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How I’ve Improved Productivity in My Trading DayI’ve been trading for a long time, and over the years, I’ve learned different ways to make the most of my time. Today, I want to talk about three ways I boost productivity in my trading day: - Using my PowerX Optimizer to quickly scan for long and short trading ideas. - Using my Wheel Income Calculator to find attractive premium collecting ideas. - Having a trading plan and following that plan. In this article, I’m going to break down each one of these and explain what they are. I’ll also explain how they help me streamline my trading. This gives me more time to focus on other things I’m interested in, like my business and real estate. 3 Pillars To Trading I always say there are three pillars to trading: - You need to have a trading strategy. - You need to have the right tools. - You need to have the right mindset. For me, I trade two strategies: PowerX and the Options Wheel. And I developed my own software tools to help me trade these strategies quickly and efficiently. The PowerX Optimizer software shows me what I should trade, when I should enter, when I should exit based on my preferred criteria, and my Wheel Income Calculator tells me which option strike has the best risk/reward. If trading software doesn’t show me this, it’s not allowing me to make the best use of my time. Let’s take a closer look at these software programs, starting with the PowerX Optimizer. PowerX Optimizer With my PowerX strategy, I’m looking to buy calls on stocks trending higher or buy puts on stocks trending lower. The PowerX Optimizer is a software I programmed for myself, my head coach Mark, and my son. A few years ago, we made it available to everyone. This software answers the three questions I’m looking to have answered when I’m looking for stocks - What to trade. - When to enter. - When to exit. The PowerX Optimizer will answer all three of these questions for you. Now, I had the software programmed for myself because I wanted all my criteria in one place. With the PowerX Optimizer, I can scan for my basic criteria that I set within the software. For instance, I want to see a 60% return on investment over the past year, I also want to see stocks that are between $5 and $200, and I want a profit factor higher than 3 and a risk/reward higher than 2. This is the criteria I use for trading this strategy. Your criteria may be different. The scanner finds the best stocks and options for me based on my criteria. I certainly don’t want to just stumble across a stock or trade everyone on TV is talking about. Worst case scenario, if nothing meets my criteria, I simply move on. Every day this scanner produces a list of stocks that I potentially want to trade — in less time than it takes to make a cup of coffee! Talk about a time saver! In the beginning, I would just use charting software like TradingView, and I would go through a bunch of stocks every day to see if they met my criteria. It got to the point where I figured there had to be an easier way, which is why I had the PowerX Optimizer developed Instead of spending hours and hours sifting through charts and doing the math, I’m able to find a handful of stocks to look through every day in just minutes. This frees up my time to focus on other things. The Options Wheel Calculator With my Options Wheel strategy, the idea is to “get paid to wait until you buy the stock.” So I’m looking to sell a put and collect premium, and I want to pick a strike that coincides with the level I would feel comfortable buying the stock. Ultimately, I want to get assigned, and then I’ll look to potentially sell covered calls on the stock. The tool I use to identify stocks and options I want to trade with this strategy is the Wheel Income Calculator. The Wheel Calculator pulls up stocks and tells me the minimum option premium I need to collect to make this trade work for me, and the risk/reward setup for each strike. I have set aside $500,000 in buying power for this strategy. That’s what works for me. It does work with smaller accounts if that’s what you have to work with. That’s why I love these tools. They have made my life so much easier. I’m not just picking a trade based on a gut feeling. Instead, I’m trading with a systematic approach that’s based on data. Remember, I like to trade for SCR Profits. SRC stands for Systematic, Repeatable, and Consistent. Trading Plan And that leads me to the last thing I want to talk about today: having a trading plan. You see, having a trading plan is key to having the right mindset to trade. There are three key parts of a trading plan that I’ve already mentioned, but again, they are: - What you’re going to trade? - When you’re going to enter? - When you’re going to exit — both for a profit and a loss. This is also where those limit and stop-loss orders I mentioned earlier come in handy. Limit orders allow you to tell your broker the price you want to get filled, and if you get that price, you move on. Same with stop-loss orders. You tell your broker what point you want to get out of the trade, and if the stock hits that level, you’re out. This allows you to not be tied to your computer, watching every tick the stock makes and opens up your day to allow you to focus on other things. I cannot stress enough how important it is to be prepared when you’re trading — and to have a plan before you enter a position. So, as you can see, by defining my strategies, I developed tools like the PowerX Optimizer and Wheel Income Calculator to help me find trades quickly and efficiently that work with my rules and my plan. I hoped this helped and I’ll see you at the next one.
TVC:SPXEducation
by rockwelltrading
1
VERU log chart. Wedge within a megaphone and channel.This is a mighty COVID treatment play. It's a coin flip whether it will break up or down out of the blue dashed wedge, but when it does. . . there are many place it can go. Options prices remain elevated even for $10 strikes (around the lower ascending channel). All depends on the Phase III trial data and analysis. Personally, I bought 1000 shares in the February pullback before the mega rally, sold into strength, and still hold 150. I've been selling $10, $15 and $17.5 strike weekly puts and taking profits at 50% to 75%. I will take any long red candles as an opportunity to sell lower-strike puts. So my bias is long, but to sell into strength. Caveat emptor.
