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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
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
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
Backtesting retest Break of Market Structure on Multi TimeframeStrategy Create a zone from the order block which created break of market structure on 1D timeframe Wait for it to be tested on 4H timezone => which will create new 4H order block Trade the retest of that 4H order block Color coding & icon use Green boxes : 1D order block zone Yellow boxes : 4H order block zone Tick icon : Trade won on 4H Cross icon : Trade lost on 4H Circle with cross icon : Trade in breakeven Win / loss assumptions Win : 3R movement without breaking -1R Loss : -1R movement Breakeven : 1R movement, followed by -1R movement Risk Management 50% TP @ 1R 25% TP @ 2R 25% TP / Trade closure @ 3R RR achieved = 3R Net R achieved = 1.75R Strategy results Testing duration : Jan 2020 - Jan 2021 Wins = 16 Loss = 7 Breakeven = 4 Non-losers = 74% Absolute Winners = 59% Net RR = 21 Avg R/Win = 1.31R Avg R/Trade = 0.78R
Education
by makuchaku
8
Covered Calls For BeginnersI’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. Covered Call For Beginners For good reason, the covered call strategy is one of the first option strategies that new traders start trading. This is an effective strategy that options traders often use to provide income on stocks they already own. Questions to be considered in this article: - What Is A Covered Call? - Should You Trade It? - Specific Example Can You Do It In A Retirement Account, EG, IRA? What Is A Covered Call? A covered call is an options strategy used traders to produce income on stocks on long stocks held in their portfolio. This strategy is used by traders who believe that stock prices are unlikely to rise in the short term. A covered call strategy is defined as holding a long position in stock while simultaneously selling a call option on that same asset. This strategy can provide income to a trader who is long term bullish on stocks but doesn’t believe there will be a significant increase in price immediately. A covered call will limit a trader’s potential upside profit if there is a significant move in the price of the stock upwards. This strategy provides little to no protection if the asset price moves downwards. Covered Call Example For the specific example that we’re going to cover today, we’ll take a look at JP Morgan JPM . The price information reflects the price of JPM back in July at the original time of writing for this guide but is just being used as an example If you were holding JPM stock in your portfolio before the pandemic, chances are that you are currently underwater. DISCLAIMER ***For the purpose of full transparency, I do not own or hold any JPM stocks*** I typically only hold stocks between 5 and 25 days. Stock Price Movement Recap For this example, we’re going to assume that I own 100 shares of JPM . If I were to purchase 100 shares for $96 it would mean that the capital requirement for this position is $9600. You’re probably familiar with the way profits move in relation to stock prices… but just to be safe: - If the stock increased to $106, or $10, I would earn $1000. - If the stock increased to $116, or $20, I would earn $2000. - If the stock decreased to $86, or -$10, I would lose $-1000. How Does A Covered Call Work? Sell one call option contract for every 100 shares of the underlying stock in your portfolio. The contract selected would ideally have a short expiration date of 7 days. You would choose an “out of the money” call at a higher strike than the current price of the stock. When choosing this strike price, you would typically choose a price at least one standard deviation away from the current strike price. In other words, choosing a strike price that you do not believe the current strike price will exceed before the date of expiration. If you’d like to learn more about this options strategy, or options in general, I have an awesome Options 101 Course. What’s the benefit of having a Covered Call for the stocks in my portfolio? It’s simple really. When you sell a call option contract, you will receive a premium. This strategy generates income when you don’t expect to profit from the movement of the underlying stock price. In this example with JPM , I received a premium of $55 for selling a call option contract at the price of $116. Provided that the underlying strike price does not move above $116, the contract will expire worthlessly and I will keep the premium I collected by selling the options contract. Let’s take a look at how a covered call will affect your portfolio with the same stock movements. - If the stock increased to $106, or moves $10, I would earn $1000 plus the $55 - If the stock increased to $116, or moves $20, I would earn $2000 plus the 55 - If the stock decreased to $86, or moves -$10, I would lose $-1000 but keep the $55 for a total loss of -$945 Why does this work? If you take the entire amount of premium you received and divide it by the number of days between no and contract expiration, you come up with a number like this: $55 dollars in 7 = $8(ish) per day. This covered call contract is paying us $8 dollars per day. If you take the $8 dollars, divide that by your total capital investment of $9,600 it equals 0.08%. This may not sound too incredible, but… If we do some basic arithmetic and take 0.08% and multiply that by 360 trading days per year, you end up with a return of over 30%. This is in addition to what you earned from the growth of the stock. On some stocks, it’s possible to earn upwards of $20 per day. This could increase annual returns in excess of 40% to 50% Does this sound a little more exciting? YES! Should you trade it? ABSOLUTELY! BUT…. There is a risk associated with this strategy. If there is a large movement of the underlying stock price that surpasses the strike price of your call option contract, you will be forced to sell your shares at this price. This would limit your upside potential to the difference between the current stock price and the price of the call option contract. Example: If the price of the stock went up to $117 (past the $116 call option) and the options contract expires, your stocks will be sold $117. This means you would earn $1,100 + $55, or $1,155. In other words, you would lose $100 for every $1 the strike priced moved above your call option contract. The silver lining is that you can probably buy your stock back the next day if you wanted to hold them long term. This type of trade can be taken inside of your retirement account such as an IRA, which provides you with another way to grow your account conservatively.
