or confirm the bullishness of this trend and and you can interpret this however you like um you know and so what does that mean when we look at trades well what it may mean is that if we want to follow along with the trend of the market in general what we may want to be doing is following this uptrend um and could it change it certainly could could change tomorrow i mean currently it's up 0.7 and we're a couple of hours into the trading day now if we come and we look at the nasdaq tech heavy index no financials we saw that you know in the last year it has had a really strong year and then it kind of has you know had a pullback a significant enough pullback that if we measure it you know it's enough that people said the nasdaq was now in correction territory if something pulls back more than 10 this actually pulled back 12. but it's been setting up a bit of a pennant pattern still in the middle middle of the up pattern and today trading above you know both the 30 and the 10 days moving averages so up trending certainly today if we come and we look at the russell or our 2000 small caps we can see that this has had a tremendous run and actually was the of the three major indices was the strongest of the three from you know november it just went on an absolute tear really up until about the middle of march and then it started consolidating and is still you know in a bit of a consolidation pattern and some might say you know broke out of this diagonal resistance line and has come back retested so across the river came back to re-test the ice and moving on up um but you know and so some technicians would look at that as a bullish sign also so i'm going to come back and the last one that we're going to look at is the vix and this is our volatility index down almost 9 today and you know when we look at this is a one-year chart you know and and if we can go back a year and a half i mean in march of last year this thing hit 80 which it hadn't seen in a very long time but it's been you know steadily kind of coming down but we had this major support level here around the 20 mark and you know now it's broken below that recently and seems to be hanging in that 16 to 20 range more often than not and right now it's sitting closer to this support level so what this tells us is there's a fair degree of confidence in the market you know so that's the message that the vix is giving us okay so there's our market forecast check excuse me now let's come and look at our activities and positions and you know sometimes what people will do let's say you've gone on a vacation and i am okay full disclosure here i am about to go on a bit of a vacation my daughter is getting married so i'm going to clear this and say what has happened in the last week and we're going to close this so when we when we look at this and it's we're seeing more now because let me have a quick drink i'm actually re-recording this session because we had some major buffering issues that actually cut the last 15 minutes off where we placed all our new trades so you will see that we are um a little later i'm going to do a couple of trades one on apple and one on cisco but prior to today um we had closed out on june 1st a trade on goldman sachs and one on jpmorgan so let's go back and look at these so with jp morgan if we want to see the entire trade let's go back say 50 days so we can see that we opened this short put vertical for 51 cents back on may 21st and it closed out for 4 cents and if we want to see our order history because you hear me often say in this class you know when exit just triggers a market order so it doesn't mean we're necessarily going to get filled at exactly that price well this time this worked in our favor and how is that well we had put in an order when we placed the trade so back here on may 21st we entered the trade and as we entered it we said hey when we've got 80 of our max gain so 10 cents is about 80 when we've got 80 percent trigger in order and we'll get out and of course we had a three-day weekend so on monday our order was triggered and it worked in our favor this time because actually we got out for four cents instead of 51.
