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SPY SWING TRADE $SPY Earnings Season Kick Off !! The trade I'm in its a bearish trade using a Debit Put Spread to keep THETA under control and hold the spikes if any. $SPY -100 X FEB 17 / 36 DTE / 370 PUT (SELL LEG) +100 X FEB 17 / 36 DTE / 380 PUT (BUY LEG) MAX LOSS = -$14,900 MAX PROFIT = +$85,100 *The goal / target is to collect at least 65%-70% of max profit around +$55,000 - When you use this strategy your MAX LOSS is capped, so even if SPY jump 100% the MAX LOSS is the SPREAD that I already PAID, so all we can do is HOLD and see if SPY during this 36 days can pull back to test the lows or just stay under $378.50 by Expiration Day for BE.
AMEX:SPYShort
by IronMan_Trader
5
TRADE PLAN 01/06/2023 TP1> If we manage to Trade/Bid above MAIN POC 3863, we can go for 3830 > 3841 > 3862 (Range POC) > 3878 > 3913. >To the upside, the level I'm looking it right now is the 3860, that's the POC of those last 13 days, we need to trade/bid above so we can try to break the LIS 3913/3915, where BULLS are losing the battle. TP2> If we manage to Trade below MAIN POC 3830, we can visit 3826 > 3800 > 3787 > 3766. >To the downside, the level I'm looking is 3826 (RANGE VAL), as we are already trading below 3960 12 days POC, so once we confirm below 3824, we have to break lower to find strong sellers to push below 3800, where BEARS are losing the battle. * We are trading in this 100 points RANGE from 3800 to 3900 levels for the last 13 days or about 2 weeks, I would say that the market structure are balanced, looking for stronger BUYERS or SELLERS around the VALUE AREAS. Below is my previous comment from yesterday:. For now no direction in the markets, just range trades, we should break anytime soon out of this BOX, and I was hoping that today with FOMC minutes we could go search some new levels, out of balance, but... Mr Market had other plans, so for now lets trade the levels and see how it goes by Friday NFP. >As we didnt break the RANGE, now its a matter of one single REPORT, NFP by tomorrow 8:30am, there's only one way to make money tomorrow, and the way is to be IN ALREADY !! The movement will be soon, and the TRADE will make it or break it bt 8:30am and will set the tone for the following weeks for a BEARISH or BULLISH continuation. >I'm using $IWM PUT DEBIT SPREAD with 43DTE for my BEARISH BET, this is kind of a LOTTO PLAY, because the TRADE will be moving a lot in one direction, the advantage here is that if its a fake out UP, I have 43 days to manage and decide what to do with it... If you want to take a trade now, you would have to go with FUTURES, or FUTURES OPTIONS using GLOBEX . #tradesafe #sizekills #justonemoretrade
CME_MINI:ES1!
by IronMan_Trader
$STZ — Diagonal Calendar Put Spread?This price forecast is purely based on technical analysis of the current setup. I guess people are drinking a lot? We've had an extremely long stretch of green - which is a stale green light - 11 days in a row of green & 6 weeks straight of green - that hasn't happened since 2017 - it looks like the stock is trying to breakout on the weekly chart, but it looks so overbought technically speaking - very wide divergence from the all of the moving averages. This is a great candidate for a diagonal calendar put spread , or just naked put buys. I'm considering buying a very far out put - possibly January 2023 - and selling near-month puts against it with the goal of both having my bought put appreciate in value and have the sold near-month puts degrade in value so I can either buy them back for cheap or let them expire worthless. If I am able to successfully roll in near-month credits against my bought strike then I can slowly pay off the position's debit & eventually have a risk-free position. In other words, if I make enough money from selling puts - against the bought out of the money & far dated puts - then I can completely pay off the cost of the puts I bought while still owning them - creates a risk free position. Let me know if this is a confusing strategy for any of you, or if you disagree with my analysis.
