Trading on the Indices, Moving Average Crossovers, and Stocks with Upcoming Dividends I Twitch 101
[Music] [Applause] [Music] hello and welcome to twitch tv with td ameritrade my name is james boyd we welcome you here today as always on wednesday at 2 to 3 30 eastern excuse me yeah 2-3 30 eastern on wednesday we actually do have twitch we answer your questions we go over past example trades which we'll talk about in a paper money platform and also we talk about different topics like fundamental analysis technical analysis just how do we how do we trend support resistance momentum questions on options all of that goes here so let's actually go ahead and hop right in we'd like to welcome uh tony in the money mr walto walter hypo fool bill shu uh moss 697 and jilly bean and wiseman and many others we welcome you here i will also show that this is being recorded and i will show you where you can also see the recording as well in two different places so stay tuned and just real quick as we're getting started i want to welcome you i know a lot of you have had interest about markets in general where to learn my background as i've been in the market since 1996. i've i've pretty much traded about everything and uh so and i've had actually about seven years where i knew nothing first getting started at least i would say it's nothing now looking back and then actually the last probably 18 or so years ish you know know a lot more than i did in the first seven years so you guys are in for a great treat here today as we talk about these things and i look to answer your questions let's hop in now remember with what we discussed here today the information presented in this stream is for illustrative educational purposes only not intended to be investment advice or construed as a recommendation of any particular security strategy or account type i am not an analyst i will not be giving specific opinions about certain stocks and or their performance i will not be discussing any etfs in this webcast please follow the chat guidelines you guys and gals have always been great about that and of course the most important part if you do choose to follow along in a paper money account that is fine but if you do that in your real live money account that is your decision alone and your responsibility to evaluate and manage now let's actually go ahead and hop right in here now remember i'm going to be watching the chat to see if there's any questions okay so if you have questions as we talk about some things let me know i'm going to stop refer to who's asking the question and let's just go over that uh go over that as well now i am using the thinkorswim platform by td ameritrade you can go to the td ameritrade.com website you can go to believe it's actually there are tools up at the very top and when you actually go to that it's going to give you an option of really what type of platform do you want to use and i'll just kind of widen this out why don't we do that so as i'm showing you these things if you say hey where is he getting that uh what i'm gonna do is if we go to the td ameritrade website go to tools and platforms what i'm gonna be showing you as many of you might be new if we scroll down a little bit you're going to see that we have different platforms uh web platforms thinkorswim desktop that's what we're using we also have the web or mobile trading whether it's on your iwatch your iphone and bill no we don't forget about you you can also use that on your samsung product as you will see on your right hand side okay bill i know you're you're good man now so we love all people okay there we go all right so now if you want that download go to thinkorswim desktop as you'll see and what it'll do is it'll ask you do you want to download that thinker's home desktop that is a software okay so i had a question on that so i just want to kind of refer i am using the thinkorswim platform so here we go now again if you look at the s p okay the 500. you know this this kind of
is really the projection target of the kind of the support to the resistance i'm not going to necessarily say it's screaming to the upside but again you got to remember it is an index and if you actually look at that just kind of slowly going up price has been above the 10-day moving average how many times we've heard that before i mean you have momentum and you have a trend whenever you actually see the red line turned up the 30 period moving average and all i need to show that chart i will show you that now sorry about that and i always forget to do that i'm going to teach myself that so first thing what i want to kind of do is uh make mention is and i'll show the where to download that toss again but the biggest actually thing is if you look at this we're looking at the s p 500 we're on the charts tab and you now see that we're above the 10 10-day exponential have been for a while and the 30-day simple okay right there now if you take a look at this what i want you to recognize is sometimes we overthink stuff don't we we just well what about the debt ceiling and what about this and what about that and what about those are all things on the outside and some of them are more important than the others the biggest actually thing kind of goes back to the chart itself if there is things like the debt ceiling if there is things like xyz that doesn't necessarily so much change whether the stock is at resistance or at support okay so if the stock is up near resistance and there's an upcoming debt ceiling well the investor for example might say i'm going to protect if the investor says you know i'm starting to see my stock break support and this upcoming debt ceiling or whatever it is is maybe starting to push some stocks down then how is that any different when there's not a debt ceiling issue i i don't know if it really is i think there if there are certain things that the investors are concerned about then they bite might be more disciplined in managing their position so what that would mean is they might be more actively engaged in moving up stops or actively engaged in terms of applying protection but i don't necessarily think that changes really a whole lot okay now just real quick as we're getting started i want to kind of go back to something so remember when we are on the thinkorswim desktop okay he said where do we get this we're on the td ameritrade.com website we're going to go down to tools and platforms we click on that and you're now going to see the tool that we're using is what's called the thinkorswim desktop you can download that and guys and gals you know i do have an ipad i also have a samsung product so bill you'd be proud of me i have two products on samsung but the biggest thing is gosh dang it the phone the ipad or samsung using that app there is incredible if you haven't used it you need to download it take a look at it today you'd be blown away as far as how far it's come unbelievable now let's actually go back to just real quick uh just briefly the sectors okay and actually let me show one chart here that we'll keep an eye on going into the close a lot of investors if you've been actually on twitter there's a lot of discussion talking about the russell okay the russo actually had that diagonal breakout watch you bring up a position we talked about earlier this week had a nice break out on the daily chart real quick on that three year weekly chart that's what it looks like okay remember what we said earlier today when you go back and actually look at the performance last year of the russell we're not saying it's going to do the same thing but investors sometimes they have a memory of