Trading with thinkorswim | Connie Hill | 9-23-19
You. Well. Good afternoon and welcome to our webinar. This afternoon, trading. With thinkorswim this, is one in which we show you how to place specific, trades on the thinkorswim platform they. Might be strategies, you know they might not be but, we're going to show you the steps to complete that and then after we show you that we'll have a 5, to 10 minute question, question, answer session or, you can pose questions either about the particular strategy. Or something about, the thinkorswim platform so. Let's, go through some quick disclosures and, we. Will 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. Probability. Analysis, shown. Do. Not guarantee their theoretical in nature and are not guaranteed and do not reflect any degree of certainty of an event occurring. In. Order, to demonstrate functionality. The platform, we need to use actual symbols, however, TD Ameritrade does not make recommendations. Or determine suitability of, any security or strategy, any, investment, decision you're making yourself directed account is solely your responsibility. Past. Performance, of any security, or strategy. Does not guarantee, future results or, success. Right. We're gonna pop over here to the thinkorswim platform, and. Stock. We're gonna take a look at here. Is. Going to be Boeing alright, now what, I want you to notice about Boeing, is. That, it. Had kind of a nice little peak up there in February, and kind of like a lot of the market it, pulled back so. We might come along here, identify, where, that diagonal, resistance. Is and then. Recently, ordered, it do well it popped through let's zoom in here a little bit closer so you can see that. All. Right so this might have been the day where it broke through resistance. Right there and then, we're gonna do is spin. Oops, let's see let's, get this guy in step it's, been consolidating. For the most part just trading, in a real tight range or what, some people might consider a neutral, range. All right so that's gonna be the, example that we decide to use today. All. Right so, let's, go place a trade, a long. Call. Diagonal. Again, this is a little bit more advanced, trade in fact, some of the strategies, that, we're going to be working with and the steps showing you how to do this are, going, to be a little bit more advanced, a nature then what we've done in the past. Now. You can see we have several, timeframes. To choose from a long. Haul diagonal, essentially, means we're going to be using call options, we. Will however be, using different months and we, will be using different strike prices all. Right so I'm going to open up here the, October, 18th. And. Maybe we don't need 36 strikes, let's just go with 18 here, and. The. First month that you select on here is going to be the month that you want to sell in the strike price that you want to sell so, here.
We're Gonna sell 25. Days worth of time and, let's, go for. Let's. Go for the three. Where. Did it go, 380. 750. Strike price right. There all. I'm gonna do is put, a right mouse click on, it I'm going, to say buy then. I'm going to come up on our long choice, of potential. Opportunities. Here I'm, going to select diagonal. Yeah. I'm going to kind of, drop. Some of this out of the way so we see this better and, what, you're going to notice is, it, did indeed take, the, 380 750, as the short strike price we can see here a minus quantity, and then, it just goes and picks the next one in sequence, and the next strike price in sequence, this, may be what you want it might not be what you want and, so I'll show ya let's collapse this again we could if we didn't want to do that November. 1 or, the October, 1 we. Could choose a couple, of weeklies in November. We could choose a November, monthly in fact that's the one we're gonna choose is the. Number November, 15, expiration. Date, so what we're going to do is we're going to come down here. We're. Going to just click on the selection, of the, month and we're, going to go ahead and pick November, 15. Here and I want you to remember that this is the long leg now. As far as strike prices, go. There's. A number that we could go with here and I'm going to open this up so we could see this, is going to be our long leg and we're not, going to have it be out as far in the money as we had our short leg it's, going to be in the money a little bit more and, so, here's one it's pretty, much out the money stock. Closed at 377. Today this, would be the 380, strike, price for, the long leg and so, let's change this, 390. We're gonna just change that to 380. You, could use 390, if you wanted to, I'm. Just not choosing to for our example, here today and, it's gonna leave us with, the 950. Net debit. We're. Gonna leave it for now we're just gonna do one series, of contracts, we're gonna hit a confirm, and sand, look. Through it make sure it represents, what you want it to represent make. Sure your short leg is in the right spot your long leg is in the right spot one, thing you'll notice is that the, net debit of 950. Here. Certainly. Takes into account the, option that we've sold because, we can see yeah that 380, option, normally, would be about 1495. Yet. Our net debit on it's going to be 950. Notice. Transaction, fees here go ahead and hit Send. Markets. Closed right now so. We'll have to wait till tomorrow morning, see, if that gets filled or not all. Right now, is your chance to ask questions. Dave. Appreciate. Your greetings, of having. A good afternoon I. Appreciate. That so, go ahead, those of you that have logged into your Google account will be those that are allowed to ask questions, if you, haven't logged into a Google account or maybe you don't have a Google account that's okay you, can go, ahead and sign up for one if you want the opportunity to be chatting and asking, your own questions.