NYSE:STZShort
by OptionsAddicts
"Facebook can't possibly go lower" ...right?Facebook NASDAQ:FB going lower was something many people did not expect on February 3rd, 2022 after the huge drop on earnings. I am afraid that many investors and traders did not pay heed to the words of one of my favorite investors Peter Lynch that "a stock can always go lower." Now price is grinding down those expecting a quick bounce. Let's look at this event as a teachable moment for price action as well as how to express options trades in high Implied Volatility using Vertical Debit Spreads.
NASDAQ:METAShort
by norok
9
$TSLA bulltrend continues? Long call vertical spread!TESLA smooth RSI confirms the breakout, well defined loss level. Max profit: $165 Probability of Profit: 60% Profit Target relative to my CAP: 46% Max loss with my risk management: ~$100 Req. Buy Power: $355 (max loss without management at expiry, no way to let this happen!) Tasty IVR: 16 (relative low) Expiry: 51 days Buy 1 TSLA May21' 595 Call Sell 1 TSLA May21' 600 Call Debit Call spread for 3.35db, because IVR is relative low. Stop/my risk management : Closing immediately if daily candle is closing BELOW the box, max loss in my calculations in this case could be 100$. Probability of loss in this way: ~20% . Take profit strategy: 50% of max.profit in this case with auto sell order at 4.2cr. Probability of profit this way: ~80%. Of course I'll not wait until expiry in any case! If you liked this article, check my other ideas. Anyway: HIT THE LIKE BUTTON BELOW , and for fresh option ideas FOLLOW ME( @mrAnonymCrypto ) on tradingview !
NASDAQ:TSLALong
by TanukiTrade
APPLE BULL SPREAD - oversold breakoutHere is some big tech-play. 1) Divergence in oversold territory My Smooth RSI indicator absolutely in the oversold territory, some bullish divergence detected. 2) Momentum confirmed with volume Some buy volume finaly arrived. 3) Parallel charting I love parallel speed-, or trendlines on chart. Now another breakout. 4) Not everything is an utopie The dangerous resistance in background! Previous support could acting as resistance later! CONCLUSION : APPLE DEBIT BULL SPREAD Max profit: $64 Probability of Profit: 70% Profit Target relative to my Buying Power: 27% Buy Power: 236$ (max loss without management) Max loss with my risk management: ~ 70$ Tasty IVR: 18.8 Expiry: 38 days Buy 1 AAPL April23' 115 Call Sell 1 AAPL April23' 118 Call Long call spread for 2.36 debit Stop/my risk management : Closing immediately if daily candle is closing below $117 Take profit strategy: I'm taking at the 50% of max.profit in this case with auto sell order. (at 2.68 credit) If you liked this article, check my other ideas. Anyway: HIT THE LIKE BUTTON BELOW , and for fresh ideas follow me : @mrAnonymCrypto on tradingview anyway! Recommendation: thanks for @csemez to pointing on this trade!
NASDAQ:AAPLLong
by TanukiTrade
S&P500 Long Call Vertical 66% Probability Of ProfitI've played yesterdays some S&P500 with vetical spread. (1) RSI in the middle zone Any direction is possible (2) Forming a bullish triangle - again Similar cases in the past one year: (3) There is a little more space to the upside (4) Relative Implied Volatility is low So I'm choosing a debit strategy. CONCLUSION: I'm using LONG CALL VERTICAL - Buy 1 SPY April16' 375 Call Sell 1 SPY April16' 380 Call Debit call spread for 4.12 debit Probability of Profit: 66% Profit Target relative to my Buying Power: 21% Max profit: 88$ Max loss at expiry: 412$ (Buy Power) Max loss with my risk management: ~95$ Tasty IVR: 4.8 Expiry: 36 days Stop/my risk management: Closing immediately if daily candle is closing below $379 Take profit strategy: I'm taking at the 55% of max.profit in this case with auto sell order. (at 4.56 credit) If you liked this article, check my other ideas. Anyway: HIT THE LIKE BUTTON BELOW , and follow my fresh ideas ( @mrAnonymCrypto on tradingview ).