what happened last time and they might try to replicate what happened last time not saying it's going to happen but they might be thinking could it happen again and actually the russell went up last year in the fourth quarter october november and december went up 25 stinking percent the index now our investors may be trying to go back to what worked last year thinking hmm could it do it again now some investors might be thinking so and now you're seeing the price break out we'll talk about that in just a moment real quick on the sector front okay the only thing i want to say on the sector front which i did not talk about earlier today uh i want to go back to let me grab that set there we go now the sectors that we've been kind of talking about there's kind of two areas that we've been mentioning that have kind of been on the press uh kind of uh right there on the ledge if you want to call it maybe trying to break out number one is basic materials this is the weekly chart of base materials if the price can close here you would actually see that be a breakout potentially on that weekly chart show the daily chart and if we look at the one year daily that's what it looks like okay you talk about the last couple days where maybe the price broke out trying to make a new support you actually see the price above that 10-day moving average remember that's a moving average that's a momentum line price gets above that could that be starting to show maybe a build in momentum the other area that is not kind of moving up with it so far that what i saw was uh industrials not yet discretionaries good grief i mean i don't even know if you call that an uptrend okay then if you actually look at let's say the financials they look like in the shorter term they're kind of showing a maybe a bull flag a slight panic nevertheless still kind of holding above its 10-day moving average and of course if you look at let's say technology okay new high for technology okay that's like groundhog state but that's a good groundhog's day if someone has actually been long really technology okay now are there any questions uh the comment came is can you talk about options on index funds okay well it's funny you should ask let's actually go back to for example the russell let's go rock okay now what i want to do is when we actually take a look at a rut now there's different products okay there's if you look at ross the russell 2000 the index the index if you buy rut you can't buy rut the shares there are no shares okay this is a cash index what you also noted now by the way there is a product that if you said i want to buy like something that tracks the russell 2000 that is stock and even maybe pays potentially a dividend okay there is that product we won't talk about that product but there is that option if someone said i want to for example do the index product the russell let's example give and show show this and i want to make sure i'm showing up full screen so what you're now going to notice is this was really a pretty easy example which is buying a call now you buy a call okay think about buying a call like you put a house under contract why'd you put the house under contract how do you do that well first off you got to give them earnest money right the earnest money contractually gives you the right to buy the house for a set price at a future date and time could you lose that earnest money could you for example decide i don't want to exercise my right and buy that house at the specified time and the agreed upon price absolutely you could just say look keep my two or three thousand dollars or whatever it is okay that's probably outdating myself but the last one i did was three thousand dollars that was almost 20 years ago so i i probably dated my last purchase there now the biggest actually thing is so that's the call the upside piece or the strike that's actually higher down here that's the two third the two 2360. so this right here what you're going to notice is it says am now that's not normal we don't normally see something and this is what we call am settlement stocks we actually look for them where they close on the third friday if we're talking about monthly options at the close now sometimes where it closes isn't necessarily the closing print these indexes or at least the one i'm pointing to this is an am settlement okay so it actually would be where the when all of those 2000 stocks open which is not typically going to be the first 10 seconds of the index it might be in the first hour or two okay but that's why it says am this is an am settlement but the idea is the same outside that there is no early assignment or exercise okay now some investors like knowing that you know nothing can happen really until expiration okay unlike stocks where you can have you can have early assignment or exercise here that's not the case and these are financially settled not settled through stock ownership or the giving away of the stock at the agreed upon strike price like a covered call that's a big difference now what you're going to notice is let's say the investors decided you know what james this was actually done to what yesterday let's say the investor wanted to replicate this but maybe in a little bit different fashion this is a long call vertical buying a lower strike and then selling a higher strike okay but let's say they now we know that that's a higher delta typically that actually has a lesser chance to be above breakeven but it has a bigger maximum gain but wonder if they said james i'm a probability person i like to for example kind of be on the selling side of the trade and i want to kind of have a lower break even so let's just kind of take the opposite they're both of these are going to be bullish but let's kind of say the ambassador said james i want to do something shorter term maybe with only 15 days left expiration that is short okay shorter term let's say the investor decides they want to sell the 2340 and then buy the 23.30
okay now if they did that now what you're now going to notice here if they sell the 2340 and then buy the 2330 you get an upfront credit okay 255 if the stock or in this case the russo if it were to close on that am settlement above 2340 they get to keep the 255. max loss is already built into the trade 245 dollars now if you take a look at this the difference the risk is mainly in okay you have an expiration date this is not indefinite this is over the next 15 days the price needs to be at or above 23 37.45 if it is it's about breakeven the way it makes maximum profit is to be above 23.40 okay now if you take a look at this the difference also is there's a commission that dollar 30. that's not unusual compared to a stock option but there is also that extra 36 cents now if this paper money account can risk fifteen hundred dollars odd trade it would really be doing about how many contracts well it would really be doing about this case about two contracts because now if we actually come down and say confirm and send what you're now going to see is the risk here is going to be locked in about 1490 okay so there it is right there okay now are there any other questions with this now so this right here is your classic short put vertical okay has an obligation at 2340 has a right at 23.30 that 2330 locks in the downside risk and that's why there's a built-in maximum loss now i want to just kind of say this quick point you kind of think about in the last 10 years i think there's two main things that a lot of investors have stumbled upon i want to kind of get rid of this okay number one is are you comfortable with the risk that you're taking or have