NASDAQ:VERULong
by decaro
True story. My Single put option "2 contract" both down/SPX downWhen i did my idea about the completion of an Elliott wave structure with 5th wave 1.61 Fibs of wave one i decided that i would buy small 2 SPY single Put contracts just satisfy my "bias" and my "emotion" toward my Elliott wave count as a worthy trading strategy. So i bought April 16 2021 + March 31 2021 just before the last price action we got in the past 5 days or so . A prefect timing to say the least to test the market and a perfect timing to buy single Put to say the least. Even though i new stimulus is coming soon and this could be another buy the dip pullback but i did it any way regardless of the huge risk if i actually have invested allot of money or bought allot of contracts. Therefore, when we got the recent pullback i opened my account and guess what i saw. Both of my "Single Put contracts" are down 41 % % 49 % and that's was at the bottom around 3800. Just imagine the situation the market is in ,SPX is down around 3 % and you hold single puts you bought just at the top, and at the very bottom your down more than 40%. Well the only thing i concluded from this "test the market" kind of style trading is at 3800sh i came to the conclusion way before the move of spx higher that this is "Buy the dip" pullback, because there is no way that we are correcting and my puts will go down in value instead going up in value and big investors regardless of their different kinds did not buy insurance what so ever for any possible correction. The only thing i should've down is to buy single Calls to see if they have increased in value or no, i guess the should've increased in value if this was buy the dip pullback because the new where the market is going. I have never tested this strategy before, but from my understanding that some big investors use it with single stocks not with SPY like me or ETFs for that matter before they decide to hold big chunk of it. I hope you can take a way something beneficial to you trading strategies or you have learned little something from my live example of a true story of mine. Wish you all the best.
SP:SPX
by samitrading
4
BANKNIFTY Expiry Day StrategyBankniftyWe had planned for a break on either side which played out beautifully. Not quite the way we would had wanted it given the market glitch and trading halt and the late move. But it did happen as we laid it out. < Refer to the previous post > Plan for Expiry: OI Analysis: Good PE OI at 36000 , overall PCR has increased so expecting a bullish Bias. 36500 is balanced , CE OI high at 37k CE Plan of action: 1. Will Look for a hold of 36200 for a bullish bias. 2. Break above 36620F will look for a move to 37000 3. Hold below 36200 can look to rotate lower to test 35850 areas.
NSE:BANKNIFTY1!Long
by PowerTrades
2
What’s The Best Vertical Spread Option Strategy?I’m Markus Heitkoetter and I’ve been an active trader for over 20 years. I often see people who start trading and expect their accounts to explode, based on promises and hype they see in ads and e-mails. They start trading and realize it doesn’t work this way. The purpose of these articles is to show you the trading strategies and tools that I personally use to trade my own account so that you can grow your own account systematically. Real money…real trades. What’s The Best Vertical Spread Option Strategy? You may have previously heard someone say, “ Vertical spreads are the same as getting weekly paychecks! “ Is that even true? We’re going to go in-depth on each strategy to discuss each of the pros and cons. I’m also going to discuss how each strategy should be used in any given market condition. Since we’ve previously discussed credit spreads and debit spreads, you’re probably wondering… what’s the BEST vertical spread option strategy? Let’s break down each of the vertical spread option strategies in detail and look at examples in Tasty Trade. Call Debit Spread What is a Call Debit Spread? A call debit spread is a position in which you buy a call option and sell a call option at different strike prices using the same expiration date. When should this strategy be used? This strategy is used when you believe the stock is increasing in price, but not a dramatic movement. What are the benefits of this strategy? Trading this position can potentially reduce the overall cost associated with taking on the trade. This type of strategy also reduces the break-even price of the trade. When does this trade lose money? When the underlying stock moves sideways or downward. What is the max risk for this trade? The max risk associated with this strategy is the cost of the premium paid to take on the trade. What is the max reward for this trade? The max reward for this strategy is the difference between the strike price of the two calls, multiplied by 100. Minus the premium paid to take on the trade. Call Debit Spread Example - Reduced Margin Requirement: $910 - Max Risk Reduced: $910 - Max Reward: $4090 Put Debit Spread What is a Put Debit Spread? A put debit spread is a position in which you buy a put option and sell a put option at different strike prices with the same expiration date. When should this strategy be used? This strategy is used when you believe the stock is decreasing in price. What are the benefits of this strategy? Trading this position can potentially reduce the overall cost associated with taking on the trade. This type of strategy also lowers the break-even price of the trade. When does this trade lose money? The underlying stock moves sideways or downward. What is the max risk for this trade? The max risk associated with this strategy is the cost of the premium paid to take on the trade. What is the max reward for this trade? The max reward for this strategy is the difference between the strike price of two calls, multiplied by 100. Minus the premium