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Coinbase IPO: Buy the Rumor Sell the News?Despite how bullish this crypto run has been; One can't help to question the possibility of the Coinbase IPO release marking an intermittent top. Looking back at the 2017 bull run, the CME Future release marked the top of the of the crypto market for some time; Post-futures release was then followed by several painful years of consolidation. It wasn't until 2020 that $BTC was finally able to re-claim its ATH crown. Though I do not expect a multi-year bear market after the IPO, I do expect some serious volatility. Another Buy the Rumor Sell the News? There is a tremendous amount of hype/evaluations around the Coinbase IPO which draws some concern. To support this, we are roughly 6.5 hours away from the $COIN release and we have a beautiful ABCD setup that just completed itself at $65,000. I have been trading the CD leg of this for the last several days and was personally hoping for this to hit 65k right around release. This early strike increases the probability of a blowing past resistance, but regardless the pattern is worth mentioning. The ABCD: ABCD Patterns are the simplest out of all the harmonics to trade. If if the BC retracement of the AB leg lands on the 0.618 we would likely find resistance at the 1.272 of the BC extension. If resistance is found and the pattern completes itself, Target 1 would be the extended trendline of AC leg while the second target would be point C. By placing a stop just over the .1414 would we have over a 1:4 trade to TP1 alone for over a 10% gain. If this would push down to TP2 we would be at around a 20% gain. All while 2-3% loss with fees. I do my best not to counter-trade; but this ratio seems too good to pass up. I hope you all found this idea interesting and maybe even a little helpful. Cheers
BITMEX:BTCUSD.P
by oh92
3
Average Up as a Trading StrategyThe average up strategy provides Huge wins, Small losses and Risk minimized. Use RANGE-CHART for this, so you could see the Buy setups more easily with less noise or time distortion. First You look for a buy setup, one that you believe that price should move rapidly from your starting buy point (you expect ab big relative move). Second You add up position. Every trader should use his own risk management based on his account size and what he is comfortable with, BUT... The position units you add have to be in the SAME SIZE! If they are not in the same size, the break-even point will not move up as I showed in the chart. Side note: experience traders can play with the portions of the positions, so they can manipulate the break-even point as they wish... In the first case on the chart (the idea was wrong), the position stopped out with 3 units of loss. In the second case on the chart (the idea was right), the price from a certain point moved away from the break-even point, which means that you were GREEN the whole time in the trade (when you had a relatively big position). You had "AIR" to hold this huge position. Many great traders used the average-up strategy: Jesse Livermore, Richard Wyckoff, Nicolas Darvas. If you are right, you are right in the biggest position possible => you have a huge win of 45 UNITS. if you are wrong, you are wrong in the small position => you have a small loss of 3 UNITS. --------------------------------------------------------------------------------------------------------------------------- Bottom-line profit => 42 UNITS of profit $$$$ If you like this educational, let me know in the comments, and like it, so it will be saved on your liked ideas.
NASDAQ:NVDAEducation
by ZoharCho
7
Why Options Are DangerousIn today’s article, I want to answer a few questions about why options can be dangerous. What are the risks of trading options? Are puts or calls riskier? Why is option selling risky? We’ll also talk about the safest options trading strategy. So let’s get started and let’s jump right in. Buying Calls & Puts First of all, you need to understand that there are different types of options. There are call options and put options. So calls versus puts, which one is riskier? Some people think that trading puts are riskier, while some people might think that trading calls are riskier, but this is not the case at all. The key question is that you should ask yourself is, are you BUYING options or are you SELLING options? There’s a huge difference between buying and selling, as well as different levels of risk involved between the two. So when you’re buying options, the maximum amount you can lose is the premium you paid. So let talk about a very specific example. Let’s look at a trade I took with TSLA and let’s say that we want to trade a call. So let’s maybe say a 700 call and right now the price is $700. What is the maximum that you can lose? Let’s say that we are bullish on Tesla and we believe that Tesla might go above $750, and we want to buy a call with a strike price of 750. So a 750 strike call expiring next week costs around $1.70 (at the time of writing this article on March 19th, 2021). Now options come in 100 packs, so this means that you’re paying $170 for this option. So in this case, if TSLA does not go above 170 by next Friday, you would lose the $170. So this is very easy, the maximum amount that you can lose is the premium that you paid. On the other hand, you are bearish on Tesla. You believe that it might actually go down to $560 so you’re thinking about a put option with a strike price of 560 that expires next week. A put with a 560 strike price expiring next week is $4.50 so a little bit more, pricier here. Again, since options come in 100 packs, this means that your total risk here is $450 per option traded. It’s the same risk here because it doesn’t really matter whether you’re buying calls or you’re buying puts. The maximum amount that you can lose is the premium. Now, on the other hand, there are SELLING options, and when you’re selling options, this is when your risk is almost unlimited. When you’re buying options, and let’s just say you want to buy a call, this means that you want the stock to go up. So going back to our TSLA example, if we would buy a call 750, that it is expiring next week for $170, if Tesla goes above 750, we make money. If Tesla goes below 750 or stays at 750, we lose the premium or $170. So not really a big deal. Now, how much money could we make on this one? Well, if we buy a call for 750, we have the right to buy 100 shares of Tesla for $750. So let’s say that Tesla closes at $800. So in this case, our profit is $800, minus the $750 that we bought Tesla for, which is $50 per share. Since options come in 100 packs, this means that we would make $5,000 in profits. This is why people love