you defined what that risk is that's question number one question number two is how do you settle in on one or two strategies preferably two okay where you say these are the bread and butter of how i try to grow my portfolio why'd you say two well because if you chose a bullish trade okay wonder if maybe the market or the stock is not as bullish maybe you kind of like something a little bit more neutral so i want you to kind of keep that in minus i want you to ask is are you comfortable with how much you're willing to risk second question is what are those two strategies for you that are the go-to strategies now we we're getting together because we want to kind of practice what some of these go-to strategies could be okay and get practice now let's say the investor decides they're going to send this they're going to put it right in that twitch class right there send the order and now you actually have a russell okay an index option the difference is someone can't assign us or assign this account to buy the shares prior to expiration that's kind of nice and you got to remember is it is an am settlement all right now let's actually go ahead are there any other questions now before we actually uh double check and see if there's any questions but let's kind of go back to some of the pressing things that kind of might be in this uh twitch class portfolio so last week and i want to kind of refer back to this okay because last week there was a question right on twitch regarding james let's say the investor had a hundred shares of stock okay and let's say that investor was a little concerned about for example uh owning the stock over earnings and maybe could there be gap down risk fare we talked about two options that the investor could use as far as trying to protect the shares of the stock the example that was chosen was using a collar just like the one that's around my neck okay now remember if you actually take a look at let's say like a classic caller it's really it's really defined as maybe something in this case where the investor is selling the call and then buying the put right now if we actually take a look at this if we actually go back and say okay could the investor now could they exit the caller if now the stock had gone through the earnings and the stock is above support could they go through the earnings now could they exit the caller now now they were past the earnings the stock is staying above support could they just exit the caller and now just set a stop could they do that could they do that or once they actually do the op the caller for november or december do they have to stay into expiration well absolutely not they could actually say look i'm gonna buy the callback which was the obligation to deliver the shares of the strike price from now on to expiration and they can sell the put if the stock was really more neutral what should the effect of the protection be nothing okay the call to put offset each other and the investor still owns the stock so in this case there's kind of really no harm no foul and the investor got their earnings with protection built in okay now is that kind of nice to know that if the stock actually really went sideways there's no real foul in doing that and that's actually really what happened with really apple in this case there wasn't really any dramatic move one way or the other so let me kind of show you this down at the bottom so what you're now going to notice is there's three contracts of the 150 250 and there's three contracts of the 145.
now if we looked at this and said hey how much is the position down well it's down about a hundred dollars but did it lose a hundred dollars what the stock went up where's the gains they're actually in the underlying share price okay now if the investor decided that they want to exit the protection how do they do it pretty simple right when in doubt right click on those lines say create a closing order and what they're doing is they're getting rid of the protection okay that's all they're doing they're saying hey i'm gonna take off the protection and they're just being long the shares of stock only okay if the investor exit the protection they just have the shares we can see what it is to get out it really was a net about a hundred dollars down but you gotta remember the stock went up so it's really more kind of more neutral matter of fact it's probably up a little bit but there is the commission for the three contracts now if that's okay send the order now let's kind of go back and look at this let's say the investor said hey james i'm still now in those shares i still have the hundred shares of stock how could the investor put back on an exit let's go back and take a look at that go back to the chart we're going to evaluate where do you think the support level is so if i were to ask you the question where do you think the support level is on the stock so after this kind of recent move we've actually seen here where would you say support is where give me one or two price levels well if we were looking at this and kind of saying price level i might say 148 another price level let's say being maybe 147 that's the extreme okay lots more touches at 148 and if we actually took let's say we kind of took an extreme like say 146 okay well if we took 147 less two to three percent below that it's just going to go back and reapply the stop so how do you do that well if you can remember when in doubt right click we're going to go back and right click on the stock itself create a closing order and we're going to go right back to where it says with stop okay now sell minus 100 not selling it now we're just saying look if the price were to go at or below 144.25 stop day no gtc good till cancel confirm and send now remember what's the risk of the stop okay the risk of the stop is that if the stock goes to that price or less let's say apple opens up at 140 opens up at 140 35. it can or could be filled at a lower price especially if the stock were to get down that's not the same with the caller okay the caller you can actually you have the right to sell at the strike price that was purchased that's a major difference okay the investor is okay with actually selling the stock there's no commission there send the order and now what you see is the investor has just reattached the stop right there okay so when someone actually does a caller over earnings they don't have to stay in it till the expiration date if they say i got through the earnings there was no crazy movement i waited two to three days it looks like a new support level's been built and now what i want to do is just reapply a stop that's how the investor could do it okay now any other questions with that okay any other questions so let's just kind of recap what we talked about so far so the thing that we've actually talked about so far is we did a short put vertical on the russell the second trade we talked about which was the management from last week it was your question okay it was collaring apple over earnings it did go through earnings it has established a higher level support and now the paper money account has just raised or reapplied the stop now when we go back and look at let's say the apple position say what else does this paid money account actually have on it it actually does have a short put vertical which again would benefit if the stock would arise okay all right so next question now remember this is different than a webcast okay tipping the webcast the class is on oh today it's on long call verticals and the instructor is going to talk about long call verticals the whole entire time we don't have that