and so you know i've had questions in the survey saying could you please walk us completely through the math so if we look at this and we said okay we sold it for 51 we bought it back for four our net gain on that is 47 cents i'm just making a note here our net gain is 47 cents a share and we did two contracts so we did two contracts so that is 94 and we're going to multiply that you know by a hundred you know so it's 94 is what we ended up with because we had two contracts and each contract represents 100 shares okay and so that was our trade on uh jp morgan and often i'm asked if i don't talk about something you know it's like whatever happened to that trade odds are that we just got stopped out or it hit our target and we closed the position so this was very similar so here goldman sachs on the 21st so the same date we opened it let me just bring my bar over here so we opened it on the 21st and similarly it got closed on the first and we got paid how much we got paid a dollar 30. so we can see that right here and we bought it back for 21 cents and here you know our credit was a dollar 20 um was what we asked for it got filled at a dollar thirty so this may be a bit of a paper money fill um you know but then we said hey if it gets to the point where it's 22 cents buy it back and we got out for 21 cents so you can see that these there can be some variation okay so and again if we we walk through the math 1.30 and then we bought it back for 21 cents so what did we end up with a dollar nine you know per share and we did one contract so that's times a hundred or a hundred and nine dollars and then the other trade how much did we make 94 so in total we were ahead by 203 and you know so you know and that was our best case expectation on that in fact a little better because you know of the fill on the um jp morgan but you know when you have a twenty thousand dollar account this represents a you know approximately a one percent gain and so the idea you know on trading something like a short put vertical is that you're looking for a base hit strategy now do these always win no we had one on apple that i think we took a max loss on last week you know so and and then you have one losing trade it can wipe out two or three positive trades and so it's important that you manage these as we go through and so that's part of what we do in this class okay so seeing as we're starting with short put verticals let's come down and look at the other short put verticals that we have and we have one on triple m that's ahead of the game it's profitable not wildly but we're up 36 on that we bought it for 55 it's now trading at 35. we sold the 200 and bought the 197 and it's at 205. and so you know if we look at that this one is triple m we might say you know what we're just going to let that continue to perk along and let time we've got time coming up this weekend and um hopefully that one will be just fine now home depot we're showing a loss on so what's going on with home depot well with home depot our our strikes are at 310 and 307.50
and when we looked at this first thing this morning it was sitting at like 3 10 30 it's now sitting at 309.77 but if we look at this and we say okay when it came down here it came down to you know 3 10 93 and this low was 310 and this low was 309.07 so it's kind of hitting this support range but if it breaks below that we may want to take this trade and close it to avoid a max loss better a small loss than a large loss and so when we come back and look at this you know it's saying we're down 104 which you know we sold this for 55 and that's why because it's now worth double that amount so it's now at 115 um is what our loss is sitting at but if we just exercise some patience it's sitting at that support level and if it bounces then all should be good in the world and if it doesn't then we make a decision on how to minimize our loss and both of these have two weeks to go now today um in our live version of this class we went out to june 25th and we added another short put vertical and on what basis did we do that well let's go and look at apple so we got filled on that at 48 cents so when we came here we noted that there was a bit of a pennant pattern and we can get rid of these because we don't have those positions anymore um you know but if we look at this we can see it was a bit of a pennant pattern setting up and then some might have said oh was it breaking below that and then just starting to come back today others might say well i see this base support here and it seems to be you know either way it seems to be bouncing off of a support level and could we come down and sell something below that and so when we came and looked at that we said could we sell perhaps this 122 120 and so if we click this line we can see that this is where our short put vertical is 122 120 expiring june i forget the date on the right come back and look um we went june 25th so we're out 25 days so if you want that to be on the chart so that when as soon as you look at it you can see okay this has you know 10 days to go or in our case today you know it's probably got 21 days to go and so those are our short put verticals now we also have three dividend stocks abr cno and ori and we can see on these they're all actually pulling back today so we have a profit on two of them and one of them is sitting at a loss so if you wanted to just have a quick look at those abr oops i could type abr and we've been in this one for a little while we have a stop in place it's continuing to trend to the upside no action required cno well this is the one where it's now breaking below a support level and on cno i believe we have a stop in place we looked at where our stop was and no action was required it's sitting three percent basically below um you know these candles that close below the 30-day moving average this one is considered a value stock and it pays if we come and we look at the trade tab you know a dividend of two percent um and it's part of the financial group so hopefully that'll just be a little dip below the 30-day moving average and that will continue but we've you know done what we needed to do to manage that and then ori continuing to the upside some might look at that and say shouldn't we move the stop up well it depends on what your routine is if your routine is that as long as it's above the 30-day moving average you can just leave it then no action would be required a dividend is coming up um so i guess the dividend was being paid today on that often that will precipitate a bit of a pullback so are we surprised that it pulled back you know the dividend's 22 cents it pulled back by 29 that's pretty much business as usual so we're good on those okay so we've looked at those three and we've looked at the five short put verticals um it by writes now this is one where you'll see a zero here so what we did is we bought back the call on nielsen and so if we come here and we type in nielsen and we're going to go back a little bit further so we bought this one a couple of months ago and we've sold a couple of calls on this so we'll get rid of the order history but we bought this for 26.29