trading options. Because if you think about it, we’re risking $170 and can potentially make $5,000 if Tesla would go up to $800. Now, let’s quickly do an example here for buying a put. So buying a put and in this case, you want the stock to go down. Using our example for TSLA again, we will buy a put with the strike price of 560 for $4.50. So our total risk here is $450. So now if Tesla goes below $560, the strike price here, we make money. Now, if Tesla stays above 560, we lose the premium. But that is the maximum that we can lose. So even if Tesla rallies right now to 800, we would only lose $450. So that is pretty cool, right? Let’s say Tesla goes to $500. So we were able to sell the shares for $560, now we can buy it back for 500. So this would be $60 per share. Since one option equals 100 shares, it means that we would make $6,000 in profits. So as you can see, with options, you can benefit from a stock going up, as well as a stock going down, and the really cool thing is that you can risk a little to make a whole lot. Now, here’s the challenge with this. If you buy a call, you only make money if TSLA is really going above $750. So if it stays below, that’s not enough for the buyer of an option to make money. If Tesla goes sideways well, same here, right? Then you not only won’t benefit from it, but you also lose the premium. If Tesla goes down, you also lose the premium. So if you think about it, there are actually three ways how you can lose money and only one way how you can make money, and this is if Tesla really shoots up. This is why many people, including myself, are interested in SELLING options. Selling Calls & Puts What are the pros of selling options? The first pro is that you don’t need to be right about the direction of a stock to make money. Here is an example I’m in right now (at the time of this writing on March 19th, 2021) with LL Lumber Liquidators. So right here, Lumber Liquidators, I actually sold a put with a strike price of 22. When does the buyer of a put make money? Well, the buyer of a put makes money if it goes below $22. For me, the seller of a put, I make money if Lumber Liquidators goes up, it goes sideways, or it goes down. It can go down all the way to 22. This is a drop of a little over 10%. So if you think about it, if LL can go down by 10% and I am still making money and this is why again, this is why selling options is so fascinating. So you don’t need to be right about the direction and you can keep the premium. So here’s the deal, the premium that you receive is exactly what the buyer is giving you. So the premium is rather small, right? So the cons are the premium is rather small, and this is where your risk is almost unlimited. So back to our example here with Lumber Liquidators. I sold a 45 of the 22 puts, and I received $0.20 per share, so $20 per put option. $20 multiplied by the 45 options means that I’m making $900. So this is the premium that I receive. However, here’s the deal. The buyer of a put has the right to sell 100 shares at the strike price. So what does it mean for me? So the seller, which is me, has to buy LL at $22, and again, this is where one option means 100 shares. So for me here, since I’m having 45 options, this means that I would have to buy 4,500 shares. Because this is where we get to the risks of this strategy here. Now, again, Lumber Liquidators can drop more than 10% and I will be just fine. But what happens if it drops below, let’s say to $20 from $22. OK? So I would have to buy Lumber Liquidators at $22, and therefore I would lose $2 per share. Here, in this case, I have 4,500 shares times $2, this means that I would lose $9,000. Now you get the idea of why selling options is fairly risky, because I’m receiving $900, but if it only goes down by $2, I’m already losing $9,000. But what if it gets worse? What if LL drops to, let’s say, $15, right? Again, I have to buy LL at 22, so I would lose $22 minus $15, $7 per share. Since I have 4,500 shares, time $7, this is where I would lose $31,500. OK. So as you can see, it is super risky if you don’t know what you’re doing. Now, I have been doing this for a long time here, selling premium, and I’ve been doing really, really well. Analyzing Risk With RIDE Let talk about a particular trade that I made with RIDE . I sold the 21.50 put and RIDE dropped. I sold 47 contracts, 47 contracts, which means that I own 4,700 shares at a price of 21.50. RIDE right now (March 19th, 2021) is trading at $13.50. So right now, RIDE is at 13.50. So this means that I lose (21.50, minus 13.50) $8. So I’m losing $8 per share and I’m having 4,700 shares, bringing me down to a total of $37,600. Now, let’s talk about it. How much money did I make selling premium on RIDE? Just on RIDE here. I sold the puts initially, then I sold calls, I sold calls, and I just sold a few more puts. In total on RIDE, thus far, I collected $4,935 in premium, but I also have an unrealized loss of $37,600. So it’s super important that you understand that there is risk involved. Now I know my way out of this. I know how I can trade my way out of this if needed. So I collected $4,900, but right now I’m down that amount. However, this means that my net loss is if I would close it right now, which I’m not intending to do, would be $37,000 minus the $4,935, let’s just say $5,000 to make the math easy, is $32,600. That would be a real loss. This is why it’s super important that you understand the risks when you’re trading options. Safest Options Trading Strategy Now, one of the questions that I receive all the time is, “what is the safest options trading strategy?” The safest options trading strategy is covered calls, and here’s why. When you are trading covered calls, it means you own the stock, and now you are selling calls against it. So what does it mean when you are selling calls? When you are selling calls, it means you have to sell the stock at a certain price. Back to my example with RIDE I own 4,700 shares, and I own those at $21.50. So this is where if I sell calls at 22.50, so this means that I have to sell RIDE shares at $22.50. So how much money do I make? So I bought at $21.50, and I sell at $22.50, so this means that I’m making a dollar profit, $1 profit per share. And since I have 4,700 shares I would make $4,700 plus the premium I receive for selling the call. OK. So this is in addition, and therefore, covered calls are by far the safest options trading strategy. The only way how you can lose with this strategy is when the stock goes down. This is where you already own the stock, and therefore, if you want to sell calls against it, it is the safest option trading strategy, at least based on my experience and my opinion.
REducation
by rockwelltrading
1