paid to take on the trade. Put Debit Spread Example - Reduced Margin Requirement: $910 - Max Risk Reduced: $910 - Max Reward: $2090 Call Credit Spread What is a Call Credit Spread? A call credit spread is a position in which you sell a call option and buy a call option as protection. These option contracts have different strike prices but have the same expiration date. When should this strategy be used? This strategy is used when you believe the stock is decreasing in price or trading sideways. What are the benefits of this strategy? Trading this position produces a credit from the premium received for selling the put option. Buying the additional call option provides protection, limiting the risk of the trade. When does this trade lose money? This trade loses money when the underlying stock moves up quickly past your strike price. What is the max risk for this trade? The max risk associated with this strategy is the difference between the strike prices, multiplied by 100. What is the max reward for this trade? The max reward for this strategy is the premium received for selling the call option, minus the premium paid for protection. Call Credit Spread Example - Margin Requirement: $965 - Max Risk: $965 - Max Reward $35 - Premium Received: $35 Put Credit Spread What is a Put Credit Spread? A put spread is a position in which you sell a put option and buy a put option as protection. These option contracts have different strike prices but have the same expiration date. When should this strategy be used? This strategy is used when you believe the stock is increasing in price or trading sideways. What are the benefits of this strategy? Trading this position produces a credit in the form of the premium received for selling the put option. Buying the additional put option provides protection, limiting the risk of the trade. When does this trade lose money? The underlying stock moves downward sharply. What is the max risk for this trade? The max risk associated with this strategy is the difference between strike prices, multiplied by 100. What is the max reward for this trade? The max reward for this position is the premium received for selling the put option, minus the premium paid for protection. Put Credit Spread Example - Margin Requirement: $837 - Max Risk: $837 - Premium Received: $163 - Max Reward: $163 How Do I Choose The Best Vertical Spread Option Strategy? I personally only select options that match my trading plan. You’ve probably heard me say it a million times if you’ve heard it once… There are 3 things you need to know to be successful at trading. 1.) You need to know which options to trade 2.) You need to know when to enter 3.) You need to know when to exit I use the PowerX Optimizer to help me execute these trades successfully.
TVC:NDQEducation
by rockwelltrading
OI, DOW & MANIPULATION - Palantir $PLTR - Short Iron ButterflyWhen 400~ institutions are crowding a stock, and the biggest of names are playing MM. I want to use them as a shield, and poke out from behind them to stab little by little. This is my all-time favorite options strategy, and it can be used under very specific conditions.. 1. Accumulation/Distribution Phase is identified (Dow Theory). 2. Range-bound movement and a sharp fall in volatility is forecasted (Ascendance/Participation Phase, with clear indication of Ranging Market, Supply/Demand levels). 3. Breakout is forecasted, and there exists great momentum, high premia and implied volatility (Excess forecasted). 4. Personal trend bias (bullish long-term outlook on company, Value investing, Trend). It is the ultimate premium harvesting strategy... ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Short Iron Butterfly Spread: "Goal: To profit from neutral stock price action near the strike price of the short options (center strike) with limited risk. A short iron butterfly spread is the strategy of choice when the forecast is for stock price action near the center strike price of the spread, because it profits from time decay. However, unlike a short straddle, the potential risk of a short iron butterfly spread is limited. Explanation: Example of short iron butterfly spread: Buy 1 XYZ 95 Put at 1.20 (1.20) Sell 1 XYZ 100 Put at 3.20 3.20 Sell 1 XYZ 100 Call at 3.30 3.30 Buy 1 XYZ 105 Call at 1.40 (1.40) Net Credit = 3.90 A short iron butterfly spread is a four-part strategy consisting of a bull put spread and a bear call spread in which the short put and short call have the same strike price. All options have the same expiration date, and the three strike prices are equidistant. In the example above, one 95 Put is purchased, one 100 put is sold, one 100 Call is sold and one 105 Call is purchased. This strategy is established for a net credit, and both the potential profit and maximum risk are limited. The maximum profit is realized if the stock price is equal to the strike price of the short options (center strike) on the expiration date. The maximum risk is the difference between the lower and center strike prices less the net credit received. The maximum risk is realized if the stock price is above the highest strike price or below the lowest strike price at expiration. Maximum profit: The maximum profit potential is equal to the net credit received less commissions, and this profit is realized if the stock price is equal to the strike price of the short options (center strike) at expiration. In this outcome, all options expire worthless and the net credit is kept as income. Maximum risk: The maximum risk is equal to the difference between the lowest and middle strike prices less the net credit received. In the example above, the difference between the lowest and middle strike prices is 5.00, and the net credit received is 3.90, not including commissions. The maximum risk, therefore, is 1.10 less commissions." - Taken from Fidelity ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ SPECULATION: - Why will SP rally 30%+ early in the week? - SP has just transitioned out of 2nd accumulation level, entering ascendance/public participation phase. - Price target upgrades from previously bearish institutions suggest they want to markup the SP. - Previous price action suggests that it opens strong on hype and positive catalysts, before entering a range to trap retail bulls. - There are Fib levels at 33~ and 35~ that must be tested for confirmation. - There is a gap to fill at 32~ for further confirmation. - Frenzied buying will soon come to an end, as the SP stabilizes. It is currently trending as "The top interest for WSB". IV will rise at first. - Large stopping volume will occur at key OI levels as Excess is sold off and we enter the 2nd distribution level. IV will quickly fall. - There is 16,286 OI on 40 strike calls for 2/26, so I don't foresee this level being broken for long next week... Above it is a gamma ramp that will take the SP to clear skies... I'm not sure the MM will allow that. - The broader market is uncertain, and a lot can change over the weekend, but judging from the low GEX, and DIX that seems to be bouncing, the market does not seem ready for a correction, yet... - Bitcoin is a good indicator for risk asset spending nowadays... Watch for huge selloff before market open, decide if it is profit-taking, or corrective. FA: - Please see my Jan. 8 Idea which documents the Fundamental Analysis I have been doing on this company. - Simply put, this company is unrivalled, and a near-future mega-company. 0.5-1T Mcap, very, very soon. SP500 inclusion without a question. TA: - Have very powerful bullish reversal indicators as support, based on my Feb. 18 Forecast. - This should take the stock price to the 60-70 levels that I forecasted in Jan. 8. QA: - Basis of the strategy is the complete control of MM's on the SP... Only a gamma squeeze can break through the key OI levels, Cohen is notorious for his put/call walls strategy, and he most definitely has a hand in the MM action here... As of Q4, his Point72 owns about 2% of the company. Much greater now, I speculate. - Historical analysis has shown that it is almost impossible for PLTR to break through the large put/call walls, and quickly reverts to the mean if it ever does. - The SP will tend to settle around the OI "valleys" at options expiration (OpEx), and quite often, it is even at the exact value to 2 decimals. - PLTR key open interest levels for 3/5/2021: $35 calls: 14,464 $35 puts: 11,776 $45 calls: 11,311 $45 puts: 8,667 $50 calls: 14,898 $50 puts: 13,168 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ STRATEGY: - Deep ITM Bullish Short Iron Butterfly for 3/5/2021, then rollover to Deep ITM Bearish Short Iron Butterfly for 3/5/2021 for the expiration. - Goal is to capture the great premium of puts before the rally, then capture the premium of the calls + puts on the pullback, for expiry. - Wings will protect the trade from forecast failure and a massive gamma squeeze in either direction. - Why I am taking this trade, is because of the historical analysis I have done since Jan. 8, and I have gathered sufficient evidence of the manipulation on this SP, and I believe that I can predict the price action to a high degree of accuracy. I don't see why the MM's would suddenly stop the range-bound price action, unless a real gamma squeeze occurs... but the wings and core long positions protect against this. - Trigger 1: Stable broader market, positive catalyst, good sentiment, 32 gap fill, breaking out of 33 and 35 Fib levels for greater confirmation. - Butterfly 1: Strike - $49.00, Upper wing - $55.00, Lower wing - $43.00. - Trigger 2: SP reaches $49.00 on impulse wave. - Rollover: SP - $49.00, to Butterfly 2. - Butterfly 2: Strike - $41.00, Upper wing - $45.00, Lower wing - $37.00. - SL: $46.00 support level pin. - Expiration: 3/5/2021 - Timeframe: 14 days DEFENSE: - How to defend the position, if things go south? If the short call in a short iron butterfly is assigned, then 100 shares of stock are sold short and the long call and both puts remain open. If a short stock position is not wanted, it can be closed in one of two ways. First, 100 shares can be purchased in the marketplace. Second, the short 100-share position can be closed by exercising the long call. Remember, however, that exercising a long call will forfeit the time value of that call. Therefore, it is generally preferable to buy shares to close the short stock position and then sell the long call. This two-part action recovers the time value of the long call. One caveat is commissions. Buying shares to cover the short stock position and then selling the long call is only advantageous if the commissions are less than the time value of the long call. - This strategy has a heavy bullish bias, so the chances of being assigned on puts are much higher than on the calls... If the SP does reach beyond, this is good for my core long position. - The biggest risk in this trade that I foresee is the SP pinned at the $46 support level, which lies between the strike price and the upper wing, of butterfly 1. - However, high premia of deep ITM options mitigates this risk. - $46 Short Straddle would be a good defense to this scenario, (Sell call, sell put) since $46 is a high probability level for 3/5 expiry. ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ This strategy can be high risk, depending on the long-term outlook on this company... For me, I don't mind being assigned at these levels, and I have a core long position, so it is low risk. The strategy is based on forecasting the price action precisely, not only the levels, but the time frame. That said, this is most definitely not financial advice. I am describing my own strategy. If you like the idea, please support by giving a like, follow, and sub!
