Breakout and Bounce Signals | Scott Thompson | 2-18-20 | Long Options


all right well good afternoon everyone my name is Scott Thompson we’re here for our long options class markets have pulled back a little bit is it time to jump in or time to bail out let’s check it out all right well it’s great to be back with you I appreciate Mike Follette cover inform you last week have a meeting that I couldn’t get out of so anyway great to be here with you a shout out to everybody that’s joined us today thank you for taking time out of your busy week I’m sure hope everyone had a great weekend great to be here with you Alfred Andy Charles Jill and everybody else if you have some questions feel free to chat those in as we go along you can also follow me on twitter at s Thompson underscore TDA so I love to see some comments or questions there as well as we post things on Twitter like I said the markets pulled back a little bit we’ve actually been stopped out of one of our long option positions today and a couple others that are just kind of going sideways so we’ll take a look at those the main focus today we’ll be looking at entry opportunities and setups and things like that so before we get started let’s go ahead and jump in here and remind everyone our presentation today is for educational purposes not a recommendation or endorsement of any particular investment or investment strategy in order to demonstrate the functionality the platform I will be using actual symbols but none of those symbols are meant to be recommendations past performance of any security or strategy does not guarantee future success and options are not suitable for all investors please be aware of the risks involved with option trading in read that characteristics and risks of standardized options thanks again for being here today again welcome to Bruce and everybody else our agenda today is pretty straightforward I want to spend as much time as possible going through the wats list I’ve chosen some stocks it looked like they were setting up we’ll see if that’s still the case here is the markets winding down to the last hour we’ll play some sample trades and our thinkorswim demo account including a bearish trade we haven’t done one of those in class I did do one a little while on a breakout kind of in between classes and that got stopped out for a loss so if we have time I’ll go through that one there’s actually on American Airlines it broke support and then completely rallied back forth but that’s why we use stop losses that aren’t guaranteed to get filled at the stop price but anyway I do want to go through a bearish trade there’s a strong breakout today that I wanted to look at and then we’ll take a look at our open position so we’re just going to fly through this today again feel free to chat in the questions let me go ahead and jump over here to my a swim platform the first stock I’ve got up is a BB V one of the things I want to point out is back about seven eight ten days ago they had earnings they broke this pretty strong resistance level at about ninety and then shot up four or five days in a row now one of the things that’s really interesting about a breakout trade and I’m spending some time talking about this first because there’s another one I want to look at it looks very similar to a BB V 7 days ago where it’s a huge breakout candle and there’s sometimes some hesitancy to take those entry signals so I want to talk about that but let’s go ahead and look at this a BB V setup the watchlist that I’m using is the penny increment watchlist it’s just available over here on the left side gadget go up to public and then come down here to penny increment options this is just a good watch list of optional stocks that have generally fairly close bid and ask spreads which is one of the things that many option traders like to see so anyway the weekly options is also available that’s on the next little drop down down here at the bottom weekly options those are options that offer weeklies which is another way to look at those higher liquidity options so anyway I’ve gone through the watchlist today I would recommend that you do that yourself looking for your either buy signal or what we call the setup now write this down in your notes somewhere the set up is what the stock looks like just before you get your entry signal alright so if you’re a bounce trader the setup is going to be the stocks pulling back near to a level of support if you’re a breakout trader the setup is basically just being right there near resistance but hasn’t quite broken out yet now the buy signal you’ll have to decide what you want that to be but bounces and breakouts or a general description of how people enter new trades either bouncing off support or bouncing off resistance breaking resistance or breaking support either way we’ll look at a couple of those opportunities today so anyway a BBV here setting up in a pretty classic bull flag that does not mean it’s going to be a profitable trade and this setup one of the things that’s kind of cool about this setup is some traders will use the momentum shift as their entry signal which is what I’m going to demonstrate here today the stock’s pulling back we have a new low day today today’s low is lower than yesterday’s low some traders will look at that as like this is the low some traders look at that so well it’s a green candle so it’s not the low day the low days the red day so it doesn’t really matter just be consistent in the method that you use today’s high is it 94 50 so some traders will look hey if that starts to trade above 94 50 by 1 cent 5 cents 10 cents 20 cents doesn’t really matter you pick a number that’s gonna cause you to take action this is one of the questions I think underutilized