NYSE:JPMEducation
by rockwelltrading
The Biggest Mistake I Faced In TradingLet's imagine you decided to become a trader. You are very motivated guy, study technical and fundamental analysis every day. Three months later you have learned a lot of information, know all about indicators and chart patterns. Using these knowledges you developed your personal trading strategy, backtested it and decided that it's profit and accuracy are appropriate for you. It is time to make money using this strategy. The strategy triggered to the current price action and you executed, for example, the long position, but.... the price started to move down and you see that your deposit is decreasing. You say: "Okay, it is normal situation", but subconsciously afraid of the potential loss. You are monitoring the price action and waiting for the price reverse in the appropriate direction, but the price continue fall down. You decided to close the position before it is too late. You did it. And the next moment the price started to go up. Later you found that your position could be closed in profit, but because of your fear you lost money. The fear is the worst enemy of the trader. Even if you have the best trading strategy you will lose your money due to your fear. It is not easy to do but just imagine that your trading sessions is just a game and there will no bad effects for you despite your trading decisions. You should believe in your skills and destroy the fear to make money. This is the biggest problem i faced in trading! DISCLAMER: Information is provided only for educational purposes. Do your own study before taking any actions or decisions.
BITSTAMP:BTCUSDEducation
by Skyrexio
6
Short Selling Put OptionsI’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. Short Selling Put Options When short selling put options, a question people ask me is, “Okay, Markus, how do you decide what strike price do you want to sell and whether there’s enough premium in there?” I made a put options calculator called “The Wheel Calculator” that I gave away as part of my recent class on selling put options (Theta Kings) that helps me determine just that. This calculator is now also integrated within The PowerX Optimizer Software as well. Using my put options calculator, I can enter a few different figures and it quickly lets me know if this stock makes sense to sell put options on. I started a small account with $25,380, and have continued to grow it substantially. This was all done by selling put premium using my handy put options calculator! So let’s take a look at a few examples using the airlines. Here’s how you can quickly compare if an option makes sense to sell. So United Airlines UAL , at the time of this is trading at $31.08/share. So I’m going to take a look at the April 24th expiration and the $20 strike price. I’m thinking maybe it would be a good idea to sell the $20 United Airlines UAL put option. So now that I have the strike selected that I would like to sell put options on, let’s take a look at the premium these options have. This will let us know if this trade actually makes sense. Right now, the Bid/Ask is $0.74 over $0.87. So I probably can get $0.80 for selling this option. This is all I need to enter in my spreadsheet, along with the expiration. With the needed inputs entered into my handy dandy put options calculator it tells me, “United Airlines can drop 36% and you’ll still be okay.” It has to drop 36% before we get in trouble. I think that’s pretty good odds in my opinion. The cool thing is that it also says that based on my account size, I should buy 17 options, and I would collect $1,320 in premium. So this means that per day I would get $110 in premium. That’s not bad at all if I can make $100 on just one position. And I like to have 4 to 5 positions in my account at any given time. So based on the number of positions I like to have, this means that you can make $400 to $500 per day collecting premium. I like this a lot because it means annualized I would make 87%! 87% is nothing to sneeze at, right? Short Selling Put Options — American Airlines So now let’s do this same thing with another airline, American Airlines AAL , and see how the numbers look. So like we did with UAL , I’m looking at what strike price in relation to where AAL is trading would it make sense to sell. For American Airlines AAL it looks like probably the $8 strike price would make sense right here. You always want to do it below the previously established low. So let’s take a look at American Airlines AAL . The price right now is $12.26. the options strike price, we said we’d probably have to look at is $8. Here we’re able to collect $0.35 per contract at the $8 strike price. And you see, I could actually, since American Airlines is so cheap, buy 41 options based on my account size. So 41 options and I would collect $1,444 in premium. This means I would get $120. That’s not bad at all. And you see, American Airlines AAL also can drop 35% and we would still be OK. We only get in trouble if American Airlines over the next 15 days drops more than 35%. Possible? Yes. This is why you should always be willing to own the stock. And this is why you want to make sure that you’re not getting in trouble. You need to adjust your position size based on your account. Here obviously, I don’t want to trade two airlines because if airlines are crashing, they probably all do. With that said, let’s take a look at Boeing AAL . Boeing Example I like trading Boeing. I'm looking at a Boeing AAL chart to see where might be a good level here to sell Boeing. Based on where AAL is trading at right now, it looks like $100 would be a good level to take a look at. Let’s first try a strike price of $100, shall we? For $100 we get probably a $1.55 right here, with Boeing AAL trading right now at $150. So if we were to sell the $100 put option on AAL , we are looking to make $1.55/contract. And you see, this means that Boeing AAL could drop 33%, so we’re good here. However, we can only buy three options. Why? Because Boeing AAL is really expensive. So if we would have to buy Boeing at $100, this is when it gets expensive, right? So you see, the strike prices here are much, much, much lower. This is where you see I would only trade three not to overextend myself. And that’s very important when you’re selling puts. You want to make sure that you’re not overextending yourself because otherwise, you’ll get margin calls. Margin calls are ugly. A margin call means that your broker tells you, “I want more money.” You want to avoid that at all costs! Because if you don’t have the money, you would have to sell the stock at a price that you don’t want. Usually, this is how you can wipe out an account. Anyhow, you see this is how we would only make $43 a day. Let me ask you, what would you rather make? $110 to $120 per day? Or $43 per day? I don’t know about you, but for me, these are better. So it’s very easy to quickly compare which options you should be trading when you’re selling puts. One of my favorite trading strategies right now is selling puts. This is what you have seen in the past few examples. My goal is to make $400 to $500 per day by doing so. The best days to sell puts is on a down day. On a down day, the VIX is usually shooting up and options premiums are higher. This is exactly what you’re looking for as a premium seller. For experienced options traders, selling put option premium in an environment like this can be a great way to consistently generate income, even if the stock doesn’t do exactly what you want. I hope this helps!