NYSE:PLTRLong
by UnknownUnicorn1043646
5
Trading Stocks vs Options: Which Is Better? I’m Markus Heitkoetter and I’ve been an active trader for over 20 years. I often see people who start trading and expect their accounts to explode, based on promises and hype they see in ads and e-mails. They start trading and realize it doesn’t work this way. The purpose of these articles is to show you the trading strategies and tools that I personally use to trade my own account so that you can grow your own account systematically. Real money…real trades. Stock Trading vs Options Trading Stock trading vs options trading, what should you trade? What is better? Is it better to trade stocks or is it better to trade options? That’s what we’re going to talk about today. I will also show you practical examples from trades that occurred today, so let me jump onto the desktop. Now, I want to use an account size of $20,000 as an example here where I’m comparing whether it is better to trade stocks versus options. Depending on your account size, just multiply the numbers that I’m showing you by whatever your account size is and you’ll get the idea. So the idea is, on a $20,000 account, we want to risk 2% of the account. This would be $400, nothing more. Comparing Stock Trading vs Option Trading Now, as we are comparing stocks and options, here are the things that I want to compare. First of all, I want to write down how much we are risking stock trading vs options trading. I also want to write down the reward, how much are we planning to make on the stock or the option. Based on this, I want to write down the risk/reward ratio, and also very, very important, the buying power. What is the buying power? The buying power is the amount of your account that you need to reserve for this trade. It is not the risk and you’ll see this in just a moment. Let’s take a look at some very specific trades that happened this morning. INSW Stock Trading vs Option Trading The first trade that I want to discuss is INSW . So this morning (at the time of this writing) on the PowerX Optimizer, INSW came up as a trade, as a buy to open. And the idea here is that we are buying 239 shares based on a $20,000 account at $22.84. Our stop loss was at $1.67 and I was trading 239 shares. I want to keep it a little bit easier for all of us with the math so let’s round up and call it 240 shares. What is our risk? Per one share, we are risking $1.67 and we are trading 240 shares, meaning that our risk is exactly $400.80. So here let’s just round it to $401. Now, what is the potential reward that we are looking for? Here we are looking for a reward of $8.62 per share. $8.62 times 240 shares, so we’re looking to make $2,069. So we’re putting this into our table, $2,069. So the risk/reward ratio here, PowerX Optimizer is calculating it, it’s 1:5.16 so let’s just say 1:5.2. Now for the buying power. Again, we are buying 240 shares, and the cost per one share is $22.84, so we need $5,482 in buying power. So this is how much our buying power will be reduced when we enter the trade. Now, let me ask you, is this making sense thus far? Just so that you know what happens when you’re trading the stock? And again, we are trying to risk around 2% of the account here, $401. Now, let’s take a look at the option here. So I prefer to trade the in the money, I’ll do another article on the difference between ITM and ATM. But here we are talking about the $22.50 call, and the risk was $172 per one option. So if we want to risk $400 overall, we’re dividing this by 172 and we can trade 2 options risking $344. We’re risking a little bit less and this is just based on the price of the option. In terms of the reward, we’re looking to make $6.80, it’s $680 per one option and we are trading 2 options, meaning that if this trade works out, we would make at least $1,360. Now, according to The PowerX Optimizer, we were making a little bit less. So let’s take a look at the risk/reward, the PowerX Optimizer calculated for us. So the risk/reward was slightly lower at 1:3.95. Now we’re rounding it up so it’s 1:4.0. So as you can see, the risk/reward ratio when trading the option is slightly worse but here’s the deal. What is the buying power that we need for this? The buying power that the broker will deduct from the overall buying power in the account is our entry price. So here we were trying to enter at $2.16, we can round it up to $2.20, and since we are trading 2 options this means that our buying power is $440. Can you already see what the difference is between stock trading vs options trading here? Your buying power is less than 10%. Now, keep in mind, the buying power is not what you’re risking. The buying power is just how much of your $20,000 is being held in reserve for this particular trade. So you can’t use this money anymore. If you trade the stock, you would still have around $14,500 left. However, if you’re trading the option, you would still have $19,500 left. Is this making sense thus far? TVTY Stock Trading vs Option Trading The other trade that I want to show you is TVTY . Here we wanted to trade 392 shares, so let’s just round it up to 400. Now let’s discuss the risk first. So the risk is $1.02 per one share. We’re taking $1.02 times 400 shares, meaning that we would risk $408, which is still within our parameters. We were planning to risk around $400 so here it would be a little bit more, it would be $408. Now, if this trade works out, here is what the reward would be. So the reward is $5.61, that’s how much we are trying to make on this trade. And if we take the $5.62 times 400 shares, we are trying to make $2,248. So the risk/reward, if we look at this, is 1:5.5. Now, here is the buying power that we would need. TVTY is trading at $11.30, so this is where again, $11.30 times 400 shares, we need $4,520 in buying power. Again, not a big deal if you’re trading a $20,000 account, it will be reduced and you’ll have less money to trade right now, around $15,500. Very, very, very important, this is not the risk. This here is the buying power that is needed. Our risk is $408. Our risk here per one option is $141. So if we want to risk $400 overall, we’re dividing it by $141, it’s 2.83. Now, in order to make it all a bit easier to compare apples with apples here, I am actually saying that we would trade 3 options, and $141 is what we are risking per one option, so $141 times 3. It’s a little bit more than our $400, but I think we are still OK here. So we would risk $423. Now the potential reward per one option is $444. So this is where we take $444 times 3, and again, this is where we are looking at $1,333. As you can see, the risk/reward ratio here is worse than if we would trade the stock. It is 1:3.15 so we are rounding it again to 1:3.2. Again, it would be better to trade the stock, but you’re using quite a lot of your buying power. For the option, all you need, all that is reduced, is your entry price, and the entry price it’s $2.47. So let’s say $2.50 times 3 is $750. As you can see you need less buying power, but you also have a smaller reward. But this is why I say usually on a smaller account, it makes sense to trade options instead of stocks. Now the other important thing, especially when you trade a retirement account, is that you don’t get a margin account. This means that you cannot leverage the money that you have in the account and you cannot short stocks. So in the US, in a retirement account, you cannot short stocks. However, what you can do in a retirement account is that you can trade put options, and with put options, you can bet on a falling market. So this brings me back to the question… What is better, stock trading vs options trading? Well, this is why I wanted to show you a direct comparison using a real-life example. This way you see exactly when it is more advantageous to trade stocks, and when it is more advantageous to trade options. Long story short, often for smaller accounts, since you use less buying power, it makes more sense to trade options. And now you have a direct comparison between stock trading vs options trading that will hopefully help you decide what is best for you.