I think you ought to be asking yourself this question when you go through your watchlist what would have to happen tomorrow or in the future for me to take action so in this case if we’re gonna be looking at long call trend trades which is are going to be our focus today on least these bullish trades is what would have to happen tomorrow for this to execute an order and we’re gonna say if it trades above the high of the low day we’re gonna use 20 cents in our example today you know nothing special about that some people like use 1/2 percent 1 percent or some other number but that’s 9450 plus 20 cents 9470 will be our entry trigger so we’re just gonna jump over here to the trade page type in a BB V and we’re doing these long call trend trades you can go back several weeks we talked about kind of the parameters that we’re using generally try to be around a hundred days out from expiration some people go as low as 50 to 60 days on up to about 150 days we’re just gonna use the June expiration today we’ve been talking a lot about this first strike out of the money one of the very first things that you want to check is what’s the bid-ask spread this difference here between the bid and the ask is a twenty cents that’s about 5% of the value of this option on a four dollar option so some traders will say hey if that’s 10% or more they won’t trade that option the closer obviously the better that is but here we have a 5% difference between the bid and ask price based on the cost of the option but we’re gonna go ahead and buy this first strike out of the money we’re doing a right-click buy custom with stop and we’ve been talking about a 50% stop-loss now that’s just a again kind of a generic rule some people like to use 50% some people might even have a tighter stop than that some people won’t have any stop at all they’ll just position size on the losing the whole amount there are four hundred dollars and thirty cents now we’ve been kind of talking about risking $500 portrayed about I’m gonna adjust that up for one of the examples we’re gonna use today just because the options a little more expensive but you know if we were willing to lose $500 on this trade or risk that $500 based on the stop which again is not guaranteed to get filled at two dollars and 15 cents but we could to go with two contracts and so that’s what we’ll do here on ABB V we’ll go in two contracts and we’re gonna set up what’s called a conditional order I don’t want to buy it right now I want to buy it when and if it bounces up now for homework today and and really anything that’s setting up in a bounce trade one of your kind of daily routine assignments is actually to look at that order see if it’s filled tomorrow if it hasn’t filled tomorrow that’s because it hasn’t gone above the high of the low day and it may have a new low day so you want to check out to see if there’s a new lower entry opportunity so and if that’s the case you know as that stock pulls back gets down your support you can adjust that entry so we’re not going to have this as a limit order we’re actually gonna use this as a well we’ll use a market order in this case be careful with these because if it does gap over the trade like tomorrow the market might gap up a BBV might gap over that trade and so the price you’re expecting to pay may be much lower than what your actual fill price is so you know if you’re gonna use this market order or any of these conditional orders you want to kind of check the market before it opens just go to the trade page look at the bid and ask price and just see if those are above your trigger point if it is you may want to delay that order let the market open so there’s not maybe a more expensive filling price than you expected all right and because we don’t really know when this is gonna break out we’ll make both of these good tell cancelled we’ll click on the little gear over here we’re gonna click below symbol click over here a door above and then we’re gonna put in there ninety or was it ninety four seventy okay again this is no special price here oops and that’s going to get us in at the market when it goes above that so this is one where we’ve done limit at the mark before we’ll just use a market order in this case here the idea is if this trades above ninety four seventy today or tomorrow or in the future without us changing it it’s going to trigger this order to buy two call options at 90 five strike alright so we’re gonna send that off now this is kind of interesting if the market goes up okay if the market goes up will this option be worth more or less than it is right now okay run your brain in a second you know right now it’s trading it for 30 on the ask if the market goes up that ask price will probably go up so we don’t really know if 215 which is the current 50% is going to be 50% of the actual fill price so let me show you a cool trick here if you change this link here from man to trigger then whatever your orders triggered at you can put a stop in here at 50% so click that little red box twice it’ll go percent and then just put 50% in here and so if the order gets filled at $5 it would set a stop at 250 does that make sense so again no guarantee it gets filled at 250 if it gets hit but that’s what we’re doing okay so we’re gonna hit confirm and send on this one we’re gonna buy – not June 95 calls if the market goes above 90 470 on a BB V we’ll sell it if it drops below that by the 50% after it gets in remember your transaction fees and we’ll throw this in or to our intermediate to trend trades alright so again if you have some questions go ahead and chat those in again welcome to Kathy great to see you let me send that order off so that’s a pending order and it’s setting up here if the order bounces the