NASDAQ:UALEducation
by rockwelltrading
1
The importance of having a plan and sticking to it!Hello traders Before I log off for the day (I'm in UK and heading to bed!) I wanted to share an idea on having a trading plan with an 'EDGE' but also having the trading psychology to stick with a trading plan. I'm lucky enough along with our fellow traders to run a script that has given us an 'EDGE' in the markets. This has enabled us to trade freely without emotional constraints. I simply place trades that appear on my charts then let them play out. I do this with no anxiety, no worry and no constant checking of the charts or my trading account. Here we have a short trade on EURAUD working the one hour time frame. This trade present last Thursday the 7th and I simply entered. I was then alerted by TradingView when the trade hit take profit on Tuesday the 12th. I've only just checked the charts now on how the trade played out candle by candle. As you will you see from the chart the trade played out with a good drop towards the take profit target before retracing back to near entry. After another little drop and another retrace to near entry the trade then headed down to take profit target. All of this happened with out me knowing! In my opinion this how trading should be! On this pair I have the script I use set to a take profit target of 1:3.4 and I always use a stop loss because realist among us will know not every trade lands. The script presents all the trade information on the chart when the algorithm sees everything is met accordingly to my settings. I simply take the trade and get on with the rest of my day. I'm able to do this as I know trading the pair in question by the manner describe above is profitable. How do I know this? The built in strategy tester tells me. At the bottom of this screen is the data from the strategy tester for the last 39 trades. This data is from two full years of trade data on the pair in question. Feel free to press the sub menus which show the performance overview and the list of the 39 trades. All data is based on 2% risk and a £1000 starting capital. No one can predict the future but this level of back test data gives me the confidence to go and trade in this manner. All of what I have described above is what has given not just me but all our traders an 'EDGE' in the markets. With that edge has come the ability to control emotions accordingly. Sticking to a structured plan is now easy and we trade emotionless with no fears or anxiety. I have left descriptions on the chart showing not only the entry and exit points of the trade but also a pointer where the old me would have been feeling regret, anger, anxiety and all the other bad feelings that can come with trading. Those feelings all used to come as a result of not having an 'EDGE' in the market to the level that I have now with using this script. For any more questions on the script in use feel free to ask any questions.
Education
by RichScott
1
How To Start A Successful Trading BusinessWhen you start trading, you need to go into it like you would if you were getting ready to start a business. Too often, I see new ‘traders’ who open their account and before ever mapping out any goals, a strategy, a trading plan, or anything, they’re already putting money into the markets… …and for me, this isn’t trading, this is gambling. So in this article, I’m going to walk you through how you can start your own successful trading business. So let’s dive in! Starting A Trading Business: Step 1 – Charting Software First, as a technical trader (like me) you MUST have good charting software. Charting software is your window into the world of stocks. As a technical trader, we rely on charts and indicators to find high-probability setups. Charting software with good indicators is an essential first step in your path to being a successful trader. I personally use (and highly recommend) TradingView. It is a paid service and for what I do, I use the Pro Version which currently costs $14.95 per month but it is well worth it. Remember, starting your own successful trading business requires a modest investment into the ‘infrastructure’ of your business. Step 2 – Finding The Right Broker Now on to step 2, finding the right broker for you! Finding the right broker can be a tricky process, especially if you live outside of the United States. If you’re trading stocks and options, I highly recommend tastyworks, or Interactive Brokers if you live outside the U.S. Starting A Trading Business: Step 3 – Trading Strategy Next, now that you have your charting software and broker, every trader needs a good trading strategy. Similar to the broker, one size does not fit all. Why? Well, there are a LOT of variables that can go into developing your trading strategy. For example, are you trading for Income or Growth or the amount you have to trade with? All of these things play a big factor in the type of strategy you want to, can, or should trade. Right now, I’m trading two strategies. My core strategies right now are, The PowerX Strategy and The Wheel. Step 4 – Trading Computer The next thing to consider when getting your trading business set up is you will need a computer. Almost all brokers and trading software are cloud-based, so you don’t need a seriously advanced computer anymore. Most computers that are less than 3 years old should be more than powerful enough to run even the most system-intensive trading platform. Step 5 – Additional Monitors. Now, for your home set up, I think at least one additional monitor is a must. The good news is that if you have a laptop, you already have one monitor! If you travel a lot (like me) I would highly recommend the ASUS MB169B+ 15.6″ Full HD 1920×1080 IPS USB Portable Monitor. They’re lightweight and work great on the road or at home. It fits easily in my backpack (because I HATE checking bags) and doesn’t add much weight. Step 6 – Trading Newsletters Next, over my morning coffee, I like to read a few different trading newsletters. I have three primary newsletters right now where I get most of my market-related news. Most of the talking heads on TV are absolutely terrible for getting non-biased information anymore. No matter what station, everything you hear is coming through some sort of filter. For this reason, I stick with these three newsletters that I’ve found to provide good info: - Morning Brew - Seeking Alpha’s Wall Street Breakfast - The Rockwell Trading Newsletter Summary Now that you have all of the pieces in place to start your trading business off on the right foot, in my next article I’m going to go through something that at first, I’m sure you will cringe: Trading Taxes. But I assure you if you’re proactive and take the time to get set up and structured properly, taxes aren’t actually as bad as you’d think for full-time traders. I hope this has helped and you’ve enjoyed it. Good trading!