Linda. Says before submitting would you show the analyze tab, Linda, I'd be happy to do that and then. Bob says well what about a stoploss and a profit, limit mm-hmm, these are some good questions let's. And actually, as we address Linda's, question, Bob. We may come up with a good answer for your question. All right. Noting, 950. Is what the current net debit is we're, gonna come over here to the monitor tab we're. Gonna come into the working orders where this trade went to and. We. Are going to select analyze. Trade. Some. Of you may be familiar with the analyze tab some of you might not we're gonna go to the risk profile. And, I, want to make sure we're only looking, at this trade I may have another, trade. Out there on Boeing. So I'm just gonna make sure here. Looks. Like we have zero in the quantity. Right. Here for the stock and. Let's. Go down here a little bit more we. See our diagonal, right there at the very bottom, all. Right so it is the only one being analyzed, just want to make sure that's the case before, we get into it now. Some of you that are familiar with the analyze tab know, the. Purple line represents. Your profit, loss as of today or as. Of. This date down here, all. Right, indeed, it is today but if you wanted to put another date in there you could, another. Thing you want to do I've here in the upper right hand corner, is put, in the. Date, when, the option, of in this case the. The one that expires the, most quickly that's, the date that we want to have in this field so, we're going to come down here and. We're. Gonna pick, October. 18, is the day that it expires, we're, gonna pick this Saturday, after, that options, expiration. Let's. Get that back oh. Darn. He does have the 19th in there okay very. Good. Next. Let's, go to our next step where we, what we like to do is see, what's. Our probabilities. When, the price of the stock is at certain increments, and those increments. Are in this vertical dotted line called. Slices. I'm, gonna come over here to this little menu over here on the right above BP, effect we're, gonna say set slices, to, the breakeven price. The, first breakeven, price we're going to head out to here is October. 19th, right. Because here's today so we're gonna go. There. To. The October, 19th, and, it. Looks, like we, have a price, slice here on the top side about four. Hundred thirteen dollars and, seventeen, cents and. We have another price slice. Down here, at, 375. 66. Or fifty-six. Now. It's, showing us essentially, where. Does. That profit, loss line cross, zero. All. Right zero is kind of you anything, top or.
Up Of zero is gonna be positive, on the trade anything lower than zero is going. To mean something negative on the trade all. Right so that's why we have. Two. Different breakeven, points here. You. Didn't draw that very good but you, ignore, that little dot all right. Now. Let's see I think we have a. Couple. Of questions in here that I want to address while we're talking about this oh. So. We've, seen, a little bit on the analyze tab here, so there's a forty, percent point. Eight forty point six percent chance, of making, some money in the trade I didn't. Reiterate, that this red line represents. The, profit, loss at options expiration, day and so this peak point is actually. Your max profit. That you could get and. What's the value there, is basically, three eighty eight all, right that's, when you'd have peak profitability. Come. Options expiration, day, there's. A forty almost forty one percent chance of that however, there's. A forty nine percent chance, that that. Value is going to be lower right. 373. 63, 50 and so forth and there's. Only a nine percent, chance that it's going to be more positive. All. Right than that number but again we're looking at, a somewhat. Neutral strategy although, the, preceding, trend on Boeing is a little bit bullish and so we do have kind of a neutral to bias on that. Now. Let's. See Linda, did. We talk, about everything that you wanted to see addressed on the analyze tab no, there's a lot of details to it so, can't, probably cover everything. Every. Smattering. Of it but hopefully that is what, you were looking for. I'm, going to address Bob's question before I get to your question okay Barry you guys have some great questions today this is good. I've. Said what about a stop loss, and, a profit. Profit. Limit, all, right we. Know that our max profit, is, up here, about 388. And. Where does that correspond, to let's go look in this bottom. Left-hand. Corner down, here is I, put my mouse up there the red line says. Six. Twenty, six, point eight nine and it's probably just fidgeting, around in there it's probably. 