order will fill okay so that’s our first setup that I wanted to go over again under these recommendations I’ve got a couple others I want to look at – now this is Facebook Facebook had a little bit of a pull back a little drop down on earnings it came down formed up a little bit of a W pattern or a tilted up W slanted up W if you look at it like that let me just kind of show you basically what that looks like here let me clear that off so the W pattern comes down goes up makes a resistance point there in the middle comes down and then goes back up again a lot of times a double bottom will have similar lows this is we kind of call it slanted up W pattern either way it’s a consolidation had some resistance at 212 dollars and 73 cents looks like it kind of broke out above that either yesterday which is Friday or the day before we’re getting a lot of follow-through today and as we talked about the breakout trade here’s a here’s a thing that I want you to understand K if you don’t get anything else out of this class take this away from it today is a breakouts high probability that it’s going to come back and test the old resistance as new support okay that doesn’t always happen so one of the things if you’re a breakout trader just be prepared for that to pull back a little bit not unusual that means if you bought it right now it’s probably going to show a little bit of a loss over the next several days so just be prepared for that mentally this is a breakout it’s closing above resistance it appears no guarantee that it will stay up there no guarantee it’ll stay above 212 and it could be a losing trade right we’ve done some breakout trades that have done okay a Home Depot I believe was one of those and we’ve done some breakout trades that haven’t really done a lot I think well Yoji when we the first week we were here that one chopped around a little bit and then just didn’t do anything all right but we’re gonna go ahead and trade Facebook here for an example I’ll type in Facebook again most of these are gonna be June expirations first strike out of the money’s running about $12 and 85 cents check the bid-ask spread 1265 1285 20 cents on a 12 dollar option little over what’s that 2% or whatever it is you know not very much and but it’s more than if this goes bad if this goes to zero we’re gonna lose twelve hundred eighty five dollars which does exceed the risk that we talked about originally I didn’t want to get a trade on on Facebook here for an example of kind of how the breakout works on a little more expensive option and even if we set the stop at 50% of this purchase price that’s still six hundred seven hundred dollars of risk potentially or if it gaps over the stop even more risk right so again when you’re trading long options this is just a great practice particularly when you’re starting out is just plan on that thing going to zero now it may not happen that way we’ve been stopped out near that 50 percent mark on a couple of trades Yoji being one American Airlines that I talked about earlier MDT’s the other one we got stopped out of today but just be aware of your risk very important I think one of the challenges people run into is they risk too much when they first start trading particularly when they start trading options and then they’re they’re unable they’re not capable of executing their guidelines or whatever system or strategy that they’re trying to follow they just won’t do it because they’re risking too much but let’s go ahead and do a right click buy custom with stop here and about half of this is gonna be let’s call it 650 all right seven that’s close enough 650 will make a good tell cancelled we’ll just do one contract here I’m gonna back off the order well we’re 1085 so it should fill pretty quickly here so let’s see if we can get this filled and then you know usually it’s great to go over your order you’re buying one twenty to twenty call stop at fifty percent again no guaranteed gets filled their transaction fee send this off should fill for us here fairly quickly and then I like to draw a little oval on the day that we’re getting filled here I do see some comments coming in let me go ahead and finish going through this a little bit of watchlists review that I wanted to do first and then I’ll come back around and answer the questions and we it’s okay to come back and touch base with the stock all right or different stocks if we go past alright the other one was visa now visas kind of interesting visa had some high end resistance up there about two hundred ten dollars chopped around a little bit some traders may have drawn their resistance more across some of these more frequently touched areas like this of about 208 if you saw resistance at 208 you could have said well that was an entry signal Friday we should have bought it Friday okay well I missed it so you know the high end resistance was up there about 210 it is trading above that today so again we’ll treat this as a breakout trade one of the things to be aware of again as a breakout trade might come back and test this 208 area there’s a little old resistance right in here so one of the things I do like to do when I’m looking at my charts is just to get an idea of where some of these pullback points are sometimes when we draw a really high end resistance and it closes below that we get a little bit of a psychological barrier that sets up in our mind all the trades not working I better get out of here obviously it’s not gonna go no sense in having it go hit my stop I’ll just get out now and take this small loss well I’ve heard that happen many times to other traders before where they get out of the trades prematurely and then the stock does what it was supposed to do the trend continues or whatever they expected