DJ:DJIEducation
by rockwelltrading
Strategy on how to trade Lockheed MartinHey guys! Hope this analysis finds you having an incredible week, and ready for an even better weekend! Please kindly like this chart if you found this content helpful! Ok let's dive in! Lockheed Martin is still officially in a bear market. It is still 30% away from its all time high, with the technicals on the weekly indicating very tough days ahead for LMT holders. Tale of two stories here when it comes to very good fundamentals but very poor technical indicators. Ratio Time • P/E 14.64 (Very attractive) • Forward P/E 13.08 ( Boeing Forward P/E is 156.29 !!) • P/ FCF 27.57 • Debt/Eq 2.56 (Normally I would say this is really high in a different sector, but money is cheap right now and these guys are in a field that requires massive capital output...this is why if I see a level this high in a utility provider I am ok, but if I see a level this high in a financial or tech I run!) • EPS 23.4 • EPS this Y +25.8% • Sales Q/Q +8.7% • ROE +171% (again justifies that debt/equity level as they use debt very...prudently) • ROI +47% • Gross Margin 13.3% • Net Margin 10.2% (Stunning) ..especially when we see the rise in price recently in Boeing . Boeing has a 2.9% GM and a -7% Net Margin guys. Yes BA are losing money with a forward P/E of 156?? Holder Metrics • Insiders Own 0.08% • Insider Transactions over past 3 M (0.00) • Institutions Own 77.9% • Institution 3 Month Transactions -0.42% So what do we do when the technicals say run and the fundamentals say buy? We listen to both! The strategy I like to take ahead a potential trade when I see two conflicting tales are either run. Or wait for the technical indicators to display signs of a potential bottoming pattern. Next Chart will display pivot points . Finding a position at a lower price heading into the mean with good underlying fundamentals is a much better approach, although it takes patience and time as I think the idea of playing a short off the TA or a long strictly off the FA would be... short sighted. Best tactic is to embrace both and wait. Pivot points below! Friend please share with me & the wonderful TradingView community how you think we should trade Lockheed Martin! If you have a LMT chart yourself please be especially sure to share it with me!
NYSE:LMTEducation
by ZenMode
My Personal Plan For 2021I’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. My Goals For 2021 In this article, I want to talk about my goals for 2021, and how exactly how I’m planning to achieve the goals, so I thought it would be fun to write them down and share them with you. Now, as you know, goals need to be specific, measurable, attainable, relevant, and time-bound. Now, I will show you my financial goals both for trading, because after all, this is what I love to do, but also for wealth building. After that, I will share with you the goals for my company, Rockwell Trading as well as my personal goals, and also my goals for this channel. FINANCIAL GOALS Trading For Income For my financial goals, let’s kick things off and start with trading. The plan here is to trade for income, and my target goal is to make $15,000 per month. This is meant to cover my living expenses. Now, here’s the deal. This is a rough estimate of how much I have in living expenses. So this means that I am looking to make $180,000 per year. For this trading plan, I opened a new account. I put in $250,000 into this new account, and it is a margin account. Since having a margin account doubles your buying power, this turns that $250,000 into $500,000 of buying power that I will use for trading to achieve this goal. To figure out how much buying power I needed, I needed to figure out my living expenses. So as far as I know, my living expenses are around $9,000 per month. You might be wondering, “If your living expenses are only $9,000 a month, why would I try to make $15,000 per month?” Well, very easy, there is this thing called taxes and I want to account for it. This cost is estimated. Quick side note. By now you may be wondering why I seem to be unsure of exactly how much my living expenses are. I will cover this later in this article. So, again, the goal here is to trade for income. My next goal is for wealth building. Wealth-Building Goals One of the avenues I like to use for building wealth and one I’ve very knowledgeable about is real estate. So the plan here is that this year, I plan to buy a 10 million dollar apartment complex. Now, I’ve already been investing in apartment complexes for the past few years, but the rough idea of the financials is: - 7 million dollars will be used through financing. So I will find a bank that is basically financing 30% of this. - I’m actually planning to raise 2 million dollars through investors. - The last one million dollars will be my own money that I’m putting into this deal. This is very typical for how investing in commercial real estate is done. Now, here is the plan. The goal is to sell this for 15 million dollars in three to five years. So we’re selling it for 15 million. Then, of course, we have to give back 7 million dollars to the bank, right? Because we’re borrowing 7 million dollars. 2 million go back to the investors because everybody needs their money back right? Then 1 million dollars will need to go back to me because I also want to make my money back. Now, this is only ten million dollars. That leaves five million dollars in profits that can be divided among the investors and me. So essentially, I’m planning on making two million dollars based on the one million dollars that I invested, which would be a very healthy return. Throughout this whole process, I’ll show you exactly how this process unfolds as it happens, and what apartments I’m looking at with video updates on my YouTube channel as they happen. My other plan for this wealth-building goal is possibly buying a resort in Mexico, and here’s why. Those of you who already follow me know with my company, Rockwell Trading, we do have a Mastermind program, and we have Mastermind meetings at least three times a year. Now, recently due to covid, we weren’t able to have these in-person meetings, but if buying a resort in Mexico is feasible, then not only could we host our Mastermind meetings here in the future, I can also rent these rooms out for Airbnb. Now while I have experience with real estate, I’ve never been in the hotel business, so this might be a really stupid idea, but maybe it is a good idea. Right now this is just a goal, and will look into the details deeper to figure out if this will be