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How To Turn $2k into $20kWe have a fantastic opportunity to end 2020 with a bang, and I am going to explain how you can turn $2k into $20k the final week of December. First I want to wish everyone a Merry Christmas and this post is my Christmas gift to you. We will either loose $2k together or make an $18k profit together. There is risk but in my opinion the reward is so significantly greater and likely. I am going through with it, and in the end it's your call. No pun intended. CSCO recently received a buy signal on the Bollinger Bands, and has growing bullish divergence on the MACD, and D+. With such strong divergence and CSCO being so close to breaking resistance, I believe we will see a break out and see the stock hit new highs. My strategy is to buy 100 contracts ( calls ) for CSCO to hit $45 a share by 12/31 The contracts are currently trading for 0.19 a contract and I can see the contract value hitting a high of $2.00 a contract I want to give all the credit to @avakstocks for finding this breakout opportunity after learning to use my technical analysis strategy. This is a big opportunity and I ask that if you decide to make this power play and win big, to donate a small fraction like $50 worth of coins to @avakstocks to help fund his pro membership. Comment your thoughts below, follow to see what happens, and make sure to like if you think this will happen!
NASDAQ:CSCOLong
by Myantman101
24
Call Ratio Spread DebitThe ratio call spread for debit is the same strategy as ratio call spread credit. But now, the upper and lower strike price are farther apart. This change, give different mathematical results as you can see on the chart. If you didn’t read the previous post, please do. In the chart we see a ratio spread of 2:1, in this case, the options that were sold are now worth less than the call that was bought. So this position is now with debit. Inputs: MA (Mastercard) Debit paid -> 3.8 (-$380 for one position) Stock price -> 338 Upper strike -> 350 , 2 calls sold Lower strike -> 330 , 1 call bought Days to expire -> 36 Implied Volatility -> 0.309 (30.9%) Date -> 12/11/2020 The Debit paid is $380, the maximum profit is $1620 with less than 1% probability, the maximum loss is theoretically unlimited. In this example, one call was bought at 330 strike price for 12.7 and two calls were sold at 350 strike price for 4.45 each, in total 8.9. The debit = 8.9-12.7 = (-3.8) If at expiration the stock price will be below the lower strike (330), all of the options will be worthless and the loss will be only (-$380). Maximum profit = Difference between strike – debit paid = 350-330 – 3.8 = 16.2 This position is neutral. At the expiration: Between 333.8 to 366.2 the position will be with a profit. $0 - $1620 Under 330.17 the position will lose (-$380) no matter what price. Above 369.80 the risk is getting bigger.
NYSE:MAEducation
by ZoharCho
1
Call Ratio Spread CreditA ratio call spread is a neutral strategy in which we buy several calls at a lower strike and sells more calls at a higher strike. In a ratio call spread with credit, there is no downside risk. The ratio spread that we see on the chart has a ratio of 2:1. We can see from the chart the non-linear behavior of options. Inputs: MA (Mastercard) Credit received -> 3.1 ($310 for one position) Stock price -> 332 Upper strike -> 340 , 2 calls sold Lower strike -> 330 , 1 call bought Days to expire -> 37 Implied Volatility -> 0.291 (29.1%) Date -> 11/11/2020 The credit received is $310, the maximum profit is $1310 with less than 1% probability, the maximum loss is theoretically unlimited. In this example, one call was bought at 330 strike price for 14.2 and two calls were sold at 340 strike price for 8.65 each, in total 17.3. The credit = 17.3-14.2 = 3.1 If at expiration the stock price will be below the lower strike (330), all of the options will be worthless and all the credit will be received. The maximum profit at expiration for a ratio spread occurs if the stock is exactly at the striking price of the sold options. The reason is that the call that was bought has some profit (stock price above strike price) and the sold options are worthless. Maximum profit = The spread (340-330=10) + Credit received (17.3) – Debit paid (14.2) = 13.1 => $1310 (mulitpling by 100 shers per option contract) The risk in this position is to the upside. The calculation for the break-even at expiration. Break-even point = Upper strike price + the points of max profit = 340+13.1=353.1 This strategy has a high probability in general and even more so when used correctly. The example that has been used could profit the most in the blue zone, where the profit is greater than 50% of the maximum profit, but it will take 34 days out of 37 to reach there. How implied volatility affect this position? In a ratio spread, there are more options sold than bought, in the previous posts we saw that volatility increase is harming sold options and benefits bought options, this example is no different. 10% increase in implied volatility, the lines are now in a worse location compare to the original position. 10% decrease in implied volatility, the lines are now in a better location compare to the original position. The position can now reach the 50% max profit zone in 30 days. The next post will be on ratio spread debit, that looks different from the ratio spread credit, the solution to the partial differential equations of the Black-Scholes model can be seen.