6:18. It's probably the max price in there, some. People might look at this and say I'm looking for a. Range. Some people might say I want, to have. An opportunity to not only sell. One call against, it but maybe two, calls against or three calls against it before the. Long option actually actually. Expires. With. The intent, and the idea. That they're trying to offset as much as the long leg premium, as they, possibly, can and then, the expectation, is the, theta is going to be positive, for the short option, allowing. You to collect some time decay on the long leg the expectation. Is that the price, of the stock will continue, to move up, possibly. Also though that volatility. Would move up as well and the, price of the stock would increase in value. Let's. See. So. Some people might not even put a stop loss on it as much as they might monitor, it and they, might have a. Mental. Stop. Where they say okay when it starts. Getting. A lot lower. On my breakeven, points, and. You're concerned then then they might decide to take some action, but, they might decide to switch their position, on it and be, a little bit more. Maybe. Even more neutral, then. Slightly, bullish and, so, there are many opportunities, that this trade could be flexible and you could turn it into another type of trade, if, indeed, you're convinced. That the initial trade, is. Not going to work for you want to take another route okay, so some might do that some might not. Reena. Barry's Reno says what, is the criteria, for selecting, the long strike, Barry. Probably. Others have this question as well, and.
Let's. Come out here, and just kind of collapse, things. Criteria. For this short lag is. Basically. Selling enough time that. You get a desirable. Premium. That helps offset that long leg now, boys kind of an expensive stock and so, the October, option that we have in there to sell. Gave. Us a premium, in the neighborhood, of about $5, 15 cents it, really only has 25, days before. Options expiration, has, a 30 for Delta so the, likelihood that it's, going to expire in the money is only 34, percent so, the inverse of that the, likelihood of it expiring, out of the money is going to be like 66, percent right now. And. Of, course you decide the short leg first now the long, leg I will. Say Barry I went for the November's, with the idea, that, maybe. The. October, 18 I could collect. Quite, a deal. Quite. A I'm. Gonna say a decent, amount of that premium, the 515. And. I might, decide to get out of it early and maybe then after that sell, maybe the, October. 25, or the November, 1st with, the idea that I want to get another extra roll in there somebody. Could as well have changed. Or gone, with the December option. Alright. Put, in a lot a longer. Period of time and more, opportunities, for all the. Kind. Of that the, thing you have to weigh in balance, is do, you feel like the stocks gonna go that direction I mean. We're talking about December, here we are in September that's, a few months out so, for some people they might not want to go out that far but. You've got the general idea it could have been any it is it could have been even January. If you had confidence that the stock, was going to continue, to possibly, move you, know bullish. To neutral, over, that period of time so hopefully that helps. Let's, see. Ricardo. Let me just read the years here real quick. Okay. Ricardo's, mentioning, something with regards, to calendars, which were, going. To do next week he, says also when. Looking at there his profile, he likes to look at this peak, and. He says if you put your cursor, at the peak of the calendar, I would like to see at least twice the gain as the net Devon if. We were applying that same logic then, we. Would say okay we're gonna net, dabit is 950. According. To Ricardo's. Logic, we'd want to get back here two times, 950. So maybe, just a little under $2,000. Which, this particular one, is not. Suited. To meet that role at all. Ricardo. Says usually without any technical, indicators. To, move up or to move down I would do a calendar, and after moving of a. Call, calendar, I would change it to a call diagonal, and. That's what I'm talking about a little bit is you might change, up the, trade its, more common in, a calendar trade, to, diagonalize, it may be at that first role but. Not always, very. Well could use the same strike price and again we're going to talk about calendars. Next, week. Dave. Says what is involved with rolling this short option, great, question, Dave ordered what. Does that even really mean okay. Rolling. An option, simply means you're gonna take one off you're. Gonna put the new one on let. Me see if I have something in, my inventory, that we could demonstrate with, this or for this. Now. Let, me come over here. To my unallocated, where, I have the most and. I. Think on one of these I have. Now. That should be off of there by now. Let's. See what we have here with Altria oh no, that's a put what, I was looking for is for something that had a stock and then also had a short option. Like. A covered, call type scenario. But. That's not actually what, I have. Sorry. I don't, have something in here already to demonstrate, but what you would do. Is. You, would come down here let me see let me just check this one okay Comcast that's a covered call scenario, so. Essentially, instead of having 200 shares of stock you would have your long. Long. Leg and then. You might have this short leg and it's actually the same time frame that we're selling in October, and let's, suppose that a great, majority of that gain had been made this. One on the call really, is. Only. Up about fifty five dollars at this point but. Suppose it were good, enough that you liked it okay we'll use this as our example all. You would do is you would come down here you. Would do a right, mouse-click.