feasible. Cryptocurrency So we talked about trading for income and wealth-building with real estate. My next financial goal has to do with something that I definitely have on my radar is that this year, and that is cryptocurrencies. Some of you know that in the past, I’ve been very, very public about being completely against cryptocurrencies, but I can’t deny that Bitcoin had a fantastic run this year. Bitcoin is now trading above $30,000. So guess what? Seems I was wrong. Moving forward I will definitely be looking into Bitcoin and other cryptocurrencies more closely, and fortunately, I have access to some fantastic resources of experts on cryptocurrency that I will interview for myself. I will also share these findings with you on my YouTube channel, and future blog posts throughout the year. My Goals For Rockwell Trading At my company, Rockwell Trading, we offer The PowerX Optimizer Software, and I am determined to make this the very best software in the world. For this, I am planning to release PowerX Optimizer 2.0 in the first quarter of this year, and I’m also developing an awesome trading log that will be integrated with PowerX Optimizer. So why do you need a trading log? Well, with this trading log it will be easy for you to analyze your trades. We all need to analyze our trades, and so this is definitely something that I will tackle this year. One other feature that I want to look into is possibly being able to execute trades through PowerX Optimizer by integration with actual brokerages. As it stands right now, you use The PowerX Optimizer to find stock, and then you have to enter the trades into a broker platform separately. I want to see if I can make this process easier, because, I have the same challenges. I see it on PowerX Optimizer, and now I have to enter it into the broker platform, so not only making trading easier for myself, but for everyone who uses The PowerX Optimizer. I’m constantly thinking of ways to improve The PowerX Optimizer, because not only do I believe in it, but I believe in Rockwell Trading as a whole. I believe this company, Rockwell Trading, can be an Inc 500 company. I am super passionate about trading, creating the best trading tools, and showing you the very best trading strategies that you can use to grow your account. It’s because of this drive I have to provide awesome value for you, that makes me believe we can make their list of the fastest-growing companies. Now I’d like to move on and share my personal goals for 2021 with you. PERSONAL GOALS Writing More Books The first of my personal goals for this year is, I want to publish two more books. So the first book, as some of you are already aware, will be on The Wheel strategy, which is a trading strategy for trading options. Right now I’m in the process of giving the book one final proof-read before sending it to the printers, and I only have a few more chapters to go, but I will be rolling this one out shortly in the coming weeks. The second book I’m thinking about writing will cover wealth-building strategies, which will cover what I’ve been doing over the past years to become a multimillionaire. When I came to the United States in 2002 18 years ago, I had $30,000, and today I am a multimillionaire, so I know a thing or two about how to build wealth. I think this would be another great book to share with you, that you can get a lot of value from. Buying A Plane Here is an absolute crazy personal goal that I have for this year, and you might actually say that this is a stupid idea, but for years I have been dreaming & fantasizing about owning a private plane. I’ve decided that 2021 might be the year where I make this a reality. Now again, this could be an absolutely stupid idea. Don’t get me wrong, I’m pretty smart about how I spend my money, and I’m not planning to buy a 10 million dollar jet because here’s the deal. A private plane is an expense, not an investment, right? However, everybody is allowed to spend money however they want, and this might be one of the things that I decide to splurge on. For other people, it might be exotic vacations, for me, the idea here is a private plane. So it’s smaller like an executive plane, and this is the kind of plane that I’m looking into. I’m definitely not planning to fly it myself, so no worries there. I’m planning to have a pilot fly it for me because I have no idea how to do this. I will look deeper into this and see if buying a plane actually makes sense or not? These are some of my personal goals. Now, in terms of habits, there are also a few habits that I want to start doing this year. HABITS Keeping Track Of My Finances First of all, I want to track everything. What do I mean by this? Well, when I say track everything, I want to get better at tracking my wealth, which would be my net worth. Now I have a rough idea of what my net worth is, but I should be probably getting much better about this so that I know at any given time how many millions I have. You see, the challenge is once you have money, it’s not that important anymore, but I want to do this and I also want to get a little bit better about tracking my expenses. Remember earlier, when I was talking about how I wasn’t sure exactly what my monthly expenses were? This is where being better at keeping track of finances, as a whole comes into play. I said that I’m planning to trade for income on my YouTube channel and that I think I need $15,000 a month, but I actually don’t know exactly how much I need. So I need to get better about keeping track of my finances. Health & Fitness I also want to get better at tracking my weight and calories. I’m 51, so I’m getting older, so it’s important to take care of this. I want to track everything from my water intake, calorie intake, and what kinds of food I’m eating. I also want to keep track of my workouts, and as of now, my workouts are very, very easy to track because it is actually zero, so I want to be better at getting exercise as well. My YouTube Channel Now how does all of this affect you? I mean, why would you even care about all this? Well, this is the beautiful thing about my channel. If you’re interested in what I’m doing with these goals, I’m planning to post videos there throughout 2021. Five times per week, I will post a daily stock market update. I used to talk about what was going on in the markets during the “Coffee with Markus” live streams. These are now separate, daily videos, 5 days a week, and this will be in four minutes or less. Two to three times per week, I will continue the “Coffee with Markus” live streams, but without