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Bajaj Auto - Critical Decision Level @3100Bajaj Auto has been following a clear trend line with topside resistance. A parallel trend line with bottom matching makes it a 339 point channel. Ignoring the covid impact from April to July the stock has been properly following the channel and gives a great call / put buying opportunity with minimal time decay to premium as it arises just a week before expiry at closing price in the range of 3100. If the closing is above 3100 call for 3200 can give excellent return considering just 7 days to expiry and because it's a long trend channel break out the upside move shall be fast so results in prices can be seen before November expiry. If it retractes from 3100 then puts shall be available much cheaper rate due to last 3-4 days upwsing and hence put of 3000 can show immediate result before November series expiry.
NSE:BAJAJ_AUTO
by Pattern_Study
Options buying and sellingI decided that before explaining complex strategies, I need to explain call options and put options and differences between buying and selling. (I'm adding down calls chart) The term "the option is worthless" meaning that the stock price didn’t finish above the strike price in calls or finish below in-puts. Buy Calls – Bullish “strategy”, you need to select a stock that will go up in price in a reasonable time. Limited loss (The maximum loss is what you paid for the option), theoretically unlimited profit. Buy Puts – Berish “strategy”, you need to select a stock that will go down in price in a reasonable time. Limited loss, theoretically unlimited profit. Selling Naked means that you only sell the option contract without owning the shares. 1 option contract equals 100 shares. Sell Calls (Naked) – In general, this a Berish “strategy”, but it depends. The seller wants the option to expire worthless, meaning all the value of the option will go to zero, the price of the stock needs to be at the expiration date under the strike price of the option. Theoretically unlimited loss, limited profit. Example: XYZ worth at the beginning $100 per share. The seller sold 1 option - Different calls: In the money option strike $95 worth - $6 ($5 intrinsic value + $1 time premium) At the money option strike $100 worth - $3 Out of the money option strike $105 worth - $1 In the money call sold – The seller sold a call at the strike price of $95 If the stock will finish anywhere below 95$ The call seller will profit $600 The stock has to go down at least $5 At the money call sold - The seller sold a call at the strike price of $100 If the stock will finish anywhere below 100$ The call seller will profit $300 The stock can be neutral or go down slightly. Out of the money call sold - The seller sold a call at the strike price of $105 If the stock will finish anywhere below 105$ The call seller will profit $100 The stock can be neutral or go down slightly or even go up in price and the seller will still profit. You should notice if the stock will go up in price large loss could happen. In theory, this loss is unlimited, in practice, the loss is limited by time. The stock cannot rise to infinity. Naked call selling is not the same as a short sale of stocks. While both have large potential risks, the short sale has much higher reward potential, but the call selling will do better if the stock remains at the same price. You can see from the example that the call seller can make money in situations when the short seller would have lost money. Covered call writing (selling) – I won’t go deep here, this means the seller of the option own 100 shares, the cover call writer is mildly bullish or neutral. People do this to decrease the risk of owning a stock or don’t believe the stock will go very high in price and they want extra profit. This limits the profit potential. Sell Puts (Naked) – In general, this a Bullish “strategy”, but it depends. The seller wants the option to expire worthless, meaning all the value of the option will go to zero, the price of the stock needs to be at the expiration date above the strike price of the option. Theoretically unlimited loss, limited profit. An example of selling puts is exactly the opposite of selling calls. The seller wants the stock price to be above the strike price of the option he sold. (Will show you down with another chart) What happens in the buyer and seller portfolio after expiration, several cases We will examine calls buy and sell if the stock finishes above the strike price of the option, for example, the strike price is 100 the stock finish at 105. The buyer needs to buy from the seller 100 shares ( 1 option contract) at the strike price, meaning he will need to have $10,000, but the stock is at 105. The buyer portfolio will be with 100 shares long at $100 with an unrealized profit of $500 minus the premium paid for the option minus commissions. The seller needs to provide those stocks, so he will be short 100 shares at $100, with a loss of (-$500) plus the premium he received from the buyer for the option, minus commissions. If the stock finish below the strike of the call option, the option is worthless and the buyer lost the debit he paid for the option, the seller received all the credit. No stock