TVC:NDQEducation
by rockwelltrading
JETS ETF Bullish inclined naked Puts - 19 Mar expiryAs the Primary trade, this is aligned to the larger market direction and is deemed less risky. I'm bullish inclined for JETS as it is considered one of the COVID19 recovery sectors. The strike is also at a resistance point of the range Overall the market seems to be bullish especially after the US inauguration. Sold 200 Puts @ 0. 36 Strike 21 BP block: 48k Max gain - est $7057.54 (Minus comms) Once my Feb JETS options expire, I will add on to this position
AMEX:JETSLong
by Ronin_trader
2
TOL Bearish inclined naked calls - 19 Feb expiryFebruary's Secondary Trade This trade is slightly riskier and is the opposite of the general market movement (bullish). Residential Construction as a category has done generally well through the pandemic, at this point most of the companies in this sector have a very similar chart movement (Downward range) which is great as it shows a level of predictability in price movement. Toll brothers is US's leading builder of luxury home. They have done well in the pandemic with their Q4 earnings breaking past estimates. For Q4 the company's home sales revenue was up 9% year over year with home building deliveries growing 10%. Despite the positive results price is currently ranging with no spikes. I'm positioning a neutral to bearish outlook as I expect the vaccination and the world getting used to the pandemic to see trading cash flow towards larger growth opportunities in COVID-19 impact sectors that are super beaten down and will see price climbing up Sold 40 CALLs @ 0.6, Strike 49 BP block: 17k Max gain est: $2374
NYSE:TOLShort
by Ronin_trader
SPX500-Bear Setup (Update)This is an updated trade plan based on my last published trade setup (SPX500-Bear Setup)-posted yesterday. Just reading price structure and making some adjustments on where I think this correction might end. 3870 is going to be descent support and would complete a measured abc move from the local top. This would give us the correction we need to proceed to 4k+....nothing has changed with my longterm view on sp. We are still in a very strong uptrend and have key fib extensions at 3960 & 4k+. Please let me know if you have any questions but for now im leaning towards taking most of my profit @387 may lets some ride just depends. Thanks, and Happy Trading!
FX:SPX500Short
by wstchse
5
The Poor Man’s Covered Call ExplainedWhat Is The Poor Man’s Covered Call? Questions we’ll answer in this discussion: - What is it? - Who is it for? - When to use it? The Poor Man’s Covered Call is a very specific type of spread. As you know, we’ve been covering option spreads for several Coffee With Markus Sessions. We’ve also covered the Covered Call’s strategy in-depth on our YouTube Channel. In this article, we’re discussing the difference between trading stocks, covered calls, and the Poor Man’s Covered Call. Trading Stocks Let’s take a look at trading stocks first. Let’s say that you’re bullish on a stock like Boeing BA . If you were bullish on this stock, you might purchase a decent amount of stock, let’s say 100 shares. At the time of the original writing of this article, this stock’s strike price was $180. If you purchased 100 shares of BA , at $180 dollars each, this would require $18,000 in purchasing power. If the stock increases by $10, to $190, you stand to earn $1,000 in net profit. So you’ve risked $18,000 to earn $1,000. If the stock price increases to $200, you’ll earn $2,000 and so on. This is pretty basic and you probably understand this concept. A profit picture is a sliding scale that moves to the right as the stock price increased. It is a visual representation of your profits. or losses depending on the movement of the stock. In this example, the price of the stock is increasing so the scale is moving to the right. Selling Covered Calls In this example, let’s say that you’re still bullish on BA . And in the short term, you expect an upward movement in price. Since you already own the 100 shares of BA stock, you can sell a $200 Call Option against these shares (again, this is based on the price of BA at the time of writing this article). If the stock price increases to $190 like you expect, you’ll earn an additional $450 on top of the $1,000 you’ve already earned. If we see a decrease in stock price, the covered call acts as a hedge. In this example, if we saw a downward movement to $170 you would lose $1,000. But because you sold a $200 Call option contract and received a premium of $450, your net loss would only be $550. Covered Calls VS Poor Man’s Covered Call Poor Man’s Covered Call When would you trade a Poor Man’s Covered Call? That’s easy! When you don’t have the $18,000 to buy 100 BA shares! And When do you trade a covered call? When you expect the stock to stay above the current price and move slightly higher. Instead of buying a stock, you would purchase a deep in the money call option at a later expiration. When looking for a call option deeper in the money, we’re trying to find one with a Delta of 0.95. his means for every dollar the stock moves, the call option is gaining .95 cents in value. Deep “In The Money” Calls For this example, We’re buying a deep ITM call at $71 which means the capital required to take this position is only $7,100. As you can see this is a fraction of the price to purchase the stock outright. At the same time, we will sell the $200 Call option. Similar to the covered call. But instead of owning the stock at a price of $18,000, we purchased the ITM call option and sold a $200 call option. if the underlying stock price moves from $180 to $190 you would make $1335 because the Delta is 0.95, which means it’s only increasing 95% of the value. The profit on this type of position isn’t as high as a covered call, but it’s much more than owning the stock outright, with much less risk and less capital. This sounds too good to be true right? The perfect strategy! BUT… there’s a downside associated with this strategy. Your profit is limited. If you see a huge movement in the underlying stock, you’ll only benefit from a portion of the total gains. In this example, if the underlying strike price gained $40, the stockholder would earn $4,000. The covered call would earn $2450, and the Poor Man’s Covered Call would earn $2,320. Many traders use this strategy because of the limited capital involved with taking on a position, and the limited risk associated with a potential downward movement of this stock.