You'd. Say create, rolling. Order, which, essentially, means we're going to close out the one that we have we're, going to go sell another one all. Right that means we're gonna have to buy it back now. You're gonna notice on here it says calendar. Don't, let that throw you off you're, like oh it's supposed to be rolling and it says calendar, you're just fine, in. Fact I switched it over to a diagonal, here and what you see is this. 47:54. The 18th, of October, is now, a plus. One meaning we're buying it back in this action and then, in the same action, we. Are going to sell, a different, one now it'll, automatically, go and grab the same strike price on a calendar, it'll. Automatically, go and grab the very next sequence, of trades going in. All right so the series so, you can keep it there or you could say you know I want it to be out here to. January. If, you want order you could use the November, like we're going to use in our example, today you, could go out here and change it and then, it's going to change here. What. The net credit is or it could be a net debit, just depending on the Train and then. What you can do is you can submit them all together, and, only. Incur. One transaction, cost for. As, the bulk amount or the base amount you're, still going to get charts with the two contracts, and however many the quantity, is however. You. Kind of are able to lump them together so, you're not, having. To pay two transaction. Fees even though basically, you're just buying one back and technically. You're just selling another one but, you do them all together and that's what we call rolling I hope. That helps you Dave. So. Dave yes the role is done in one transaction, perfect. Good. Question. Yeah. You, guys had a lot of good questions today. I'm. Going to go ahead and just delete this here that was just our makeshift. Or our example. Here on Comcast just to kind of show you the rolling even though that's not what we're doing, here today all right Dave sounds like you're good well. Perfect well. Our time on this particular webcast, is pretty short we don't spend a lot of time on it but, we just want you to see the mechanics, get a few questions answered, as, I mentioned next week we are going to be doing a calendar. Spread as our example trade now. If you don't really, know options that well you, would like to know options better come over to the education, I'm going to point out a couple of areas for you first. Of all I'm going to come down here I'm going to select on options, and you. Would at least want to go through the very first options, course which is trading options. More. Advanced, courses weekly. Options and options, for volatility. Are two. More option, courses, that, you can pursue that are a little bit more advanced, in fact calendars, and diagonals, those are going to be covered here in. Our options, for volatility, if you wanted to be even more specific and say Connie where is that strategy I want. You to come in here to chapter two two time spreads, and then. You're going to learn about long calendars, and then, is you, get a little bit further into it we're gonna it'll, cover calendars. As well which we're going to discuss next week those, are great places to go also. Ken Rose taught, it where a webinar last, Thursday. At. 3 p.m. in Eastern time is typical, time to teach he's, specifically, taught, on long, diagonal, on call. Diagonal, and, so, if you want to go out find that out, in, the archives. In the, webcast please do so it's not posted. Yet in, fact I said why hasn't, that posted, yet Kim taught that class last Thursday, so. Compliance. Is just finishing up with it and I expected, it to be posted, possibly, by the end of the day but I can't promise, you that since. I'm not in control of it all right now. Next, we're gonna have barb Armstrong. Teaching. Trading. With a smaller, account, and she. Gives you some ideas of different types of trades you could do and things, to can take into consideration, when. Trading. A small account. Now. I just need to remind you that in order to demonstrate functionality. At the platform, we need to use actual symbols, however, TD Ameritrade does not make recommendations. Or determine suitability. Of any security, or strategy, an investment, decision you make in your self-directed account, is solely your responsibility I. Appreciate. You being here today everyone, have, a good afternoon go join Barb's class should love to see you makes. Everyone feel fine. You. You.