we can talk about whatever we want to talk about within reason of course and the biggest thing is we're trying to answer your questions along the way so let's hop right back in jmp man 33 jb what might cause the illegal shares on the collar synthetic this one is trying to mainly exit well we kind of saw that earlier today if an investor has a stop or and or a target and the investor tries to go maybe adjust the stop or etc they probably already have an existing stop already they just need to cancel that or edit it and it will stop saying illegal okay that's why it's saying that okay now i could bring one up double check don't want to spend too much time on this but let's say that the investor uh said in this case well simply put is if you actually came in now i'm gonna do this to kind of replicate what you might be saying okay let me know if we're on the same page but in this case don't worry about what i'm doing i'm just going to kind of imagine that there was a a stop on this okay so the investor says i'm getting a legal why is it showing that okay so what i'm going to do is i'm going to type in a number 150 all right so now let's say the investor comes in now what you're now going to notice is it says illegal okay so what does that mean it means that there's already an existing order okay now that's the first part okay your first part of the question is what might cause the illegal shares error is there an existing order you'll see over here on the left hand side where it says buy and sell i already have an order and now when i try to come back on and redo an order it's illegal because there's already something happen so that's the first part the collar long synthetic this is a long synthetic that is one trying to manually exit the legs long call short put and there's not an existing stop or an exit in place which would give that error so if we went back now if i went back into this and okay so if you don't mind i'm gonna go back down to the bottom and i'm gonna right click on this cancel the order okay so now there's nothing there there's we don't have the order now when i come back on and i reattach let's double check it i'm going to try to go back in and apply in order to exit okay now when i do the exact same thing okay gonna go back do the exact same thing i'm gonna see if it gives me the error message just replicating i'm trying to kind of walk through the question okay 150 save confirm and send there's no error message leads me to believe now you know if someone was saying this to me i would say i want you to double check on the on the trade tab on the position is there any order like where it has a sell or a buy that's one place but i think another place that i would double check go right back to where it says monitor okay i want the investor can now go down to where it says working orders why would you go here i want to double check okay if i go to working orders and if we want to just do this quickly we can just go right to the symbol column and we can just kind of click on this and it will go from a to z okay what i'm looking for is we're on marriott and if i go down and look at anything i want to see is there anything in this column that says marriott now if i do this and still it says illegal then then that would be a good idea to call the broker and say hey i don't i double checked in both places i checked on the trade tab underneath the position i don't see anything that says buy or sell number two i went to the monitor on the working orders and i double checked in the symbol column i don't see anything that is a pending order okay i mean outside that i don't know what would actually be causing that all right now jmp man let me know if you actually uh did check the working order okay the only next step i could really kind of say would make sense is ask the broker and say is there anything that's actually causing that not to be sold the only other thing i could be thinking about is settlement maybe if someone's an account where okay if someone's uh and actually latch me is actually saying maybe log off toss and come back in and resolve maybe it's not resyncing it perhaps i mean try that as well but typically if you cancel the order and it registered and it's not in working orders it shouldn't be doing that if it is call the broker to verify okay but i think those are kind of uh the comment comes from uh well yeah certain so so that was not in the first part that was not in the question right does being collared make a difference yes because you see how we keep talking we kind of find out a little bit more okay so if someone said hey you know i'm in a long synthetic and it is collared and i'm trying to set the stop you got to remember when the investor collars that long synthetic that short call has an obligation okay and so when you do that okay that's why it's triggering okay uh illegal because the investor who has the short call has an obligation so if you accidentally get stomped out of the position and you have a short call those are that's a naked call okay didn't hear that in the first part of the question but now we find out what's going on now and i'm not going to spend more time on that but that that would make the difference yes okay now uh the other comment can said from from amanda can you go over the script you added to twitter now jp uh jmpman33 let me come back to that i just don't want to spend more time on that i think we talked about that for five or seven minutes but let me let me come back to that in just a moment but the answer is yes it would make a difference okay now uh amanda says let's kind of take a look at some of the uh the scripts and and one of the one of the things that i've actually had asked lately was really really regarding some of these uh like moving average crossovers okay so if we actually go let's say to my twitter page and just kind of scroll down and i'm going to kind of just go to this this right here for example and i'm not going to go into this entirely we're going to go into the action of it okay the pract using it but this is really kind of think of scripts as a search and we're going to use the market watts quote page okay when you think about searches there's lots of different searches based upon volume trend long term short term relative strength etc these are really in a way you could think of it as different searches that the investor could actually use they could pick what they want okay now the one that i actually kind of talked about today is there's been a lot of discussion regarding like moving average crossovers so example given and i'm just kind of going to what was ass okay but if we actually for example go to this which is you know and i kind of looked at a nasdaq list okay so one of the questions that always gets asked is hey i pulled up the russell 2000 i'm getting custom it's not pulling them up so listen okay we need to pull up a list of probably less than 50 stocks okay that is why i actually break these indexes down in half so that way they load okay that's why now you're going to see over to the right hand side there's a column that says 10 slash 30x that is really a 10-day exponential moving average crossing the 30. okay now what you're going to notice is anything with the green x means that is crossing over potentially today it's not guaranteed for accuracy the investor would want to go check we are in just a moment but then the investors there's some investors that say i like moving averages but i feel like the moving averages can lag a little bit noted so on that the hma cross that's the whole moving average cross and you'll actually see right down here