NYSE:BAEducation
by rockwelltrading
2
AMD: Stock Market AnalysisHello everyone, long time no talk. I hope you all are doing well, I took an extremely long break from trading and decided to take some time to learn from all of my mistakes. Sadly, I went through a really rough streak in the past but we will see if I am capable of learning from my mistakes and if I am capable of being a profitable trader. Enough talk, lets get to business. I have many reasons as why AMD is a solid buy right now and where the price target is to sell. Please bear with me since I do have a thorough explanation. 1.) Structure: -Ascending triangle formation -Confirmed double bottom on the daily/weekly time frame -Clean break on resistance on daily/weekly chart. Each one of these reasons show why we are in a bullish position to buy, and now is the time to enter the trade. 2.) 20/50/100/200 EMAs: -100 day EMA shows as a strong region where many buyers enter in. -We are in a true up trend and Golden cross formed on 23 May 2018. I believe we are still on a bullish upward trend. 3.) RSI/Divergence Indicator: -Bullish Divergence did form on the four hour and is confirmed. -Still have plenty of room on the daily time frame before reaching the over bought region. -There also seems to be many buyers in the 40 region of the RSI in the past. (This paired up with the 100 EMA shows a strong bullish trend.) -When the 40 region showed a strong bounce up and a mixture of this stock touching the 100 EMA, there was a very strong break out for AMD. Could see another one forming again soon. 4.) Conclusion: -From a scale of 1-10, 1 meaning sell, 10 meaning buy, I give AMD a solid 9. -Quarterly earning was very strong but sell off occurred due to a possible over reaction of AMD losing market share to Intel. -Their quarterly earning showed an increase in revenue as well as they had destroyed their EPS. -From their last quarterly around this time they have increased their revenue by a whopping 58%. ~I am not a financial advisor, but BUY THIS STOCK. ~GL and wake me when we sell, Master Chef out.
NASDAQ:AMDLong
by MasterChef23
6
$SPY: All time highs everywhere and not a dip to spare...AMEX:SPY The market is already rampant with speculation but here's my two cents. I know the danger that exists and trying to call the top but at this point, it almost seems inevitable that the time is near for the S&P 500 to retrace. Many of what I would call legitimate bearish signals have been rejected repeatedly leading to higher price levels. This, though frustrating for technical traders, isn't unfathomable considering that the perceived risk in the market is extremely low unlimited QE coupled with low-interest rates and an increase in individual investors has led to the markets having a level of liquidity that supports this growth and current bullish sentiment. In fact, when examining the chart it does look like the S&P 500 actually does have some more room left to the outside but at this point that room is limited and it coincides with the psychological price resistance level of $400 ($392-$408 is what I predict to be the reversal point range). At that price, $SPY will be in the range of fib extension levels that commonly signal the completion of a cycle - and looking at the chart, it does appear that the S&P 500 is possibly completing the third impulse wave of a larger multi-year cycle. At the moment, there are several divergences on multiple time frames and much of the rise in price over the last week (five days of positive price movement ending with a 4.7% gain for the week) is contrasted by reducing volume with sell volume often higher the buy volume. CBOE:VIX has returned to a strong support level which could mean another pop in volatility around the corner which could trigger a sell-off driving SPY lower into April . That being said, lack of bearish catalyst and influx of individual investors into the markets could extend the rally well into the year before wave completion. I would suggest treading carefully here trimming position and building a hedge. Puts on $SPY do not have a track record for being profitable so I would recommend rather buying AMEX:UVXY as a hedge or if not deterred by the past performance of SPY puts, ITM puts with expiration dates at least 3 months out could sufficiently counterbalance any incoming market turbulence. Short-term calls may be on fire this week but with limited upside, as it is hard to imagine the S&P 500 can extend this run after a five-day streak without any significant pullback. (Believe it or not, this is actually the abbreviated version of my analysis but it is Sunday morning and I should probably be doing other things besides charting right now tl;dr SPY will likely overextend itself on the push to $400 before volatility returns. Margin Debt, 10yr Treasury Rate, Inflation, CBOE:VIX , S&P 500 PE Ratio all on watch. Sharp correction possible by April.