AMEX:SPYLong
by TanukiTrade
9
FUNKO LONG CALL VERTICAL: high PoP (66%) and good ROI (30%)Look at that volume in uptrend! Max profit: ......................................................... $113 Probability of Profit: .............................................66% Profit Target relative to my Buying Power: ......30% Max loss with my risk management: ...................~ $100 Buy Power: $387 (max loss without management at expiry, no way to let this happen!) Tasty IVR: 13 (relative low) Expiry: 58 days Buy 1 FNKO May21' 10 Call Sell 1 FNKO May21' 15 Call Debit Call spread for 3.87db, because IVR is relative low. Stop/my risk management : Closing immediately if daily candle is closing BELOW the box, max loss in my calculations in this case could be 100$. Probability of loss in this way: ~15% . Take profit strategy: 60% of max.profit in this case with auto sell order at 4.55cr. Probability of profit this way: ~85%. Of course I'll not wait until expiry in any case! If you liked this article, check my other ideas. Anyway: HIT THE LIKE BUTTON BELOW , and for fresh option ideas FOLLOW ME( @mrAnonymCrypto ) on tradingview !
NASDAQ:FNKOLong
by TanukiTrade
5
AbbVie Inc - Long Call Vertical SpreadQuick trade for monday on $ABBV Breakout formation 1) Swing Pivot Last swing pivot breaked at 109$ 2) RSI in the middle zone Many space up and down too. 3) Squeeze indicator On my squeeze indicator "prepare for storm" sign. This in dicator I'm using for predicting any significant move in near future. See examples in the past. CONCLUSION LONG CALL VERTICAL AbbView Inc Max profit: 120$ Probability of Profit: 64% Profit Target relative to my Buying Power: 31% Buy Power: $380 ( max loss without management) Max loss with my risk management: ~ $140 Tasty IVR: 6.9 Expiry: 66days Buy 1 ABBV May21' 100 Call Sell 1 ABBV May21' 105 Call Debit call spread for 3.8 debit Stop/my risk management: Closing immediately if daily candle is closing below $103.8 Take profit strategy: I'm taking at the 55% of max.profit in this case with auto sell order. (at 3.85 credit) If you liked this article, check my other ideas. Anyway: HIT THE LIKE BUTTON BELOW, and follow my fresh ideas ( @mrAnonymCrypto on tradingview ).
NYSE:ABBVLong
by TanukiTrade
DOW JONES debit spread play with good chanceI've opened a LONG CALL VERTICAL spread yesterday end of day for Dow Jones. Correction maybe consolidated, I'm expecting some short squeeze soon. Otherwise the probability of profit is godd, and the trade is manageable because of lower strikes. (1) Relative Implied Volatility is low I'm using my Relative implied volatility indicator to determine the credit/debit type of option trades. Low relative implied volatility justifies debit option strategy (longing options) instead of creadit strategy (shorting options) (2) Neutral RSI - no oversold or overbought Uptrend still holding after a quick correction. My Smooth RSI indicator is in no one's land. There is plenty of room up and down. (3) Observing other Down Jones instrument Every Down Jones instrument pretty same indicator values for RSI and RIV too: DJI, YM, DJIA, DIA CONCLUSION: I'm using LONG CALL VERTICAL - Buy 1 DIA April16' 305 Call Sell 1 DIA April16' 310 Call Debit call spread for 3.92 debit Probability of Profit: 67% Profit Target relative to my Buying Power: 26% Max profit: 105$ Max loss at expiry: 395$ (Buy Power) Max loss with my risk management: ~120$ Tasty IVR: 3.1 Expiry: 38days Stop/my risk management: Closing immediately if daily candle is closing below $309 Take profit strategy: I'm taking at the 55% of max.profit in this case with auto sell order. (at 4.55 debit) If you liked this article, check my other ideas. Anyway: HIT THE LIKE BUTTON BELOW, and follow my fresh ideas ( @mrAnonymCrypto on tradingview ).