below that i actually gave the scripts for both of those okay now what i would like to show is if you now how many of you say i don't know how to put that on let me know if you do not know how to put that on okay i don't want to take the time to actually talk about it if someone says we're all good okay now what i'm going to do is we're going to go back to a list of stocks so here's the here's the s p 100 and if you will if you want watch you kind of for example we'll start by looking at the s p 100 now what i want to do here is i want to imagine that each week we're trying to build a portfolio we're trying to build the positions that could help move the account higher now i swear now these positions right here those ones those are only management positions there's not any new stocks this right here i don't have any like stocks i want to go through the process with you okay and i want to kind of show you sometimes if the investor has multiple searches on one page how it can be a little easier to scan the markets in real time okay just be quiet and let's do this now let's now what you're now going to see is we're going to go to where it says s p 100. now remember when we talked about this the weeks prior the investor could look at let's say the percentage change or weak percentage change would be today obviously week would actually be think of it like a bull flag pole okay the stock that went up the highest for the week that would probably be a potential candidate for a bull flag pole if someone says i'm not really interested in short term i'm kind of really more interested in in like trends long intermediate to long term that's what the month and the year today percentage is for okay good now we're going to go over here to the right hand side and let's say the investor said james i am looking for some stocks that have been performing in line with or stronger than the s p 500 okay now this is the job of the investor now does the investor have to pick stocks that have been stronger than the s p 500 no i don't have too many investors coming up to me and saying james what i really like to find is stocks that are actually performing worse than the s p 500 and have shown a long-term history of doing that in 25 years i've never had anyone ask me that or tell me that now could they be out there they could but usually investors are saying i want something that's moving in line with the s p okay or close to it or something that's shown a history of being stronger now let's say the investor went to this and said you know what uh ford is an example in this case where over the last let's say three months it's shown a history of actually being quite strong okay so ford now we're going to look at different price dollar stocks now if you look at another one we actually see dow okay so ford dow now the difference is actually with dow here is you kind of see that it was red underperformed gray kind of performing in line with the s p then it went lighter green slightly outperforming the s p and actually stronger green so this is where the investor is kind of saying transfer over time as strength on the doubt let's talk about that another one where we're kind of seeing some transfer of strength is actually in the bmy which is healthcare which is not a surprise we saw healthcare go up then we got bib you also see in there if you take a look at this and say what's been quite quite the strongest it's really been abby v now when we actually take a look at this so we got a couple stocks from our relative strength perspective uh four dow bmy bib when we look at this hold is really more the bounce setup the 20 or the 55 those are potential horizontal breakouts okay now if you take a look at this what you're now going to see is we now actually have a 30-day moving average crossover and we now actually have in this case the whole moving average crossover the x plus two is means that crossover two days ago x plus one means it crossed over a day ago and x actually means it's crossing over today verified okay now lately my wife decided she want a security system so the guy that came they put sensors in all the windows so on my house let's say there's 15 sensors whatever if someone tries to come through this house opens up the window and on my phone hey basement window is open right this is that same idea that if something were to move or open or trigger it flashes and says pay attention okay so on this if the stock really goes up a lot you can kind of get relative strength alcohol a breakout all in one day or two or et cetera especially if the move has been that strong okay now let's kind of for example go back to the daily chart okay now i'm going to kind of let's go back just real quick to the base materials ixb so the investor might look at this and say huh if the sector is going up now sometimes people will say to me why you know i work a job i'm busy good people that are successful tend to be busy but they tend to be also productive and they want to be efficient with their time good we're on the right track so far so now the investor says i'm not going to look at each stock individually because they don't have to necessarily they could actually say i'm going to look at the indexes they're going to look at the sectors and then drill down into the stocks that might be driving that performance that makes sense don't have to argue with me now let's say for example the investor says one of the stocks that i'm looking at here is a stock for example like dow now when we actually take a look at a stock like dell and go back to that chart is this really no i'm doing this on purpose but is this for example something just because it's showing strength do we see anything here where it's bouncing or breaking out we see a crossover but is that crossover really something in an upward trend yes or no yes or no do you see an upward trend do you see a bounce off support where it's breaking out of resistance just take a yes or no if i back this chart off a little bit more do you see that upward trend now if you're confused you should be now some of these when we do this we'll say yeah there's been a cross over but we don't really see it really uh being in an upward trend so we're going to say the word next okay go next now the other stock in that list was ford now when we actually go back and look at four do you see something when we actually take a look at the trend do you see a trend now if you can't see it in literally like three seconds it's probably not an upward trend okay it's that easy if you like pull up the chart and you see it start in the lower left and it's in the upper right there's the upward trend okay now if we go back and say let me see what ford was showing here okay four let's actually look together so number one it had had relative strength here here here so what you're saying is this has not just been today that's correct if someone had a heck she had a discipline for crying out loud could you imagine that someone was disciplined could you imagine if they had a routine could you imagine after five years of doing this if they actually had a system in place unbelievable okay now the funny thing is investors we could be pulling from the same list dow 30 nasik 100 sb100 they're looking at the same list but it's how they're combing the list that's actually evaluating someone who's brand new to someone who's experienced maybe like amanda now what you'll notice is it's also showing cohold close above the high the low day it's also showing a 20 day high 55 day high i think a short-term intermediate and also on that whole moving average it's actually showing there it cross x