it to do it does that the problem is if they’re not in the trade anymore so you know I like to draw these lower end areas resistance and supporter areas so you know kind of the maybe that problem area is about 205 you know just be aware of those different areas well go ahead and place a trade on Visa here today to again for our example let’s type in visa over here again none of these are recommendations these are just stocks in that penny increment watchlist that they’re showing characteristics of what some traders consider entry signals bounces or breakouts now you’ll have to decide where you want to go for you all right here we are first strike out of the money 810 to 795 again an attractive bid-ask spread here doesn’t mean it’s gonna be a winning trade it’s just it’s very close together we’re not spending eight dollars to buy and have to turn around and sell it for four right so close bid ask spread right click buy custom we’ll just do one contract on this one to 405 50% stop there good tell cancelled one contract so some people might go in there with two but again that’s gonna be about $800 a risk based on the stop that it could gap over that and we lose more all right so that’s confirm and send this one going in there for the 215 call in June buy it that or sell it if it goes down below $4 transaction fee on one contract and we’ll send that off should be filled fairly quickly got filled at $8 and we’ll draw our oval in here indicating that we got in the trade all right then here’s the engine was talking about there’s wpm now a couple things I want to point out is we look at these stocks in this watch list okay did the stock break resistance what would you guys say okay if the stock is trading or closing above resistance technically we said that’s a broken resistance area now one of the things that we’ve talked a lot about in this class and we’ll continue to do that is setting up conditional orders James boy does a great job of this in fact if you want to learn more about the the techniques that James uses for options in a whole portfolio join James at 11:00 a.m. Tuesday mornings Eastern Time and he’ll talk about kind of managing a whole portfolio how do how do option traders or stock investors use options in their portfolio but one of the things that he talks about a lot I do as well is like when you see a set up the the the option trader likes to set up a potential trade like we did on ABB V in case it breaks out right now the drawback of course is maybe it trades above that trigger point gets you into the trade and then has a completely reversal at the end of the day but the other side of that is sometimes this happens right if we had an order sitting on here at thirty forty five or thirty thirty five or thirty twenty six or something above that resistance area that triggered us into the trade at the end of the day here we would have had a nice little profit on that most likely okay depends on how the options are trading and so on but you know this stock has gone up dramatically it’s up five percent today breaking resistance and so now the question becomes this okay what do option traders do here should an option trader act on this breakout signal now what’s your first reaction to that I know what mine was when I saw this is I thought that’s gone too far can’t I’d I don’t want to buy it today it’s gonna it’s just gonna pull back well we don’t really know what’s gonna happen tomorrow remember that a BB V example I showed you right okay a BB V what happened it broke out pretty strong movement probably not 5% but it went up one to three days and possibly hit some short-term targets for some investors before there was the pullback right so I don’t know what’s going to happen on a tour this wpm that we’re looking I just know that it has broken that resistance and it you know I guess that the last 20 40 minutes of the day here it could pull all the way back but here’s the technique I want to show you one of the things that was really really frustrating when I first started trading options was I got very frustrated about a buy signal I would see the buy signal then I would say something to myself like well I don’t want to really take that you know let me have a little more confirmation right and so I would wait and then I would wait and like that third fourth fifth day often times that was the day that it took off and so I started asking myself well why didn’t I take action and the answer was pretty much always the same I didn’t want to lose money on the trade well that was generally because I was risking a lot more than I felt comfortable with so again if you start with the appropriate amount of risk are you willing to lose 200 300 400 how much do you want to risk on that trade well if that’s the case on something the big breakout like this because we don’t know what it’s going to happen we kind of expect it to come back here and test the thirty dollar area as the new potential support but let’s go look at a half position let’s take a look at what our full position would be based on 500 dollars of risk based on that stop maybe we could do two three four contracts but hey we’ve kind of missed a bunch of this move already maybe we dip a toe in the water get something on there if it does pullback we’re only losing money on half of that position and then if it does set up in that flag like a BB V did then you know we can maybe add to the position on a new bounce or a new opportunity right so let’s go take a look at what these options cost on wpm okay lower price stock only trading at $30 so these options are a lot less expensive if we set a stop at say half you know if I buy an option for $2 that’s a risk of $1 again based on that 50% stop which is not guaranteed to get filled