we bought the stock and this is a buy right so we bought the stock we sold the covered call with the intention of treating it like a short-term trade where we would get out quickly the goal was to be called out the stock pulled back so we bought the call back for 10 cents so we were up by 65 cents there or because it's one contract we were up by 65 then we sold another call for 75 and it was the 27 call we rolled that call to 28 and it didn't cost us anything to do that today we bought that call back for 35 and so that 75 we'd have to subtract 35 so our net on that is 40 on this one plus the 65 so we're up 105 dollars on this example on nielsen um and we still own the stock and so when we looked at it at the chart what we said to ourself was hey self um here's a stock we bought it this time and then it kind of was range bound and then it came up broke through with you know a pretty big candle day went up hit 2842 and now has been kind of languishing a bit so and today it's pulling back to this 30-day moving average but still above this previous resistance level and above the 30-day moving average so we thought well if we can buy this call back and lock in some profit on that we'll do that and then if it if or optimistically because we do have an exit on this if the trade goes against us if this goes back to the upside we can sell another call and then get not only the benefit of the stock going up in price but get the credit for the call and so we'll look at this in the upcoming weeks and say if it's bounced you know let's sell another call but that was the thought process behind that one with fcx so and here's another one i believe we've sold a couple of calls on this one as well so we bought it at 42 and this is one we had in our account for a lot of last year um and you know we've got a 44 gain on that call but again when we bought this the idea was to look at this as a shorter term trade and if we look at fcx you know copper got hit the last couple of days and this is a stock that represents a company that mines copper so look at that like a year ago it was trading at ten dollars a share so when we look at this we entered the trade here when it was breaking out and then it's pulled back come up hit 46. a share so we did this buy right for june and it's pulled back and so again we have a couple of options so we could use the option of saying well let's just let it ride and so we did kind of one of each with nilsson we we bought it back with the other one we let it ride but we could come in and say you know this is at a support level i believe fcx is strong you know looking kind of strong from an analyst perspective at least um and you know if we come down here you know a lot of these numbers earnings per share up etc sales down a bit last year but it seems like that has been boosted um so you know if you come to your monitor tab if you did decide that you wanted to close out that call you would right click create a closing order let's say let's buy that call back with the intention of selling another one confirm and send okay so that was that one so we've now managed our buy rights and now what we're sitting with is two companies where we just own the stock we've already looked at our short put verticals so there are two trades left for us to look at one is a trade that we had put on a week or so ago on u.s bank core so we did seven long call verticals at 60 and 61 and it's currently worth about the same amount so we're down a whopping seven dollars on this because it's down one you know it's down one cent um you know times seven hundred um and so if we come and we look at our chart for usb why did we place this trade well we saw a stock that was up trending in a sector the financial sector which has been one of the leading sectors since november and you know even though it's been kind of crawling along this 30-day moving average it just has to close above 61 and that's where our line is it's above 60. um so you know to get our max gain it just has to be trading above 61. in two weeks so the uptrend is still intact it hasn't closed below the 30-day moving average and so patients we're just going to let that one continue to percolate now we did add another one today and we added a long call vertical when we were live in the buffer zone um on cisco and we did the 5250 and the 55 so we did a long call vertical and the goal of course with a short put vertical is to sell something and have it expire worthless with a long call vertical we want to buy it and have it go up and this one has unfortunately pulled back a little bit today but we're early days on this so let's come and look at cisco and why we might have decided to place this trade csco so here are our strikes let me just come back again they're at 52 50 and 55.
just let me write this down and so this at first we were looking at you know could we do a short put vertical on this um and you we could but there wasn't enough premium in it to make it interesting and so we thought okay well what if instead of doing a short put vertical we did a long call vertical and the idea being that it goes above 55 and could we make some money on that if it went above 55 and when we bought it it you know was trading i'm just going to write that 55 and 52 50. i'll show that on the right so when we looked at that it's like okay it only has to go up another 80 cents from this today's high for us to have our max gain it doesn't have to go up two three four dollars and what's our max gain well with a long call vertical we paid 217 to get in there's a two hmm okay i didn't do such a good oh no we paid a dollar 37 to get in i'm thinking how could i have done that okay so earth to bar so we paid a dollar 37 to get in and there's a 2.50 difference in the strikes and so what's the most we can make is the difference between the two so if we look at 13 so we can make a dollar 13 that's the most we can make on this what's the most we can lose a dollar 37.