crossed two days ago so let's actually pull up the chart and let's double check what we're seeing here so what i'm going to do is i'm going to pull up that chart and i'm going to pull up the chart with the whole moving average at least i'm going to try to let's see if i can't get it there we go and what i'm now going to see is about two days ago did the whole moving average cross two days ago it did okay so it's accurate it's what it's showing now this chart is not showing though it's not showing the hold well it's not yet but we could add it on there and remember if we actually had this on here this could actually probably be a little easier to help us see the kohl dots we see a little dot there uno we see another little dot right there too okay our dos okay and so those little dots the green dots represent the gold and then are matching up to what is actually really being seen on the market watch tab so the the purpose of the market watch list is that way you don't have to look at every blasted stock okay now also when you actually say ah i'm seeing a crossover right there and you go to the chart and you see the dot and you see that green shade the green shade in the last two days is confirming what you also saw on the list does that make sense we good on that now let's say the investor said i want to go long the shares of stock okay now if we went to this and said i want to go along those shares of stock what might be a potential area of support okay so if we actually go back and look at sometimes these old highs can be an area of support we could also go back and kind of take a look at this could we also say there's a diagonal line okay touching here here here here here something like that okay absolutely now but you're gonna notice that whether we looked at diagonal or horizontal those are pretty much the same now if you had a dollar for every time someone said i i can't really find trends uh i can't see any potential entry setups uh things like that you could show them pretty much a picture not maybe the only one but it could help if they just showed what i just showed you just by seeing the relative strength this would probably tip off that there's been some type of trend recently and potentially now could that change yes okay now when we talk about go hold or the 20 or 55 day high that is showing a potential entry set up in the trend now i think a lot of times what happens here is well yeah but if i buy here it's at the all-time high well there's some investors that didn't buy amazon back in 1998 because they said it was at an all-time high i didn't buy amazon back in 1998 because it was an all-time high you get it okay so as i just want to throw up okay be very careful of saying an all-time high all-time high doesn't really mean anything outside that the price is the highest has been in the last 52 weeks okay you don't know if that stock has been supported fundamentally you don't know that okay you'd have to check now let's say the investor says i'm going to buy the stock buy custom they're going to now going to go in this case to with stop this is a stock trade okay now sometimes people might think that if i know about options why in the world would someone ever want to own shares of stock well ask elon musk that okay so the biggest actually thing is there's nothing wrong with the options but sometimes investors flat want stock okay because they want the dollar for dollar exposure the stock could then morph into a cover call which is another potential layer of premium but the biggest thing is they also might want the dividend okay and they want that dollar for dollar exposure support is right around 1657. if the investor were to take 16.57
less three percent that's going to be setting a stop about 16 okay so 1607. now day to gtc now this is really important you understand that the investor needs to be comfortable with what the risk is now could you actually just type in what risk in terms of dollars are you comfortable with losing can you type that in okay can you type that in of what you're comfortable with risking okay now also when we actually go back and kind of measure this and kind of say you know how far is this stock really off at support this stock being an 18 stock it's really about 13 off a diagonal support now that's if you look at the diag that's if you look at the diagonal horizontal line that's not necessarily off the moving average now when we actually go back and look at this we talked about earlier today let me kind of draw this and i'm going to use a 10-day exponential moving average okay we talked about today sometimes the 10x 10-day exponential moving average can act like a level of support and we said what happens if the stock is greater than 5 off the moving average did we say the investor couldn't do it or did we say maybe could the investor do like a buy limit order we said maybe the investor might do a buy limit order and they might put the buy limit order maybe 5 above the 10 period moving average what is that about it's about 18 now again if you had a dollar for every time someone could have put an order in but then they for example felt like it was too high but they did not set the buy limit order there's a really good chance they missed the entry setup so we're going to go back and type in 18 why 18 well because 18 represented no more than five percent off the support level okay that do stocks go up and down last time we checked they do could the stock maybe go down 60 cents from where it is now it'd still be in the upward trend probably okay so now if we take a look at this we have a stop at 1607 gtc and now the paper money account is going to kind of evaluate what's the position size if the investor said james in any given trade i tend to buy 15 000 worth of stock that's the capital amount but the investor needs to be thinking is okay so that would be about how many shares 833 shares and what's the risk per share now listen to this okay i can't tell you the number of people i've met in years that really are sitting in cash all because they're not comfortable with taking risk now if you take a look at this if they said my position size is fifteen thousand dollars okay and what is the risk the investor is taking from 18 to potentially 1607 that's a dollar ninety three per share okay now if the investors said if they buy 833 shares and that stock has a risk of let's say a dollar 93 then what would the risk be well let's bring it up 833 shares dollar ninety three guys and gals i got one thousand six i got 1607. if the investor said james i cannot lose more than fifteen hundred dollars what should they do with the number of shares or what could they do okay they could say look i'm just going to drop the number of shares if we drop down to 800 okay times it by dollar 93 we're gonna get a lot closer to fifteen hundred dollars fifteen hundred dollars represents the money that the investor is okay with losing they didn't wanna lose it but they said that's the acceptable loss okay that's if they lost the 1500 it wouldn't break their confidence it wouldn't cause them to say i'm you know investing isn't for me there they just have an understanding that sometimes the the trade can go against the investor okay now are there any questions on this what i'm showing here okay now this actually is a list of the s p 100 the second list and one of the stocks that's kind of come up in that list a little bit uh is lily lily's actually been one of those stocks in the last let's say about three months it's mostly been in the green mandalays is actually been kind of rotating from red to the gray to the green showing relative strength