AMEX:DIALong
by TanukiTrade
6
Locking in a Profit Without Day TradingDay trading can be a quick way to capture intraday profits. However, not all accounts are suitable for day trading or can afford the pattern day trader requirements. If a trader has already completed three day trades in the past five trading days, it leaves them with two options when they have a profit on a newly opened position. 1. Either close the position, take the profit, and trigger a pattern day trade label or 2. Hold the position until the next day and hope the profit is still there. There is a third option that locks in a profit while still avoiding a day trade. This is done by legging into a debit spread. Legging into a Debit Spread A vertical debit spread is created when an investor buys-to-open (BTO) one option and sells-to-open (STO) another option further OTM. Both legs are opened on the same underlying equity and use the same expiration. However, both legs do not need to be opened at the same time. An investor can instead buy-to-open (BTO) the long leg first and then setup a sell-to-open (STO) order for another option further OTM. The STO order should be placed for a credit greater than or equal to the debit paid for the BTO leg. This is called legging into a debit spread. Example: BTO September 200 put for $10.00 of debit. Instead of placing a closing order for the 200 put, place an order to STO September 195 put for $10.00 of credit. When the STO order fills, this will create a September debit spread with a net debit of $0.00. (BTO for $10.00 debit - STO for $10.00 credit = $0.00 net debit) The risk on the trade is $0.00. The maximum risk, or potential loss, from a vertical debit spread is the net debit (cost basis) of the spread (BTO leg debit minus the STO leg credit). The potential profit is $5.00. The maximum profit that can be earned from a vertical debit spread is equal to the width of the spread minus the cost of opening the spread. No further action should be taken on this spread until the next trading day. Even placing a closing order the same day opens up the risk of being filled and tagged with two day trades. The next market day, a closing order should be placed to STC the entire spread for a credit. This order can be placed in premarket or at market open. Regardless of when the order is placed, it should be worked until the position is closed. When locking in a zero cost basis, the current value of the spread is the profit. Example: Holding a legged into debit spread with $0.00 cost basis. STC the spread for 3.40 of credit. The spread was BTO for $0.00 and STC for $3.40 resulting in a $3.40 profit. The total profit on the position is $3.40 per share, or $340 per contract. Locking in Profits This strategy can also be used to lock in profits of a position that was initially intended to be held overnight. An investor BTO a TSLA call based on an upcoming earnings play. TSLA moves 50 points going into market close and the current position has $25 of profit per share. Instead of using a day trade to close the position, STO an adjacent strike to create a debit spread to lock in a profit. Then BTO a new TSLA call to realign the account for the same earnings play. Example: 7/21 13:15 PM ET TSLA trading at 1560. BTO Aug 1560 Call for $150 per share. 14:30 PM ET TSLA is now trading at 1610. The Aug 1560 Call is now worth $175, equaling $25 of profit per share. STO Aug 1570 Call for $170 per share. This creates a debit spread with a $20 net credit . BTO for a debit of $150, STO for a credit of $170 = $20 net credit . This is now a debit spread with a credit as the cost basis. Depending on your trading platform, this may be shown as a negative cost basis. This is because it is a credit on a debit spread. Max risk = $20 profit, no risk on the trade. Locking in a credit is a guaranteed profit on the trade. Max profit = $30: $20 of credit + $10 of spread width. BTO the Aug 1605 call for $157 per share. This allows the account to still be setup for an earnings play. Net risk of the two positions is $157 debit - $20 credit = $137 of risk per share. Next Market Day: 7/22 9:30 AM ET TSLA gaps open to 1679 due to earnings. STC the Aug 1560/1570 debit spread for a