the market updates, as they will now be in the other videos. I am planning actually keeping you updated on the wealth-building strategies I was talking about, with video updates. I will post videos updating everyone on the progress of my goals, and, of course, I also will continue to post videos covering the very specific strategies that I will use for trading. When it comes to trading, I will continue to show you exactly the two strategies that I’m currently using, which is The Wheel strategy, and the PowerX strategy. If I decide to trade any other strategies this year, I will post videos about that as well. I will share videos with my real estate adventures, which as of right now, is where I’m planning to invest in a 10 million dollar apartment, possibly buying a resort in Mexico. I’ll be sharing everything with you, the good, the bad, and the ugly. I also want to cover topics I haven’t covered before, for example, credit cards. I have a bunch of credit cards and I’m using them wisely, so for instance, topics about credit cards like, “The Apple Card, is it worth it?” I have 3 American Express cards so I’ll cover whether or not they’re worth it. I also can tell you that right now I have 650,000 airline miles, so I will show you exactly what I’m doing to get all of these points because, with 650,000 airline miles, you can go around the world several times. Another topic of interest is that interest rates are low right now. So we will talk about, for example, LOC these lines of credit, or does it make sense to refinance your home? I have been looking into refinancing my home and I will let you know what I found of whether it makes sense or not, and other strategies to employ when interest rates are low, and then when interest rates are high. For example, when interest rates are high, I will cover high yield savings accounts as well as CDs. YouTube also has these so-called “shorts” and these are videos below one minute or less. These will be videos that I do as a quick reference guide. So for example, what is the bid/ask spread? What is Theta in options? Recap So let’s just briefly recap, I wanted to share my goals with you for 2021 and they are: - Will publicly trade here for income with a new $500,000 margin account, with the goal of making $180,000 a year. - For wealth building. I’m planning to buy a 10 million dollar apartment complex, and am looking into buying a resort in Mexico for the Mastermind meetings for Airbnb? - I will look into cryptocurrencies and see which cryptocurrency. Does it make sense to invest in Bitcoin? Are there any other cryptocurrencies worth investing in? Is it better to maybe invest in gold or silver? - I will look into publishing two books. - Improving the PowerX Optimizer Strategy. - I’m looking into if a private plane is a stupid idea or not. - Keeping better track of my health and finances. - Becoming an Inc. Fastest Growing Company. - Providing more content on my Youtube channel. So long story short, this will be an exciting year. I am super excited for 2021. This is the first time ever that I’m doing anything like this, and I will really be pulling back the curtain throughout to show you everything that I personally do. I hope that you find this not only interesting but that these are also strategies that you can employ in your life right away, but this really depends on what stage of life you’re at. You might be at a stage where you are still trading for growth, trying to build an income, and I will show you very specific trading strategies for doing this. It might be that you have a retirement account and you’re looking back right now. You’re getting your initial statement and you say, “You know what? This hasn’t been doing anything over the past year and I want to have better wealth-building strategies.” If so, there will be videos on my channel as well. Sometimes you might be wondering, “Does it make sense for me to open an American Express account or to have an American Express credit card?” Or something relating to this. And I will share all of this with you. Hope that you’re enjoying this. And this is what you can expect from me in 2021.
TVC:NDQEducation
by rockwelltrading
3
Why one cannot be completely bullish or completely bearish? Why one cannot be completely bullish or completely bearish? The stock market consists of two major players. Some people are long traders they bet the stock price will go higher. They buy low and sell at a high price to make a profit. Some long traders buy the stock at a high price and sell at an even higher price. Some long traders look for bargain stocks. Some other people bet the stock price will go lower. They are short-sellers. They don't own the stock initially, but they borrow the stocks from the stockbrokers and sell the stocks from a high price, then when the price drop they repurchase the stocks back at the lower price, return what they initially borrowed with interest back to the stockbrokers, and then profit the price difference. We can interpret the security market as a continuous tug of war game between the long traders and short traders. Sometimes one side will win the game, and in that situation, the price will advance higher or lower. Sometimes one side will gain strength that means the price will speed up and advance faster. Sometimes one side will win, but then go in the opposite direction temporarily and that is a correction. Sometimes one side will win but will lose strength completely and reverse direction completely. Due to the rapid changes in the security market, one trader cannot be 100% bullish or 100% bearish. Therefore, a market opinion may be "I am 70% bearish, and 30% bullish." That simply means that I am 70% confident that the price will go lower, but I reserve 30% market opinion that the price may hit a bottom and may reverse direction and go higher as the market story develops. When that happens, I am ready to liquidate my short position and willing to participate in the opposite direction or stay on the sideline. Thank you for reading! Greenfield Remember to click "Like" and "Follow!" Disclosure: Chart interpreted by Greenfield. Just a market opinion by Greenfield Analysis LLC for only educational purposes. This is not a recommendation. Greenfield Analysis LLC has no investment in any of the securities mentioned in the article, and no plan to initiate a trade in any of the securities mentioned. Greenfield does not receive any compensation for this writing. Investment involves substantial risk. You should consider carefully before making an investment. Investment at your own risk.