AMEX:SPYShort
by myceliium
2
Pattern Day Trader RuleI’m Markus Heitkoetter and I’ve been an active trader for over 20 years. I often see people who start trading and expect their accounts to explode, based on promises and hype they see in ads and e-mails. They start trading and realize it doesn’t work this way. The purpose of these articles is to show you the trading strategies and tools that I personally use to trade my own account so that you can grow your own account systematically. Real money…real trades. Now I want to talk to you about the pattern day trader rule because this rule requires that you have at least $25,000 in your trading account if you are day trading. Here’s the tricky part. The tricky part is that you could trigger this rule even if you’re only swing trading, and not day trading, which is why it’s important that you are aware of what the pattern day trader rule is. I will give you examples of what can trigger it, even if it’s accidentally, and I’ll break down what then happens if you trigger it. Most importantly, I want you to be aware of how you can avoid it. What Is The Pattern Day Trader Rule? So what is the pattern day trader rule? According to FINRA, who set the rule, a pattern day trader is a trader if you execute 4 or more day trades in 5 trading days. So if you execute 4 or more day trades in 5 trading days, then you’re being flagged as a pattern day trader. This is not a good thing. So what actually is a day trade? A day trade is a trade that you open and close, during a trading day. So as an example, if you buy a stock at the open, at 9:30 Eastern Time, and then sell it before 4:00 pm Eastern Time, you are placing a day trade. Now, very, very important: this whole rule only applies to stocks and options. It does not apply to futures, forex, or binary options. It only applies to stocks and options. How To Trigger The Pattern Day Trader Rule How can you actually trigger this rule even if you’re swing trading? Well, it actually happened to me very recently. My head coach, Mark Hodge, and I, we were trading with our Mastermind members. I asked Mark to place a trade in my account, but he accidentally placed it in the wrong account. When something like this happens, I have a rule. “When you make a mistake, liquidate.” So I asked Mark to close the position, and when he did that counted as a day trade. So we opened the trade, realized we made a mistake and closed it right away. This lead to me having one strike in this account. And again, if we would get 4 strikes within 5 business days, then we are flagged as pattern day traders. Now, here’s another scenario. Let’s say that we enter a trade tomorrow and it hits the profit target or stop loss on the same day. So this would be another strike because now we are also entering and exiting during a trading day. So as you can see with this, even if you’re not day trading, it is possible that this could happen a few times. If this happens 4 times within 5 trading days, then you’re flagged as a pattern day trader. What Happens When You Trigger The PDT Rule? What happens when you trigger this rule? Well, first of all, if you have more than $25,000 in your account, nothing happens. This is because the pattern day trader rule says, if you are a pattern day trader, then you need to have $25,000 in your account. Now if you don’t have $25,000 in your account, then you will be restricted to trade on a cash basis only for 90 days. What does this mean? Well, see, as a day trader, you actually do need a margin account, and when you trigger the pattern day trader rule and cannot put $25,000 in there, this means that now you are restricted to trading with cash only. So let me give you an example. Let’s say you are trading the Wheel trading strategy, and you put $20,000 in an account. This means if you put it into a margin account, that you get $40,000 in buying power. So when you trigger the day trading pattern rule, you no longer get this buying power here, the 2:1 leverage. You are now basically going back to whatever cash you put in there when you trigger this rule. How To Avoid Triggering The PDT Rule? Now the question is, how can you avoid this? Well, and I want to give you three tips for how to avoid it. Number one, have $25,000 in your account because if you have $25,000 in the account, then triggering the rule won’t matter. What about if you don’t. Number two, you want to make sure that you count the number of day trades. Leave the date you placed a day trade on a sticky note, and count the number of day trades that you do even if it is accidental, so you can keep track of how many strikes you have. Number three, you can avoid it here by trading a cash account. So if you’re not trading a margin account, you don’t have to worry about it. Then, of course, if you are trading futures, forex, bitcoins, so cryptocurrencies, or if you are trading binary options, this is also when the day trading pattern rule does not really matter. Summary Now you know what the pattern day trader rule is, how you can trigger it, even if it is accidentally, what happens when you trigger it, and how you can avoid this. So let me ask you this, at this point, was this helpful at all? If so, feel free to share this video on Facebook, on Twitter, and I’ll see you for the next article.
NASDAQ:NDXEducation
by rockwelltrading
1
Put Option Plan for $GMEI invested in $GME and Initially when I first heard it trended massively, My instant thought was to short the stock because of the obvious overvalue of the company. I went into the situation oblivious to what was actually the WSB's community moving in on the stock. After a lot of research I learned what was going on and gained a complete understanding of the situation at hand and decided to move in. I believe the stock will end its shine by the end of this week, with that thought I came up with my strategy to purchase 2 put option's. I've been day trading for about 4 to 5 months now, and what I have noticed some of the time in the market, is that; Say when the price of a stock is increasing rapidly, there's spots of selling pressure that occur in between Long Bullish sticks. The opening/ Closing price for these moments of selling pressure in a underlying Bullish trend, are points in price where the stock reacts differently around these resistance lines. I am planning on placing my puts strike price $37. The yellow lines represent the range I believe it will be traded in based on selling pressure points and movement around the resistance line off of the first initial Pump. Off Topic: My first time uploading a post here. Let me know what you think of it! Thanks for reading!
NYSE:GMEShort
by GreenDayTrade
1