there but you could do like five contracts on five hundred dollars of risk right if your based on that stop so let’s go in with two contracts here kind of half a position will set up the order the same as we always would buy custom with the stop we have to stop there 50% kind of automatically in this case but we’re going to go with two contracts instead of maybe the five we could do and that way if it does pull back into a flag or comes back and test that resistance area then maybe we can add to the position on that next bounce if it happens now I do want to talk about this this is a fairly low price stock right so one of the challenges where this has gone up 5% today already if it does pull back into that $30 old resistance new support potentially area maybe it hits this stop right so some traders will say you know what my normal operating procedure here is to put a stop on there at 50% but because that’s a low priced stock because it’s maybe a little bit more volatile than some of the higher priced stocks as far as percentage movements goes maybe we don’t put a stop on there at all and we figure well if it goes really bad we’ll lose $400 which is still less than our $500 max loss risk so let’s do this let’s cancel this order here and just do the buy order at half a position then if it does pull back maybe that intraday volatility could hit that dollar stop if it was there but we’ll leave it off we’ll just keep an eye on it we’re willing to lose $500 but in this case we’d really expect this to bounce may not happen that way but that way we don’t get jiggled out of it having a stop that’s maybe too tight on a lower priced option that’s a little more volatile okay so let’s go ahead and send this one off as well we have our transaction fee a little higher here because we have two contracts 30 to call and we’re gonna send that off should fill for us and we’ll go ahead and I do like to try to draw my ovals up about where the midpoint of my oval is where I got into the trade so like if it pulls back during the day or something like that I know about where it was when I got in okay so there’s taking a look at wpm a couple others I want to look at here Goldman Sachs this was the bearish trade we haven’t done a lot of bearish trade level haven’t done any bearish trades in class I did one kind of outside of class I did record that as a loss on American Airlines and this one’s basically breaking support right a little bit of a descending triangle type of feel we had some support there about thirty-five we have some old support at 2:28 some old resistance about 223 and some people will trend trade there put options I didn’t want to do that today I wanted to do a target on this so you know let me show you a one technique this is just one way I’m gonna use what we call a Fibonacci extension so drawing tools come down drawing tools this little percentage right here’s your Fibonacci retracement let me show you a kind of a cool technique if you’re doing a bearish trade if you go from support up to like a resistance area and I’m just gonna choose that first or last level of resistance that we had that’s up there a little bit about 2:45 77 and click that in there now here’s two very common targets for a Fibonacci retracement or Fibonacci extension the one 61.7% line or the 200% line now I did this on purpose I did this earlier before class but I thought it was really interesting the 161 lines up almost perfectly with this old support level and then the 200% line is very very close to the old resistance level so some traders would choose maybe a 200% target and then keep an eye on the 160 I said 160 1.8 it’s sorry I said 160 1.7 it’s actually 160 1.8 so let me show you we’re gonna use 2 24 25 is our bearish target on this we’ll set the stop again we’ll just use a 50% stop because it’ll be easier we will keep an eye on the 235 old support level if it closes back above that will probably either stop out of this trade or just close the trade down but let’s go ahead and put this order on as a put trade now again kind of same parameters but as a shorter term trade with the target maybe we don’t need to buy as much time right you do want to get an idea of how long that trade might take so if you look at the pattern in this case it looks like we took about three weeks so option traders when they’re going directional especially because time decay works against you you want to try to buy extra time a general rule of thumb calculate the move you think you need based on price patterns if you go visit Pat mullaly’s class on Fridays advanced charting techniques he talks about price patterns and how to calculate that distance but basically however long the pattern took to form up this one looks like about three weeks breaks down we’ll give it three weeks to hit our target but we’re not gonna buy just three weeks because why well time decay gets really bad the closer against expiration so we’re gonna add 30 days to our allotted time so three weeks plus 30 days call it about seven weeks eight weeks somewhere in there or about sixty days okay so let’s take a look it’s fifty to sixty days on the trade page that’s probably about an April expiration so let’s look at April expiration not the call side we want to be over here on the puts first strike out of the money again just good practice check that bid-ask spread we’ve got a seven 2705 bid-ask spread fifteen cents on a seven dollar option pretty close together we’ll right-click there oops let’s do this let’s do the same stops right right click buy custom was stopped we are buying the put not selling it buying it puts is a bearish trade we’ll set our stop here at 50% good tail canceled and we’ll just do one contract on this one as well click confirm and send by the 