so that's why we did three because we're willing to risk up to 400 and i think it came to 411. and so when you look at the 113 divided by 137 what's that as a potential for a return on your risk 82 and the thing that many find appealing is that you know this stock is already trading within a dollar of that 55. so why trade there why not say if you're really bullish on something why not go further out because our first strike was in the money well because the probability of it being successful is higher we could have come to the trade tab and said well why don't we do the you know the 55 and the 57 and you know we we absolutely could do that but you know what are the odds of it going above 57 currently under 10 9 you know so where what are the odds of it going a above 55 30 and you know if this moves up dramatically in the next day or so you know this delta is a fluid number and will continue to change okay so that's what we were looking for on cisco okay so we did that one that was a new trade today and then the last thing that we reviewed was tech and tech is a covered strangle and so what is a covered strangle well we bought the stock that's why it's called covered and then we sold a call above it and then sold a put below it and so you can see here that you know we sold the call for 78 cents it's now worth 18 cents we sold the puts for 77 cents they're now worth 62 cents so we have a small gain on each of those um but the stock which we paid 25.39 for is now trading under that it's now trading at 24 41. so if we come and look at this and it's a friday and you're saying okay well time decay is going to work in our favor on the covered call and the short put we may just want to hang out on this one and we have two weeks prior to expiration on the short put in the covered call and so the idea here or the goal when we place this example trade was for the stock to even go up through our strike and end up called out we were doing this as a short-term trading strategy and you know these puts would expire worthless and that would make us happy and even if we got called out on the call you know the stock would have gone up in value we get the premium for the call so all in all it could have been a very pro it could be a very profitable trade still so what happens if it expires you know at 26.50 well our short put would expire worthless our covered call would expire worthless and we'd still own the stock so we could do something similar again or we could just exit the position altogether you know now what if it comes down well we'd end up owning more shares and so you know we may want to we'll we'll want to be monitoring this one fairly closely so that was tech so guys that was our class for today so you know we looked at or reviewed um over 10 trades we looked at five short put verticals we looked at five dividend or sorry three income producing stocks we looked at our covered strangle position and we looked at two long call vertical positions and we added both a long call vertical and a short put vertical to our example portfolio today now one of the things that i haven't covered yet was that what we did was we brought up the dow and we just started clicking through because i'm asked quite often how do you find the stocks that you find and we kind of went through a little bit of that thought process and one of the ones that we looked at was caterpillar which is kind of sitting right up here and we walk through you know why a trade might work and then why it might not you know it's sitting at this resistance level but this stock has been on a serious uptrend started consolidating broke out you know if on monday it bonks its head through and we've done a short vertical which is bearish it's really counter to the overall trend of the stock and it's counter to the way the market is currently trending we probably wouldn't get enough premium to do a short put vertical and might not have enough confidence that it is going to break through yet because it hasn't you know to do a long call vertical so you look at it and go okay so the best action on this today might be to do nothing and then you go to the next one and the next one but guys um the weekend to wait so i'd like to wrap this up i know that many of you who were with me live today and all i can say for those of you who stuck with us through that whole presentation i really applaud you for doing so it just shows you me how dedicated you guys are um and you know i i've been on the other side of it so my heart goes out to you it's why i have re-recorded this because i know many of you would be looking i knew many of you would be looking this for this in the archives so thank you thank you thank you for continuing to show up and be part of this community and to most importantly to show up for yourselves by attending a webcast like this so did we do what we said we were going to do yep we had to look at the markets we managed our current positions and we added two new trades which for us in this class often we add five or six but we got two in there um and we'll be monitoring those in the weeks to come so guys thank you so much for joining me today keep in mind that all investing involves risk including the risk of loss and keep in mind also that this presentation was for educational purposes only um you know we use a lot of different symbols to demonstrate this platform and to demonstrate the concepts that we're talking about the trading strategies that you might want to become familiar with but none of this is to be construed as a recommendation regarding either strategy or individual stock so guys have an absolutely fantastic weekend take care and i will look forward to seeing you in a webcast coming up soon bye for now