NASDAQ:NFLXEducation
by GreenfieldAnalysis
What role does strategy play in trading?Sunzi begins by establishing the importance of strategy. Although the word bing has been translated as "war" in most works in the west, once you approach the original Chinese manuscripts and the sense of Sunzi's work, you immediately come to understand that he was not talking about warefare, instead, Sunzi wants us to appreciate how important it is to develop strategic skills to avoid our own destruction when competing. Of course trading is man-made, but competition is a natural process. We are all the products of evolutionary competition, however, the true skill in competition—that is, an understanding of strategy—is not inborn. For most of us, competition creates problems, but only in the sense that if we don’t understand strategy, life is unnecessarily difficult. We earn our livelihood, love, and everything else through strategy. When we say that skill in strategy is important in our lives, we are saying specifically that strategy is a skill. It isn’t inborn any more than the knowledge of mathematics is inborn. We must learn strategic skills. We develop these skills by working at them. Some people are more comfortable competing than others are, but to become successful at any level of competition we all have to work. Competition in trading brings out the best in us. It enriches the world in which we live. It replaces less effective methods with more effective methods. The trading world competes for every single dollar. In doing so, traders constantly improve their operational choices and decrease the costs of their operation. Competition eliminates poorly developed traders and and leaves only the best in each category. So, do you really have what this vast compettition arena requires?
CME_MINI:ESH2021Education
by SunziTrader
1
EDUCATION: Scalping 3-EMA StrategyHello, dear subscribers! Today we are going to talk about the popular 3EMA scalping strategy which is usually used on the 1-min timeframe, but we can demonstrate it only on the 15-min chart because of restrictions. Step 1 First of all we should define that the market is in short, medium and long term uptrend. The 200EMA shows the long, 100EMA - medium and 50EMA - short trend. Consequently all the three EMAs should follow in one direction, it's slope should be strictly positive for the uptrend identifying. The uptrend is an obligatory condition for the long position execution. Step 2 If the step 1 condition is true the next step is to identify entry points. We should enter long position when the price crossed the 50EMA from up to down, but after couple of candles crossed it again from down to up Step 3 Take profit and stop loss identifying. You should stop loss if the price crossed the 100EMA line from up to down. Take profit setup can be different: the fixed % growth, the price and 50EMA crossover and the price and 100EMA crossover
Education
by Skyrexio
1
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
Options strategy Iron CondorIron Condor - a spread with limited risk and limited profit, using four different striking prices but the same expiration date. The position is a combination of puts and calls all of which are Out of the money. The maximum profit is realized between the two inner strikes, and the maximum loss is realized outside of the higher and lower strikes. This strategy is preferable for beginner traders because there is no unlimited risk theoretically, unlike selling straddle/strangle. When selling an Iron Condor (or Iron Butterfly), the trader is neutral. Because all the options are Out of the money, the trader receives credit for it. The inner options are being sold, those options worth more than the outer options that being bought, inner options are closer to the stock price, which means their strike is closer to At the money strike (to more expensive options). If the stock price closes between the two inner strikes at expiration, all the options will expire worthless. The trader will receive all the credit. Chart example: Inputs: Credit recived-> 13.45, Stock price-> 484, Top Upper strike (Bought) ->560 Call Top Lower strike (Sold) ->530 Call Bottom Upper strike (Sold) ->450 Put Bottom Lower strike (Bought) ->450 Put Days to expire -> 46 Implied Volatility -> 46.7% (0.467) Date - > 02/11/2020 Maximum Profit = The credit recived = $1345 Maximum Loss = Difference in Upper (or Lower) Strike – the credit = 560 - 530 – 13.45 = 16.55 = 450 - 420 – 13.45 =16.55 Maximum Loss = $1655 If the Iron Condor is not balanced (the differences between strikes are not equal like in this example), the calculations are different. Like selling Straddle / Strangle, the same conclusions about increase or decrease in Implied volatility are true here. In these conditions, it will take 10 days for the position to enter the profit zone and 35 days to receive 50% of the credit. This post relates to previous posts.