230 puts 720 stop out at 360 if that happens transaction fee now this one we’re gonna put in a different group I created some long put short-term trade okay it’s not a swing trade in my book swing trade means I’m buying it or put out resistance want to sell it the first support level this is a breakout trade I kind of expect it to go down maybe rally a little bit and then make a progress toward that target so we’ll see what happens okay it send that out got filled and we’ll draw a little oval here again I’ll still draw a green oval cuz I did buy the put option and we’ll just see if that comes down and hits that target now we could have setup in order to get out at that target this one I’ll just visually keep an eye on it and maybe next week if it hasn’t hit the target yet I’ll show you how to put that order in there alright so one last thing I wanted to do while we’re here today and then I’ll take a look at the questions real quick MDT we bought on a nice bounce off support the trend was beautiful the stock went up made a new high came down made a lower low short-term rallied up made failed to make a new high came down gapped down on earnings even though they beat the earnings estimate by about four cents still gapped down hit our stop we ended up taking a loss on that one that was here this morning got stopped out at about a dollar ninety okay so I wanted to take a look at that one one other one I wanted to look at was micron micron we kind of bought off this little bounce in the uptrend it did break resistance and that breakout failed came very close to our stop over here did not hit it rally back up still showing some resistance there about sixty dollars and fifty cents came down and we’re just kind of sideways here now one of the exit strategies that we talked about was the trend breaking this is another one this is kind of your time management if the stock really hasn’t moved much for you you could keep this on we have a stop on this one but Microsoft here or not Microsoft micron micron we have bought it for 5:30 our stop sitting there about two dollars and sixty five cents it’s that’s for 60 right now we’ve had just a very small loss and this is one of those that really didn’t play out now one of the mistakes people make is they get out of something and then they don’t keep an eye on it if this stock still meets your entry parameters then go ahead and you know keep that open there right but you know if you close it then keep an eye on it for a new buy signal and if that happens for you then you can always get back in but we’re gonna go ahead and close this take a small seventy dollar loss on this one we’re gonna cancel our existing order and then we’ll just do a right click on the symbol create a closing order and we’ll just sell that off and have our transaction fee there but we’ll sell that off we get out of that trade and we just got out why because it’s really not doing what we want it to do it’s kind of go on sideways when you’re a directional option trader sideways isn’t good if you’re a probability trader doing short verticals which we teach on Wednesdays or long verticals which we teach on Thursdays you know that sideways movement oftentimes isn’t that detrimental but in a long option time decays working against us so we’re gonna go ahead and change this to a little red oval here and then let me jump in there on your questions and I’ll go to the monitor tab and so a couple questions here Charles says if you wanted to limit your loss to 20 percent would you enter 80 cents or 20 20 percent so on that stop Charles is that talking about our order that we placed over here if I let’s go back to us do a BB V so we went in there right click buy custom was stopped and I showed that trigger right where we had the trigger let me go over here and kind of set this conditional order up just so we can have the other opportunity come in there and I don’t know why that’s not coming up here but that was weird there we go all right so the question was as if we wanted to stop out at say 20% loss then we would just right-click or left click on that button and put 20% here so the way that reads that Charles is it’s going to take a look at that purchase price and then put the stop 20% below it all right if you do 80 percent here then you’d be risking 80% of that purchase price does that make sense all right great quick question Dale great to see you Dale made a comment here about this the market coming back on a breakout trade let’s go look at that a BB V so ABB V you know broke out comes back you know some some traders look at that and say well that happens about 70% of the time I don’t have any real statistical data but you know my my empirical own observations is yeah that’s it’s it’s a high percentage more than 50 percent that it comes back and test that old resistance it’s just something to be prepared for it we talked about that breakout trade one of the things that really freaked me out when I first started as I would see that breakout entry signal I got really excited about that I would place my option trade or my stock trade and then it would go up a day or two then it would start to come back and I’d kind of freak out a little bit because I just didn’t expect that and so if you’re prepared for that to come back and test it happens frequently so you know you’ll have to decide what it is for your own trading you know how often those trades are coming back and testing those old support levels but it does happen usually more than 50% of the time and so just be prepared for that it’s not not something to panic about that’s why you look at the trend you look at those support and resistance levels and generally speaking if you’re a directional option trader and those levels are holding