increasing relative to the s p nike has been the one that's been very strong i think that's been talked about quite a bit oh that actually comes up to the example we need to discuss i almost forgot nike okay now let's go back and let's talk about a management example just briefly now the reason why we kind of need to talk about that is nike is right here so where's here well here is right here okay let me point to it there what type of trade is that what type of strategy are we looking at and as we look at that type of trade let's kind of also go back and see when the trade was placed okay so is that you're telling me what's the strategy that we're looking at is there anything as we look at the strategy you might say james we might consider doing what now there are 16 days left okay now that doesn't necessarily matter do not be fooled okay and think oh 16 days left i don't need to do anything that's not necessarily true there might be something where the investor says hey the reward risk ratio has shifted a lot and there it might not make a lot of sense to stay in for the last 16 days the option was sold for 263 the option price now the mark values at 14 cents which is closer to zero if that price is closer to zero that means that it has a higher percentage okay and the higher that number is to a hundred the more likely that investor might say you know what james i'm not going to stay in the position you can only make 100 as 94.68 percent of it when was the trade place let's look together let's evaluate the trade was placed on 10-5 let's go back to the chart let's kind of evaluate what was the setup what did the investor see at that time as we go back to 10-5 and let me kind of put this back on yeah that's what i want right there i want that 10-5 so if we went back and kind of looked at this on 10 5 it was right here now kind of give me a little feedback okay so if i said hey the chart was right there what was maybe this chart showing at that time to say hey why did it enter right there i mean was there anything showing on that chart on 10 5 that's where it was was that aggressive now the one thing we would actually say on that date it did actually have a hold on that day i mean we see the green dot okay and and so we would say okay got it go hold but it kind of looked like maybe it got in maybe below the 10 period moving average that might not necessarily be true because maybe when the trade was placed it was above the 10. but we would say that that was pretty early okay and so maybe where that stock was in the morning it was above and nevertheless it was the first day above the 10 period moving average okay first day so if we said hey was it delayed it wasn't delayed but that's kind of sometimes the risk of maybe being in first is does the breakout hold now let's go forward a couple days later now all of a sudden there's another cohort dot okay so there's kind of that hold again another coho dot and then if we kind of go a little by the way there's a moving average crossover and which would have showed on the market watch probably and then now what you're going to see is there's another call there's the fourth time okay that it actually show called and all of a sudden there's that green line now why is the green line right there the green line represents the 20b high so you've kind of had four things go on you've had four cohort dots you've had the moving average crossover and now the stock is hitting the 20-day high which is going in which is probably saying hey could that stock actually be breaking out breaking out kind of happened before that it already broke out of that diagonal a couple days prior now with where this trade is right now okay we're talking about now okay but if you go back and look at that that's where it was so you've had one two three four five and by the way if you look really close there's six so in the last let's say i don't know three weeks there's been six times okay alcohol dot okay close about the high the low day and you've probably had about eight times where the stock is actually hit the 20-day high which is again just kind of leading to the idea of potential breakout now when you go back to this chart and say is the stock done i mean is this it is the trade over or maybe could the investor maybe consider rolling the position now remember if the investor rolls the position they think the stock could do what what do they think the stock could actually do what do they think the stock could do now we already talked about for example this first part which is many of you said james exit the position take the profit now let's go back to that idea which is what is a strategy or two that the investor says i want to become a black building not a white belt not a yellow belt i want to become a black belt in many investors might say i like to do cash secure puts i like to short put verticals okay okay what is it for you if the investor says i'm going to buy that option back and i'm going to evaluate how to potentially get in again okay if you guys and gals think actually the trend could continue first pay first place let's kind of take care of the current position which is exiting and sacking or profit taking on that 249.50 confirm and send now what
it's doing is it's giving back some of the premium and it's ripping up that contract for the obligation to buy the shares at the strike price from now to expiration and or in expiration but to do so you got to give some of the initial premium back plus a commission of 65 cents if that's okay the investor says send done when we actually go back no it hasn't failed yet though we'll watch that if we go back to the chart how many of you are thinking that this trend might potentially try to to continue so if we were to look at this chart okay right there do you think this trend might continue would you consider on selling another put i'm gonna cut nike does feel okay so check it fills would you consider selling another put or a short put vertical or a stock trade do you think it could go up now as i'm actually getting an answer we see that the last five weeks the stock has gone off five weeks in a row not one not two not three not four five times in a row now if that stock goes up like that this is probably creating the pull if that stock would actually pull back might be creating the flag if that stock tries to make another run up to the resistance it might try to break out again okay now jilly bean is actually saying yes but i think it will pull back a little bit okay sure but let's say actually the investor says i think the stock could actually pull back what might be a strategy that is not as sensitive a stock trade a a long call trade longs to the those are all trades that have a delta probably greater than 50. the short put typically has a delta of 30 to 40. okay and if that stock were to go down it's on the hook to buy the shares at the strike price the two strategies that really kind of come to mind the short put vertical long call vertical those only have a delta of maybe 10 okay maybe 20. paid money account is going to come back in now what it's going to do is it's going to go out a little bit further now with what you just said in this case which is jilly bean says yes but i think he'll pull back first a little bit okay i'm with you okay so with that ideas if the investor says look i think it could maybe exhale a little bit in the shorter term could the investor maybe sell a little bit farther if it were to pull back okay okay now by selling now with that idea could it pull back could the investor maybe sell something that is not so close to the current price with the idea that it might pull back okay now this is where the investors selling farther on time for that idea and also maybe changing the steam rake to maybe a strike price where they say i don't want it to typically be as high okay at delta's normal that's when the investor might adjust the strike price to maybe be on the lower end of that range of a delta 30 to 40. the investor comes in and says i'm