credit of 6.70. Total profit on the spread is the $20 net credit + 6.70 of credit to close = $26.70 of profit per share or $2,670 of profit per contract. STC the Aug 1605 call for $195 credit. BTO for $157, STC for $195 = $38 profit per share or $3,800 profit per contract. Total profit is $64.70 on a net risk of $137 = 47.2% return and no day trades used. Credit on a Debit Spread In the above example, the stock moved enough for the STO leg to have a higher value than that of the debit paid on the BTO leg. This legging in allowed for a credit cost basis when normally a debit cost basis would be held if both legs had been opened at the same time. When the credit received on the STO leg is higher than the debit paid on the BTO leg, this creates a credit on the spread. This does not make it a credit spread. It is still a correctly constructed debit spread because the STO leg is further OTM than the BTO leg, but instead of holding a debit and risk on the trade, the position now has a credit, no risk on the trade, and a guaranteed profit If a debit spread with a credit is held until expiration and expires out of the money, the “loss” on the spread is actually a profit equal to the credit held. When a strike is OTM at expiration, it no longer has any value to it. It has lost all time value and because it is OTM, it contains no intrinsic (ITM) value. Example: The BTO leg for $150 is STC for $0.00 = $150 loss. The STO leg for $170 is BTC for $0.00 = $170 profit. $170 profit - $150 loss = $20 profit per share or $2,000 per contract. If both legs of the debit spread are in the money at expiration, the profit on the spread is equal to the credit held plus the spread width. When a strike is ITM at expiration, it only contains intrinsic (ITM) value. It has lost all time value. Example: AMZN settles at expiration at 1580. The 1560 call is 20 points ITM. The 1570 call is 10 points ITM. The BTO leg for $150 is STC for $20 = $130 loss. The STO leg for $170 is BTC for $10 = $160 profit. $160 profit - $130 loss = $30 profit per share or $3,000 per contract. It is not recommended to hold ITM spreads on American style options until expiration due to risk of assignment/exercise. American vs European Style Options Most stocks and ETF’s are American style options. This means that if the buyer of an option chooses to exercise or assign their rights they may do so at any time prior to expiration. Indexes such as SPX, NDX, and RUT are European style options. This means that any exercise or assignment may only occur at expiration. Trading spreads on European style options, can alleviate the concern of early exercise/assignment. If both legs are ITM, they can only be exercised or assigned at expiration. For American style options, the closer to expiration and the further ITM the STO leg is, the more likely it is to be exercised/assigned. This is why building time into the position is beneficial by using an expiration at least 2-3 weeks out. Additional Information This strategy works best on long options, BTO a call or BTO a put. It is not recommended to be used to lock in a profit on an existing debit or credit spread. While you can use this strategy to leg into a credit spread, debit spreads tend to be more efficient as credit spreads rely on rapid time value decay so generally require sooner expirations. The legging in strategy works with any spread width. However, the larger the spread width the further the underlying will have to move for the STO leg to be at the same value or higher than the cost basis of the BTO leg. When legging into wide spreads if you can lock in a cost basis less than the current spread value you still have profit potential. Legging into a debit spread is an efficient way to avoid day trading but still guarantee yourself a position that can be closed the next market day for a profit. As long as the debit spread is not at expiration or extremely far out of the money, the spread should have value to it. A zero cost basis debit spread can be closed for a profit equal to the current value of the spread. While locking in a credit on a debit spread results in a guaranteed profit equal to the credit on the spread plus the current value of the spread.