and it hasn’t hit your stop yet those are not reasons to get out of the trade just because it pulls back a little bit all right Chuck says here is it better to trade options on higher price stocks does volume have to do with the option increase in value so you know I can’t really answer is it better to trade options on higher priced stocks the you know reality is Chuck if you trade options on higher priced stocks those options are going to be more expensive so you know that’s one of the things to be aware of like we did on Facebook today that option was pretty expensive if if the trade goes south quickly if the stock were to gap down if there were some bad news if the market falls apart those expensive options can lose their value very very quickly so you’ll have to decide where that is volume on the stock does play an important role usually the higher the volume is on a stock then the better that bid-ask spread is on the options the you know more volume on the options more open interest on the options and so that’s a pretty common thing that option traders like to see is high volume you know where’s that million shares or more it’s pretty common you’ll have to decide where you want that to be for yourself all right Veronica great to see you first time love to have you to come back again suppose one buys calls without any stop is it possible to add a stop afterward or a OCO order the answer to that is both yes you can you can add the O Co order in you can add a order for a stop after the fact and in fact let’s go take a look here some of these didn’t come through on the orders that I placed but in order to do that you could say well o the micron order hasn’t filled that’s why it’s not there but let’s take a look at Mesa for example we got in it visa let’s say we don’t have our stop at $4 or wherever it is and we wanted to set up a no co order we could do a right-click create a closing order to sell that and so it brings up a single order you can actually come in there and just do o Co now you don’t want to do a first o Co be our first triggers o Co because the first orders already gone through right but you could go in there and say well I’m gonna go ahead and create a duplicate order now I have to selling orders right and you could say well you know I bought that option for $8.00 if it goes to 14 I want to sell it and if you wanted to set a stop say that $4 you know you just want to make sure your orders are correct right and good tell cancelled on both of those so like I could set this order up where if it goes up to $14 in value it would sell it for me or if it hits the $4 stop it would sell it for me and then 100 means one cancels other okay and so you could do that it’s a great question there hopefully that’s helpful for you all right Tyler sauce says why not buy a put to enter the position okay so like Tyler you know buying a put gives you the right to sell the stock so you might be talking about selling puts to enter a position you could certainly do that in fact it’s just not the topic for our class in fact Brent Moore’s on Monday 3:00 p.m. Eastern talks about covered calls and selling puts or short puts as a strategy one of our strategy focused webcasts it’s just this this is a very specific webcast here where we’re just doing long options I’ll be buying calls or buying puts period even though sometimes I might want to do some other type of strategy this particular class is just for buying calls just for buying puts and we’ll talk about swing trading short term trading and longer term call options which is what our primary focus has been over the last several weeks but I do want to get into some swing trading and teach you some techniques there that some option traders like to use for those sort term directional option trades all right and then this will be the last question here says can you can you buy an out of the money long call vertical sure you know this is I’ll it there but yeah you can do an out of the money long vertical you know you can create a vertical pretty much any way you want to create it if you wanted to do like a vertical here you could either do buy one strike in the money right which is pretty common you do buy a vertical one strike in it to ten one strike out at 2:15 but you could also create an order let me go ahead and create just a blast all here you know this isn’t out of the money long vertical to 20 to 25 what’s the difference well two things the out of the money long vertical is gonna be a lot less expensive and guess what stocks going to have to move a great deal just to not lose everything okay here’s a 2:20 call if the stocks below 220 this is going to be worth zero right so it’s a much lower probability type of a trade john McNichol talks about long verticals and diagonals on Thursdays at 3 p.m. Eastern Time so you can go see that but there’s kind of a review of those questions hopefully that was helpful for you today you know we did go over our watch lists where tential entry signals talked about bounces talked about breakouts bowls bullish and bearish we placed a whole bunch of trades today we looked at that open position on MDT that got stopped out we looked at our open position on micron that was really kind of just going sideways and we decided to close that again not a recommendation there for you in order to demonstrate the functionality the platform we did use actual symbols again none of those symbols were meant to be recommendations options are not suitable for all investors and thanks for being here today everybody I hope you had a great time and hope that’ll be helpful for you as you learn about trading long options have a great day everyone we will see you later you

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