going to sell the 165 and then buy okay sell vertical and now in this case go to sell the 165 buy the 160. so i need you now i want to ask you a quick question if i were to ask you what if if there were two strategies that this paper money account does a lot what do you think those strategies are could you guess i mean you're the one watching what strategies do you think the paper money account uses quite a bit and why all right no you type that in send the order now we're now going to actually come down to another one now let's kind of flip the list a little bit here okay so what i'm now going to actually do is let's kind of go back to the nasdaq some of you actually like the nasdaq and uh for example let me actually go back down yeah right here here we are okay now some of you like the nasdaq stocks now i'm going to kind of scan this list and what i'm going to kind of scan is if i look at this list and i kind of say which stocks might have a hold and or a break out of the high now amd we already talked about that earlier this morning another stock for example that is showing a potential hold with a 20-day high is bmw bmrn now guys and gals we said by we said bristol myers bmy we also said bmrn these are healthcare stocks you would know that because if you actually track sectors daily we know that those sectors have actually been quite strong okay now if the investor said what's on the next list the second part of that nasdaq list you're now going to see that also one of the stocks now i'm going to show a little variation okay when investor actually looks at trends we said trends can be actually seen in the monthly chart but also the year-to-date chart okay the proof of trend is in performance okay if it stunk it'd be at the bottom of the list if it was so stinking strong like tesla it should be near the top that monthly or year-to-date percentage is the easiest thing because if it really is trending strong it should be in the near the top list now james calm down come down i think sometimes investors make this extremely complicated and they don't understand simplicity is better than complex okay so the investor's absolutely okay if they said hey i'm just going to look at the monthly returns look at the year-to-date returns that is not implying that it's going to continue to go up but if someone said i'm going to look for trends those that could be a great starting point relative to the s p that's what the rs for is the relative strength but if someone said james we actually see that the year-to-date returns have actually married it has actually been 30.99 we see that those actually monthly percentages of 5.27 decent actually as far as merit and over the last couple weeks we've actually been seeing there's been some strength in marriott now what i like to kind of think about is just because we see marriott doesn't mean we can't talk about hilton because anyone that is just living their regular life would know that it's not just marriott you go to the marriott across the street there's the best western you go across the mary there's actually hilton or whatever hotel if you see marius moving for the love of pete go look at the peer group comparison but i want to actually talk about this okay now right now we don't see in the last three days or less any moving average crossover not lately not not right now we see a 20 55 day high but we do see where it says bowl what does bowl mean okay well now bold does not mean bull then it's actually hitting the 20 or 55 day high that column is kind of minimized a little bit narrowed that would actually kind of say full flag now these scripts you want to verify the accuracy let's go to the chart and see what we got now here's the funny thing is you as a retail investor you have the same list of stocks that so and so on such and such show has okay you can have very similar tools that someone else actually has and you could someone could actually be literally well not even at a computer on their iphone or their ipad okay wearing slippers with shorts okay that's what's actually so incredible about some of these tools is you have the same list and it can have very similar tools now i want to kind of talk about this and let's kind of bring this up okay this was a stock that just had earnings today okay now if you take a look at this what you're now going to see if we take a look at let's say marriott that stock today why is there really three dots legally actually four here one two three four why are there four dots well the four dots are actually there every time the stock was actually trying to hold you only had one recent day lately remember today if we were to close here it'd be closing above the high of the low day the low day being the lowest most recent red candle james i'm confused there was only one of them you shouldn't be confused because if you only have one recent red candle the stock would only need to get above yesterday's high that's it okay remember simplicity don't have to make it complex so now the investors say well james i want to actually maybe look to maybe go long now some of you have actually kind of asked about long call verticals okay now if we actually take a go to the trade tab the investor might look at this and say well how could someone maybe it's 164 stock if you had a dollar for every time someone said i can't trade these bigger dollar stocks some investors might say that they they don't even think that well you don't have to buy a hundred shares you can buy five shares one share ten shares right they might not think about that but could they maybe just buy a long call which is the right okay the right to actually buy those ships at the strike price now here's the deal when when the investor actually buys a right okay to buy the shares do they really want to buy the shares or do they really kind of for example want to buy they just want to have the control ah they just want to control it okay they just want to control the right of where they can buy the shares from now to expiration what they really want is intrinsic value they want equity okay now the investor might not say look i got to pay the 9.30 they could then actually come in and say could i sell something against this to offset that debit what they have to pay for the call well if they chose that that would be the 160 and the 165. 160 165. now again think about in the last 11 years how many stocks have gone up the investor said i don't know how much i'm willing to risk number two is i don't even have a strategy or two that i'm comfortable with how many hundreds of stocks or thousands of examples has the investor just kiss goodbye because they never knew a strategy of how to trade the trend that's sad okay now the biggest actually thing is when you're learning a strategy do not try to go out there and say today i'm going to focus on 14 strategies no the investor might say i'm going to practice maybe two types of strategies and i'm going to do them over and over and over and over again to become a master at them okay now if we take a look at this buy the 160 sell the 165 debit 280 the debit is what the investor could risk okay now if you take a look at this what's the max loss well what the debit is we have a five dollar spread max