NASDAQ:NFLXEducation
by ZoharCho
12
Option strategy sell Strangle/Straddle In the chart, you see the strangle strategy when sold, I will show what will happen if the implied volatility changes, you can see this strategy being bought in the next post. You can come back to this post and watch how things play out. As a rule of thumb, strategies are sold when implied volatility is relatively high and bought when implied volatility is relatively low, the seller would try to anticipate IV decrease and the buyer would try to anticipate IV increase. Selling Strangle The strangle is a position involving calls and puts, they will have the same expiration date but different strike prices. Selling Strangle is established by selling Out of the money calls and puts when the stock price is usually in the center. This strategy when selling a strangle is neutral, the seller anticipates that in the life of the options the stock price will remain between the strikes, and at expiration, the options will be worthless and the seller will receive all the credit. The green zone is the profit zone, the yellow lines are the break-even lines, the blue lines are losing lines, the lime green lines represent when you can realize 50% of the credit. I added pink broken lines to show where this strategy will have the maximum profit at expiration. For example, from the chart, these options are from 29/10/2020 close in Zoom. The strategy sold for -> 44.6, meaning credit is received. Stock price-> 489.68 , Upper strike (call)-> 600, Lower strike (put)-> 400 Days-> 50, Impleid volatility-> 82% (0.82), date-> 29/10/2020 For one position we received 44.6, multiplying by 100 (number of shares per contract) if the stock price will be between 400 to 600 at the expiration date , all the options will expire worthless, the seller will receive all the credit $4460 this is the maximum profit. Upper break-even point at expiration: The upper strike + credit received = 600+44.6 = 644.6 Lower break-even point at expiration: The lower strike - credit received = 400-44.6 = 355.4 Between 600-644.6 and 355.4-400, one of the options is not worthless at expiration, so it has intrinsic value, the seller will get between $0-$4460, the seller will need to close the position before expiration to avoid assignment. If the price got to 689.2 or 310.8, the position is losing, in this case (-$4460), this strategy has a limited profit and theoretically unlimited loss. You can see from the chart that It will take at least 22 days to realize 50% of the credit, some traders don’t want to wait until expiration and they prefer to close the position at 50% credit. How implied volatility affects the position? (20% increase and decrease) The blue area is the new profit zone, the purple lines are the new losing lines. If the IV will raise after entering the trade (left chart), the seller will need to wait 18 days before his position will re-enter the profit zone, what was before a profit area will now be a losing area. On the other hand, if the IV will fall (right chart), the seller will profit much quicker, the losing lines will be farther away. Selling Straddle This strategy is a private case to the strangle (the general strategy), in the straddle both options the calls and puts are at the same strike price, usually At the money. The strategy is sold at the money because the time premium is the largest there. This means that the seller receives a lot more credit for this strategy, the downside is for getting the maximum profit the stock price needs to finish exactly at the strike price, the probability for this to happen is less than 1%. The opportunity to realize 50% of the maximum profit will take longer than the strangle, in this example 39 days. The break-even lines will be much closer. The maximum profit for this example is $11,690, much larger than the strangle. The risks are also much larger. How implied volatility affects the position? (20% increase and decrease) The selling of the strangle and straddle are not for beginner traders, due to the risk involved, a less risker strategy is the Iron Condor . In the next post, I will show the buying side of the strategies.
NASDAQ:ZMEducation
by ZoharCho
3
My trading strategies : Trade against the trapped trader!STRAT 11 : Basic premise As price continues in a trend, more and more traders keep piling into the same direction, hoping that the trend will continue and they will make money. However, at some point, the trend sharply reverses, breaking the market structure in opposite direction and trapping a whole bunch of retail traders in the direction of trend which just got reversed. We create a zone which identifies these trapped traders and then patiently wait for them to exit, and trade with limit orders in the direction of their exit. You can add additional confirmation signals from DXY's directions for the instruments which are highly correlated to DXY (EURUSD, USDCHF, etc)
COINBASE:BTCUSDEducation
by makuchaku
3
A Market Probe Versus A ShadowA Market Probe Versus A Shadow A market probe is a way for the bulls and bears to measure the market desire to advance further in the current trend direction or not. A shadow is a rejection of the price reached; therefore, a reversal is more likely to follow with a shadow. The question that I ask myself when I see a candlestick shadow is, "Is that a shadow or a market probe?" Let review the monthly chart of TSLA Tesla Inc's stock for an example of a market probe. In February 2020, with the monthly chart, we can see an upper shadow of the candlestick, which is often misinterpreted as a shadow, but instead, it is an example of a market probe. The market probed the price level of $191.16 but shortly retreated. The lower shadow for March 2020 is a bear trap. A bear trap is when the market gives a false bearish signal instead the market makes a price reversal and continues higher. In June 2020, the stock price of TSLA Tesla Inc advanced above that price level probed back in February 2020 which is $191.16. Again July 2020, the TSLA Telsa Inc probed a new high price of $357.90 and reached the current market price of $609.99 (as of the market closed on Friday, December 11, 2020). That is an increase of 221.76% from the initial market probe in February 2020 of $191.16. The next question I think is how to determine whether that is a shadow or a market probe? Furthermore, the question after that is: Is that a market probe or a bull trap. Let save that for another discussion because that will require a more in-depth market analysis and more articles. Ultimately, it is the immediate market conditions and the final market decision that determines the price. Thank you for reading! Please click Like and click Follow to see more. Greenfield Disclosure: Just a humble market opinion by Greenfield Analysis. This is not a recommendation. Greenfield Analysis has no investment in any of the securities mentioned in the article, no plan to initiate a trade in any of the securities mentioned, and does not receive any compensation for this market opinion.
NASDAQ:TSLAEducation
by GreenfieldAnalysis
2
A Probe Versus A ShadowA Probe Versus A Shadow The candlestick shadow refers to the upper and lower thin lines of the candlestick body. A lot of that has been written already by others, so in this article, I like to mention just a few differences between a probe versus a shadow. A market probe is a measurement tool. A market probe checks the sentiment of the bulls compared to the sentiment of the bears. A bull probe is when the bulls test a new higher price level, and a bear probe is when the bears test a lower price level. I think a shadow is a possible price reversal, and a probe is when the price explores a new price and may advance further in the same direction. Is that a shadow or a probe? Let save that for another discussion. To answer that question, it will require a more in-depth market analysis of the immediate market conditions and ultimately the outcome depends on the market decision. Thank you for reading! Please click Like and click Follow to see more. Greenfield Disclosure: Just a humble market opinion by Greenfield Analysis. This is not a recommendation. Greenfield Analysis has no investment in any of the securities mentioned in the article, no plan to initiate a trade in any of the securities mentioned, and does not receive any compensation for this market opinion.
TVC:DJIEducation
by GreenfieldAnalysis
7