transaction is happening. Time – The more we get closer to expiration the greater the time decay, this is good for the seller and bad for the buyer, remember the seller wants the option price to go to zero, receive all the credit. Volatility – Raise in volatility is good for the buyer and bad for the seller, when volatility raises the option gets more expensive. If the option that was bought now worth more because of the rise in volatility the buyer profit from it. There is a lot more to say about this subject, every strategy has a different consideration that needs to be taken into account. Note: Naked option selling is usually a strategy for professional traders. Chart: Buy put – option price -> 129.4 , stock price -> 3286.33 , strike -> 3045, days -> 52 , implied volatility -> 47.4% (0.474), date-> 27/10/2020 Sell put – option price -> 127.25 , stock price -> 3286.33 , strike -> 3045, days -> 52 , implied volatility -> 47.4% (0.474), date-> 27/10/2020 Delta 0.3
NASDAQ:AMZNEducation
by ZoharCho
1
Salesforce.com - Potential Bullish PivotHey Traders! Salesforce.com NYSE:CRM has been on my radar today and according to my studies... CRM is giving off a strong bullish signal according to where the price is relative to the Bollinger bands and Keltner channel. I drew a few dots on the chart above to highlight the areas of interest so you can see what I look at. The Cyan dot is just to locate the price when it is between the lower Bollinger bands and Keltner channel, this is the area where I start paying attention for a bullish trade setup. The Magenta dots are for when the price is between the upper Bollinger bands and Keltner Channel bands and is when I start looking for a bearish trade setup. I use the white dot as an entry signal as price has come back within the Keltner channel. White dots following the cyan dots are bullish entry signals, whereas white dots following magenta dots are bearish entry signals. The entry signals are what I consider to be pivot points where the stock may begin to change direction. However, this strategy does generate false positive signals from time to time. As an attempt to avoid false entry signals, I take into account the trend of the stock. The stock has been trending upward the last 90 days with a net change of +33% (based on closing price 06/19/2020). Therefore, based on the indicators and trend, my assumption is that CRM could move higher. Ideally, I would like to see CRM reach $260 per share within the next 14 trading days... but who knows what could happen. Keep in mind: The days surrounding the outcome of the U.S. election, market fluctuations, and unexpected news events can send CRM in an unfavorable direction. This idea is not a call to action, nor should it be considered investment or trading advice. The ideas expressed on our TradingView page are for educational and entertainment purposes only. Leave us a comment below! - Are you bullish or bearish on Salesforce.com?
NYSE:CRMLong
by UnknownUnicorn6775423
Netflix is nearing a pivot pointHey traders, so Netflix NASDAQ:NFLX has been dropping the last 6 sessions and has fallen into one of my favorite areas for catching a pivot trade. Basically, the strategy here is to wait for Netflix to pop above the lower Keltner channel after being in between the lower Keltner and Bollinger bands before taking any long trades. Price still could move towards the lower Bollinger Band, so we need to be patient and not rush into a bullish trade, unless you are ok with having some drawdown, which I am not. I trade options, so I try to wait as long as possible before the pivot happens because theta decay eats up the long call position if I get in too early. If you are buying the stock, the passing of time will not hurt your stock position. On my trading platform, I wrote an indicator that automatically plots cyan dots whenever price is between the lower Bollinger Bands and Keltner channel, and then it plots a white dot once price crosses above the lower Keltner channel. I manually drew an example of what that looks like on the chart above. So now that you know what I am waiting for, I'll tell you a couple of things about this strategy. Sometimes, the move I am waiting for ends up happening in between sessions. For example, if tomorrow NFLX gaps up and opens near the upper Keltner Channel, I wouldn't take the trade because the move I was hoping to capture with the long call already happened. I am looking to ride the long call as the stock steadily moves itself across the Keltner channel until it reaches the upper Keltner or Bollinger band. Another thing that could happen, is price could fall past the lower Bollinger band. If that happens, it invalidates the trade (at least for me it does) and I would wait for the price to come back between the lower Bollinger band and Keltner channel so that I'll be ready to try again it crosses above the lower Keltner channel at that time. Note for Options Traders: I usually try to buy calls with this setup, but I almost always experience a period of sideways movement which end up hurting the long call. To avoid the negative effects of theta decay, you can substitute the long call with a put credit spread since put credit spreads benefit from theta decay making them cheaper to buy back.
