AMD JAN 20 57/ JAN 27 62 DIAGONAL PUT
Updated
LOW BASE SET-UP:
AMD has been in a low base since about Dec 22nd and has been consolidating for more than 5 days with lower or equal volume. Overall market conditions are bearish, so downside is probable.
I was planning on using the Dec 28th candle as my entry point back then, but at that moment in time, it did not meet the 5 day consolidation requirement. So I waited a bit more. Turned out to be a small bear rally back to the 20 day on Jan 3rd. I'll be using today as my entry point.
No stops. I will be set up for max loss risking under 2% of my portfolio.
DIAGONAL SPREAD STRATEGY:
How strike prices and expiration dates are selected:
57 is my target point. From Oct 10th to about October 24th we traded in another low base set up (supply and demand zone) and my thesis is that we revisit that area within the next couple weeks or sooner. On the hour chart, I identified a tight downward channel which I used to determine my outlook. I originally was thinking we could visit 57 by Jan 13th, but Jan 20th is more than enough time.
Position management strategies when the stock goes lower:
If this falls lower than my 57 target and stays below 57 by the 20th, I'll close out the entire combo. The week of the 20th I'll watch this if this is below my 57 target to see if it'll run back up to hit the apex of the trade.
Position management strategies when the stock goes sideways:
If this goes sideways, I'll let my 57 strike expire and hold on to my 62 strike until the 27th. I'll be set up for max loss.
Position management strategies when the stock goes higher:
If this goes higher, I'll let it expire worthless and move on to the next trade
Position management strategy at expiration:
At expiration, if this is below my target or at my target I'll close out the entire combo. We we're still above my 57 target, I'll hold on to my 62 strike until the 27 and close it out.
AMD has been in a low base since about Dec 22nd and has been consolidating for more than 5 days with lower or equal volume. Overall market conditions are bearish, so downside is probable.
I was planning on using the Dec 28th candle as my entry point back then, but at that moment in time, it did not meet the 5 day consolidation requirement. So I waited a bit more. Turned out to be a small bear rally back to the 20 day on Jan 3rd. I'll be using today as my entry point.
No stops. I will be set up for max loss risking under 2% of my portfolio.
DIAGONAL SPREAD STRATEGY:
How strike prices and expiration dates are selected:
57 is my target point. From Oct 10th to about October 24th we traded in another low base set up (supply and demand zone) and my thesis is that we revisit that area within the next couple weeks or sooner. On the hour chart, I identified a tight downward channel which I used to determine my outlook. I originally was thinking we could visit 57 by Jan 13th, but Jan 20th is more than enough time.
Position management strategies when the stock goes lower:
If this falls lower than my 57 target and stays below 57 by the 20th, I'll close out the entire combo. The week of the 20th I'll watch this if this is below my 57 target to see if it'll run back up to hit the apex of the trade.
Position management strategies when the stock goes sideways:
If this goes sideways, I'll let my 57 strike expire and hold on to my 62 strike until the 27th. I'll be set up for max loss.
Position management strategies when the stock goes higher:
If this goes higher, I'll let it expire worthless and move on to the next trade
Position management strategy at expiration:
At expiration, if this is below my target or at my target I'll close out the entire combo. We we're still above my 57 target, I'll hold on to my 62 strike until the 27 and close it out.
Trade active
Note
Letting my 57 strike expire worthless. Hanging on to my 62 strike until next Friday since we did not reach 57 target by today.Trade closed manually
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