NYSE:MAEducation
by ZoharCho
1
Call Bull spread vs Call Bear spreadA lot of traders don’t understand why when they entering a spread they don’t receive most of the money even if the stock price is going their way immediately, in this post we will see why. A spread is a position in which we buy one option and sell another option on the same stock. All the options are Calls, with put spreads all the options are puts. There are three types of spreads (when you buy one option and sell another, unlike ratio spread). Vertical, horizontal, and diagonal. What you see on the charts are Vertical spreads. Vertical – The calls have the same expiration dates but different strike prices. From the chart: Bull spread (Left chart)->Call upper strike (sold)-> 85, Call lower strike (Bought) -> 80, the expiration date is the same on the 18 of December 2020. Horizontal – The calls have the same striking price but different expiration dates, for example, both sold and bought calls have the same strike price of 80, but the one that is being sold ends on the 18 of December 2020, and the one that bought on the 15 on January 2021. Diagonal – a mix of vertical and diagonal, not the same strike and not the same expiration date. I will only show here the Vertical spreads. In the call bull spread, the position will profit if the price will be above the upper strike price (85) at expiration, and will lose if the position will be under the lower strike price (80). The options will not be worthless so to avoid commissions the position will be closed before expiration. We can also see from the chart that in order to close the spread early, the stock will need to do relatively big moves. A call bull spread is a debit spread. In the call bear spread (right chart), the position will profit if the price will be under the lower strike price (80) at expiration, and will lose if the position will be above the upper strike price (85). Under 80, all the options are worthless at expiration and all the credit will be received . The amount by dollars, not percent that the stock needs to move to close this position early in the bear spread is lesser than the bull spread, but on the other hand, the directions are different and we should not take a position based only on this criteria. If the implied volatility will decrease all the lines will move to the center. If the implied volatility will increase the lines will move from the center. In the next post, I will show the ratio spread.
NASDAQ:MRNAEducation
by ZoharCho
1
Green Tuesday I predict Apple to hit a minimum of $132 a share Tuesday 12/22. With fundamental sentiment put aside, I would like to focus on the technical aspect. First of all, the green shadow between the most current candles are bullish divergence and it can also be seen on the MACD. The MACD has hit a low and is trending upward now, and the small green bar on the graph indicates growing bullish divergence. RSI is also returning to 70 where Apple usually sits. Bollinger Bands also give a buy signal. Comment your thoughts below, how high do you think Apple will rise before it corrects? I am up 75% on my options call 12 contracts for a strike price of $130 by 12/31. Average cost 1.20 per contract.
NASDAQ:AAPLLong
by Myantman101
11
Apollo Hospitals @2110 - Target 2400 and stop loss of Rs. 22Apollo Hospitals has approached it's multi year trend line negating covid turbulence from April to July. Historically, for Apollo Hospitals RSI has been a critical indicator suggesting whether to expect the trend line to be a Support or resistance. After the quarterly result blues are over, RSI indicates that stock is ready to approach and cross the multi year trend line if it holds above 2110 on closing basis. Very small stop loss can fetch 300 Rs upside in quick time. Good candidate for call buying also given recent down trend call pricing would be cheap.
NSE:APOLLOHOSPLong
by Pattern_Study
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