NASDAQ:NFLXLong
by UnknownUnicorn6775423
2
Time consideration short-term vs long-term buy call options Hello traders, In my previous post, I wrote about, At the money / In the money / Out of the money call option, basic definitions, and the 6 factors that determine the option pricing. I remind you that options pricing is based on the partial differential equation from the Black–Scholes model, the solutions to this equation are not linear, which means it is hard to visualize how the option price will behave. A short explanation about “time premium” and “intrinsic value” and “premium”. To buy an option you pay a “premium” the price of the option contract. The premium is the combination of time premium and intrinsic value Out of the money and At the money only have time premium. (intrinsic value is zero) At the money options have the most time premium. In the money options have intrinsic value and time premium. The intrinsic value of an In the money call is the amount by which the stock price exceeds the striking price. For example, the strike price of the option $90, the stock price $100, the intrinsic value is 100-90 =$10. To this, we add time premium for this example we assume $1, The Total price of the In the money option, called premium is $11. The Theta Theta is a measure of the time decay of the options. This is the risk measurement of time on the option position. Theta is usually expressed as a negative number, it is expressed as the amount by which the option value will change. For example, an option bought for $7 and have 14 days until expiration, the theta of the option could be (-0.5), which means the option will lose half a dollar per day if all the other variables stay the same. Options trader should know that time is the enemy of the option buyer and a friend to the options seller. (Options selling will be explained in another post) Long-term options (one year for example) are not influenced by time decay in one day’s time. The theta of a long-term option is close to zero. Short-term options, especially At the money options, have the biggest theta because they are the most exposed to time decay (The less time you have, the more rapid you lose time premium). At the money have the most time premium, do not get confused with premium (“time premium” and “intrinsic value”), Out and In the money options have less time premium. The time decay (theta) of options on a very volatile stock will be higher than of options on a low volatility stock. The volatility of options will be explained in another post, but what you should know, the higher the volatility of an option the higher the price is (more “expensive”). The higher the price, the more time premium the option has, therefore more time premium to lose daily, which means those options have higher theta. I want to note again, that the equation and their solutions are not linear, options will lose more of their daily value near expiration. Chart explanation and conclusions: We see two options in TSLA, short-term, and long-term, the faded colors belong to the short-term and the strong colors to the long-term. Differences between the options: the option price, the days to expire, the volatility, and other “greeks” like the delta. The strongest factors, stock price, and the strike price of the options are the same. We can see that the long-term options have a much sharper angle (more flat) than the short-term angle, meaning the time decay of the short options is much greater as we expect. The profit lines (3,2,1) of the long-term options are above the short-term options. The break-even and the loss lines of the short-term options are above the long-term options. If you have questions ask them in the comments.
NASDAQ:TSLAEducation
by ZoharCho
1
Options Idea: Buy The Jan. 21, 2022 INTC 40.0 Call @ $13.90Intel just gapped down after its last earnings release as margins tightened from almost 60% last year to 53.3%. Trouble lies ahead as well since Intel’s 7-nanometer manufacturing is delayed which will give AMD a 6 month head start to eat away at Intel’s market share. Intel has responded by initiating a huge $10 billion stock repurchase program. This is in addition to the Oct 2019 repurchase program already in place, bring total repurchases to around $20 billion. Even though Intel is in trouble, we think there’s an opportunity for a longer-term play. Observe the historic Price/Sales ratio for Intel in the weekly view. We are buying today at 2.75. We’ve marked entries over the last few years at the 2.75 PS level. Every entry would have been successful over a 1 year holding period. The 50 week average on the PS ratio for Intel is 3.32. Nevertheless, we like to reduce risk with options, so we are not going long in Intel. We are buying a deep in the money LEAP call on Intel today at $13.90, which gives us unlimited profit potential above $53.90 and limits our losses below $40. Since this is such a long term LEAP call, we have 16 months (or 72 weeks) to sell monthly or weekly calls against this position. So while our current breakeven point is $53.90, we intend to lower our cost basis through the sale of out of the money shorter term calls. This is strategy is called the poor man’s covered call. The important point is that with a $53.90 breakeven, the lowest priced call we can sell is $54. If we sell a lower priced call and INTC were to rise too quickly, the trade could lose money. Selling next month or next week 15 delta out of the money calls should produce more than enough income to compensate us for the loss of dividends on this position and reduce our breakeven to $51, which is where Intel was trading today when we opened our long position. Our objectives for short call income generation against this position are as follows: Initial Objective: $2.90 (Extrinsic Option Premium), reduces breakeven point to $51 Secondary Objective: $4.55 (5 Quarters Dividends on 100 shares) Stretch Objective: $13.90 (100% of capital recovered) If we complete our initial objective we’ll have recovered our extrinsic option premium, giving us the benefit of going long in INTC at no additional cost. If we complete the secondary objective we’ll have not only recovered the option premium, but also generated 5 quarters of INTC’s $0.33 dividend, making our position equal to a long position in INTC, but at 20% of the capital outlay. And our final stretch objective is to recover $13.90 over the life of this call, recovering our capital early. Standard Exit : We exit the trade for a profit when the PS ratio on INTC approaches 4. Early Exit : We exit the trade for a profit as soon as INTC has recovered the 50-week moving average. 20-INTC-03 Opening Date: Sep 1, 2020 Expiration Date: January 21, 2022 DTE: 507 IV: 35.81% IV Percentile: 69% Odds of Winning: 32.60% (before selling short calls) Odds of Losing: 67.40% (before selling short calls) Win: > 53.90 @ Expiration (before selling short calls) Loss: < 53.90 @ Expiration (before selling short calls) Reg-T Margin: $0 (long position, uses $1390 cash) Chart Legend Green Area: 100% Win Zone. If we finish above or in the green area, we’ve made a profit on our call. This is a long call, so our potential gain is unlimited. Red Area: If we finish in this area we have a loss. The size of the red area is the size of our maximum loss. Since we’ve bought a call instead of gone long, we have no additional losses below $40. 1 standard deviation, 2 standard deviation, 3 standard deviation projections from Opening Date to Expiration Date are included. Follow us here on TradingView to get updates as we adjust this trade with the short calls we will be selling against this position.