SP:SPXEducation
by NewCycleTrading
4
Trader's Guide to Vertical Debit SpreadsThe strategies and ideas presented in this guide have been designed to provide you with a comprehensive program of learning. The goal is to guide you through the learning experience so you may be an independent, educated, confident and successful trader. There are numerous variations of traditional options strategies and each has a desired outcome. Some are very risky strategies and others require a considerable amount of time to find, execute and manage positions. Spreads are a limited risk strategy. Spreads Spreads are simply an option trade that combines two options into one position. The two legs of one spread position could have different expiration dates and/or different strikes. Spreads can be established as bearish or bullish positions. How the spread is constructed will define whether it is bullish (rising bias) or bearish (declining bias). Different types of spreads can be used for the same directional bias of the stock. For example, if the stock has a declining bias, a call credit spread or a put debit spread could be opened to take advantage of the same anticipated move down. In this guide we will be talking about Vertical Debit Spreads, which are a limited risk strategy. Learning how to manage risk is as important as learning the details of a strategy. Vertical Debit Spreads A vertical debit spread is created when an investor simultaneously buys-to-open (BTO) one option and sells-to-open (STO) another option. The premium paid for the BTO is always greater than the premium received for the STO thus, creating a net debit from the trader’s account. Example: BTO a call using the May 180 strike for a debit of $7.57 STO a call using the May 190 strike for a credit of $3.42 Net debit for the spread is $4.15 The proper construction of a vertical debit spread is to BTO an at-the-money (ATM) strike and STO the strike that is 5 – 10 points further out-of-the-money (OTM). When opening a call debit spread, further OTM means a higher strike. When opening a put debit spread, further OTM means a lower strike. Both legs are opened on the same underlying equity and use the same expiration month. The Delta Ratio Delta is a factor in how profitable a debit spread may be. When the underlying stock moves, the value of the options will change at the rate of the Delta. Delta values will be different for different strikes depending on how far out-of-the-money or in-the-money the strike is. Look at an options chain for the current expiration month. Find the Delta of the at-the-money strike and compare it to the Delta of a strike 20 points out-of-the-money. The ATM strike will always have a higher delta than the OTM strike. This means that the value of the ATM strike will change more quickly than the OTM strike, as the underlying stock moves. When properly constructed, a debit spread is designed to take advantage of the Delta relationship between the long and short options. By STO a strike further out-of-the-money than the BTO strike, the long leg will increase in value more rapidly than the short leg. This is referred to as the Delta Ratio. Put debit spreads are used when the stock shows a declining bias. Puts increase in value as the stock decreases in value. In this case, the long put would increase in value creating a profit. The short leg would increase in value creating a loss. However, as we learned earlier, due to the Delta Ratio, the long put is increasing in value faster than the short put is creating a loss. This will create an overall position profit as the stock moves down. Here is an example: Stock trading at 520 and has a declining bias. BTO 520 put STO 510 put This spread creates a debit of $4.80 Stock declines to 510 causing the values of the puts to increase. The position can now be closed for a profit. STC 520 put BTC 510 put The value of the spread has increased to $5.80. Since the stock declined in value, the put options are more expensive. The spread was BTO for a debit of $4.80 and STC for a credit of $5.80 resulting in a $1.00 profit. Call debit spreads are used when the stock shows a rising bias. Calls increase in value as the stock rises. In this case, the long call would increase in value creating a profit. At the same time, the short call would increase in value creating a loss. However, as we learned earlier, due to the Delta Ratio, the long call is increasing in value faster than the short call is creating a loss. Stock trading at 500 and has a rising bias. BTO 500 call STO 510 call This spread creates a debit of $4.80 Stock rises to 510 causing the values of the calls to also rise. The position can now be closed for a profit. STC 500 call BTC 510 call The value of the spread has increased to $5.80. Since the stock increased in value, the call options are more expensive. The spread was BTO for a debit of $4.80 and STC for a credit of $5.80 resulting in a $1.00 profit. Risk and Reward on Vertical Debit Spreads Reward The maximum profit that can be earned from a vertical debit spread is equal to the width of the spread minus the cost of opening the spread. For a vertical debit spread to realize the maximum potential profit, both legs of the spread would need to expire in-the-money which means the position would need to be held until expiration. I do not recommend holding positions until expiration. Short term movements in the stock/index plus limited time value decay provide opportunities to close out positions for a profit of about 10%. If a position is