NASDAQ:INTCLong
by OptionsCoach
10
Home Depot - Potential for break outHome Depot is currently trading near its 21 day EMA. Bulls will need Home Depot will to push through the 21 day EMA resistance level to take the stock up to its recent high. Although we see a double bottom, which is known to be a bullish reversal pattern, please be aware that this chart can also be interpreted as seeing a simple price consolidation pattern, such as a wedge or triangle pattern. We will be monitoring Home Depot this week to see if it breaks above the 21 EMA.
NYSE:HDLong
by UnknownUnicorn6775423
1
Options Idea: Buy The Oct '20 JWN Call Calendar Spread @ $2.35Nordstrom has been a big loser since COVID-19 and is on a long-term downtrend. However, it's been on a short-term uptrend since late August and just blew through its July highs. The next objective will be the early August highs around $17.50. Our goal is to ride the short-term trend for as long as it lasts during September and October. We don’t want to own this stock long-term, but we’ll hitch a ride on this short-term trend with a long-call. Since we’re not long-term owners of JWN we’re buying an Oct. 16 2020 call and we will sell weekly out of the money calls against it to lower cost basis. Look at the yellow trend line for a reference as to where JWN might be and that’s the area to sell weekly out of the money calls against this long call. Make sure your weekly short calls don't run up against the trendline. Here’s how we set-up the trade: Sold the September 11, 2020 $17.5 Call @ 0.25 Bought the October 16, 2020 $15 Call @ 2.60 Our objectives for short call income generation against this position are as follows: Initial Objective: $1.23 (Extrinsic Value of Long Call) Stretch Objective: $2.60 ($0 capital outlay) We on the way toward meeting our initial objective by selling the Sep 11, 2020 call at $0.25 and next week we’ll sell another weekly out of the money call to get closer to our initial objective. 20-JWN-01 Opening Date: Sep 8, 2020 Expiration Date: October 16, 2020 DTE: 38 IV: 93% IV Percentile: 56% Odds of Winning: 36.60% (before selling more short calls) Odds of Losing: 63.40% (before selling more short calls) Win: > 17.35 @ Expiration (before selling more short calls) Loss: < 17.35 @ Expiration (before selling more short calls) Cash Requirements: $235 Chart Legend Green Area: 100% Win Zone. If we finish above or in the green area, we’ve made a profit on our trade. Since our position has a long call that means our potential gain is unlimited after Sep 11, 2020. Up to Sep 11, we are limited in our gain by our short call. Red Area: If we finish in this area we have a loss. The size of the red area is the size of our maximum loss. Since we have no uncovered options, our loss is limited on this trade to the price of our long call minus the credit taking in on our short calls. 1 standard deviation, 2 standard deviation, 3 standard deviation projections from Opening Date to Expiration Date are included. Make sure to follow us on Tradingview for updates on this idea as we continue to reduce our cost basis in this trade.
NYSE:JWNLong
by OptionsCoach
Trade Log NIFTY August 25In my yesterday’s trade log, I said "NIFTY is on it’s way to the upper boundary of the gap -11633. I don't know how fast it can travel, But I expect that target to get achieved in this expiry. If It gets to 11633 in the next two sessions, I plan to take a reversal trade with tight stop loss. Till then, just ride the trend using intraday breakouts." Nothing much has changed. My trades I sold 11500 CALL when the opening range broke. It was covered later. My observations NIFTY had a choppy day. It was 4th straight higher high higher low day. It closed 0.05% up. BANK NIFTY gained 1.13% VIX up 0.44% Advance Decline ratio 21 to 29. Reliance Industries continues to drag by losing 0.65% My view for tomorrow For tomorrow, I don't have clear bias. I think there is not going to be a gap up opening tomorrow. NIFTY did 3 consecutive gap ups. Tomorrow, it may be flat to gap down opening. It needs to be seen how the gap gets bought. Intraday, short trade is more probable if there is no large gap down and NIFTY fails to keep opening range. The support is placed at 11400 and 11360.
NSE:NIFTY
by Observe_Think_Act_Think