profitable and the trader decides to hold the position hoping for a bigger profit or in an attempt to carry the position to expiration, there is a good chance that the profit will disappear and the position could turn into a losing position. This also will increase the risk of assignment/exercise if trading an American style expiration. A good way to lose money is to wait for a bigger profit Risk The maximum risk, or potential loss, from a vertical debit spread is the net debit (cost basis) of the spread (BTO leg debit minus the STO leg credit). Example: BTO 2765 call for a debit of $11.70 STO 2770 call for a credit of $8.30 Cost basis of the spread is $3.40 $3.40 is the maximum risk. A maximum loss will occur when both strikes are out-of-the-money at expiration. Learning how to properly adjust positions will avoid this. A trader establishes a bullish (call) debit spread when the chart indicates a rising bias. The breakeven point is the lower strike price plus the net debit. Referring to the example above, if the stock was at 2768.40 at expiration, there would be no loss and no profit. Example of breakeven point on above debit spread: Stock settles at 2768.40 at expiration The 2765 strike is $3.40 ITM, the value of the strike has $3.40 of intrinsic value and no time value. The 2770 call expires OTM worthless and you keep the 8.30 of credit as profit. Since you do not want to exercise your right to own the stock, you sell the 2765 back at the price of $3.40. This results in a $8.30 loss. $11.70 BTO – $3.40 STC = $8.30 loss You get to keep the original credit of $8.30 from the 2770 call. This netted against the $8.30 loss results in breaking even on the position. A trader establishes a bearish (put) debit spread when the chart indicates a rising bias. The breakeven point is the BTO (higher) strike price minus the net debit. Calculating the Return The profit percent return is calculated by dividing the profit by the risk. After all, if the trade lost 100% of the risk that is the amount the trader would no longer have. In the example above, the net risk is $3.40. If the debit vertical spread trade resulted in a $1.00 profit, the percentage return would be 29.41% ($1.00 / $3.40). Lower risk drives higher returns relative to capital at risk. American vs European Style Options Most stocks and ETF’s are American style options. This means that if the buyer of an option chooses to exercise or assign their rights they may do so at any time prior to expiration. Indexes such as SPX, NDX, and RUT are European style options. This means that any exercise or assignment may only occur at expiration. Trading spreads on European style options, can alleviate the concern of early exercise/assignment. If both legs are ITM, they can only be exercised or assigned at expiration, which allows flexibility to continue to hold the position rather than take action to avoid assignment/exercise as would be suggested on American style options. Opening a new Put Debit Vertical Spread The following steps should be referred to when opening a new put debit vertical spread position: 1. Review the technical indicators on your chart and confirm there is a consensus between multiple indicators pointing to a declining bias. 2. Select an expiration that is one to three months out. One month is generally the minimum time to expiration you want to use. Building time into the position is advised in case it needs to be managed. The sweet spot for opening new positions is two months to expiration. 3. BTO the at-the-money (ATM) put strike. BTO the strike that is closest to the money. When the stock/index is trading between strikes, BTO the first strike higher than the current price of the stock. 4. STO the strike that is 10 points further out-of-the-money (OTM). With a put spread, further OTM means a lower strike. BTO ATM and STO 10 points further OTM will create a debit. Generally, when properly constructed, the debit will be in the range of $4.00 - $6.00. 5. When placing the order, always use a Limit order. A limit order specifies to the market the amount of the debit you will accept. A limit order will be filled at the specified limit or lower. Market orders should not be used. 6. With some stocks and indexes, the difference between the bid and ask is quite large. The broker will usually give you a quote called the “Mark”. This is the midpoint between the bid and ask. It is the price you should start with when submitting your limit debit order. 7. Calculate the risk of the position. Cost basis of position is risk. So a position with a debit of $4.50 would have a risk of $4.50. 8. Use the risk number to determine the number of contracts to open. Risk x 100 = the investment required for each contract. With $4.50 of risk and one contract, the total investment would be $450 ($4.50 x (1 contract x 100 shares per contract)). 9. Once you know the total investment required per contract, you can decide how many contracts to trade based on the size of your portfolio. Generally, allocating 5% of the total portfolio to each trade is good risk management. Smaller account sizes may require a higher investment per trade but should not exceed 10%. 10. After the trade has been opened, place a Good-til-Canceled (GTC) order to close the position for a $1.00 profit. A GTC order will stay active until market conditions are such that the position can be closed for a $1.00 profit. GTC orders execute automatically and do not require you to be in front of your computer to take advantage of the profit opportunity.
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SP:SPXEducation
by NewCycleTrading
9
Trading Edge 2020 Portfolio -Trade #6 - WMT - Asymmetric Spread Ticker: WMT *This trade is a little more complex, than the others, as it has 2 separate spreads, but stick with me Position: 1st leg - Call debit spread - 21st Feb 2020 expiry - Long 114 Strike call = $4.85 - D = 0.99 - Short 115 Strike call = $4.25 - D = 0.95 - Net cost of 1st leg = $0.6 Position: 2nd leg - Put debit spread - 21st Feb 2020 expiry - Long 120 Strike put = $3.88 - D = 0.88 - Short 119 Strike put = $3.30 - D = 0.73 - Net cost of 2nd leg = $0.58 Total net cost to run 1x of EACH spread = $1.18 <-------- This is the key number to pay attention to (DO NOT ENTER if this price is above $1.30) Profit Target/ Exit: - Maximum profit at expiration is $0.82 (both spreads finish at max value) - Maximum risk = $0.18 (one of the spreads is guaranteed to finish at maximum value ($1.00), therefore the maximum risk is simply the excess, in this case $0.18 - This gives us a "Return on Risk" (RoR) multiple of 4.5, this is a very good asymmetric trade, but it is entirely dependent on the price paid for BOTH spreads, this is why the highest price i would pay is $1.30 for both spreads, lower than $1.25 would be ideal - Even the worse case scenario of paying $1.30 would still result in a $0.30 risk to make $0.70, which is still a RoR multiple of 2.3 - Exit, let the spreads run their course for the duration, we are risking the full exposed premium (so limit your risk assuming it will fail) Rationale: - The high RoR multiple is the major rationale, coupled with the relatively low risk and entry cost - So long as WMT finishes within the outlined white lines, the trade will be profitable - If WMT finishes within the red lines, the trade will achieve maximum profit - Position size only so that your are risking a relatively small amount, i will risk no more than around $400 - Technically, WMT does appear to be more bullish than bearish, if this does eventuate, then a simple way to play that would be to incorporate a naked bought call, to capture the upside, however this would also make this a directional trade, whereas currently this is a theta dependent trade. *Note, the specific entry prices will likely vary, however so long as the net cost to run 1x of BOTH spreads is less than $1.30, ideally less than $1.25, then it will still be a valid trade - TradingEdge
NYSE:WMT
by Profit_Link
TRADE IDEA: RTY DEC 20TH 1610/1620 LONG PUT VERTICALWith the small caps at long-term range highs and implied volatility at the low end of its 52-week range (rank/implied 10/15.8), it's potentially debit spread time. Pictured here is an /RTY 1610/1620 long put vertical with risk one to make one metrics ($250 max profit/$250 max loss) with a 1615 break even. Unfortunately, markets are wide in RTY, so some price discovery may be required if you're going to go that route. Alternatively, look to put on a similar play in RUT at NY open ... .
CME_MINI:RTY1!Short
by NaughtyPines
JNJ Sideways and declineJNJ debit spread 130/120 Put spread 2.53 debit Max profit is 7.47 exp September 20th. I have a pretty long debit spread on JNJ its a high reward low risk trade. I think it may continue lower slightly and hit my target which in this case will be $5 on the spread. If I lose and it rises and stays above 135 etc. I will close the trade on August 30th for a loss and salvage anything that I can. This is a journal entry and not trading advice. Double bottom breakdown and sideways movement is my prediction since we're in a bull market it may move higher.
NYSE:JNJShort
by Synaptic724
bear flag on AIG and subdued volatility: put debit spreadAIG currently is trading with an IV30 of 19.6, making its IV Rank 21.8. This low rank indicates that the options will be cheap, and encourages debit spreads, regardless of being bullish or bearish. These spreads will profit when volatility mean-reverts to higher levels. Because of this well-developed bear flag, we are expecting a continuation of the prior downtrend, thus reversing the immediate uptrend characterized by higher highs and higher lows. To profit off of this, we are doing a put debit vertical by longing the July 26th 54 puts and writing the 53s, for a max potential profit of 41 and capped potential loss of 59, per contract. This is particularly cheap because they expire prior to the expected earnings announcement on August 1st, '19. The break even price is 53.41 because it is being done for a debit of .58. There is max profit below the short strike K = 53.
NYSE:AIGShort
by LaurenTrading