Consolidation to Potential Breakouts | James Boyd | 2-11-20 | Using Options as a Stock Investor

Consolidation to Potential Breakouts | James Boyd | 2-11-20 | Using Options as a Stock Investor


hello and welcome to using options as a stock investor my name is James Boyd happy February 11th – you just want to give you a quick heads-up it is Valentine’s week hopefully you have a plan in place I just want to make sure we welcome everyone here today as we talk about using options as a stock investor my name is James Boyd great to be with you here today just real quick as we’re getting started remember you can follow me on twitter at jade underscore TDA go to twitter.com if you haven’t do that put it on your watch list or your list to do today get on there you could follow any instructor camera may Mike Fairborn or John McNichol etc you can follow all of us on Twitter that’s the way we actually connect with you all so just real quick as we can start remember with what we talked about here today for educational purposes only remember that any example we talked about it’s not a recommendation understand that in order to demonstrate the function of the platform we will be using actual symbols we will be remember that student we talked about example remember that TD Ameritrade does not make any recommendations determine suitability of any security or strategy that is up to you to decide what you want to invest in and any investment decision you make in your self-direct account and solely your responsibility and also any remember that all investing involves risk including capital or even potential unrealized profits when we also talked about options remember that the the definitions of the option the Greeks are located at the very top left be aware of those what are we going to cover here today well last week we talked about W patterns hopefully everyone saw W’s as they were sleeping that night and we talked about identifying reversal points that was last week hopefully you got some practice with that this week okay we will have that same format we’ll talk about market sector update I’m going to ask you some questions be ready to type those answers in and we’re going to talk about stocks and options examples consolidation which we’ve seen a lot of that consolidation a lot of these stocks as far as price patterns and we’ll take a look at some of those socks that might be consolidating that could be leading to breakouts we’ll talk about the class portfolio and the favorite section of all time which is going to be portfolio math we’re gonna get a quick rundown as far as what the paper money portfolio is done for the year just get some updates and then how do we actually calculate really some of the math that we should be aware of and be watching the learning outcome here today is identified no resistance levels for potential entry and so that’s what we’re gonna do now a lot of some of you have asked regarding what’s the next class that I’m gonna be doing let’s say live Vince is asked about am i coming to Detroit no Mike Follette will be in Detroit the next time I’ll be going out and about will actually be in Denver Colorado at the investing foundation class so Mike flat teaching there in the Detroit area just want to give you quick heads up on that some of you have asked let’s go ahead now and get started here let’s take a look at the first item of business on the agenda we won’t look at Amazon but if we take a look at this I’m going to pull up let’s say the SPX and if you look at the SPX what you’ll notice on the SPX and these were our lines from before okay these were our levels that we talked about and we talked about the W pattern last week we talked about the low the low the middle of the W and you really go back to the last date we had a class which was on 2/4 which was right there you’ll notice that the price got above that and we’ve actually been in this case that the the price action has been above both moving averages we’re using the whole moving average of the 20 and the 10 and so price action has been above the 10 again which tells us momentum and we’ve been above that 20 again which is telling us about Teta trend oh my goodness boy has there been a trend we had a prior high right there prior high and we go back and we look at the candlesticks you’ll see a bullish engulfing candle right there and that when we see a bullish engulfing highly likely that that is also something where we’re having a CAHOLD Close above the high of the low day117
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and we saw in the SPX that that was a close higher day with today being a gap open okay no feds Paulo speaking or was speaking gold is getting crushed it’s only down thirteen points right now but you’re gonna see that markets liking what he’s talking about now we said last week that when you take a look at the the ndx okay that has still been the area that’s had the relative strength so when we look in the last week which two indexes have been the strongest it’s the Nasdaq number one and really number two as being the S P okay what you’re gonna notice is the Nasdaq never really went down as much how we had it had it what we call a tilted up W where the low was not as low as the previous and really what you saw that’s last week all arrow that and you’re gonna see the whole moving average since we got above the middle of the W and then since then we’ve just kind of been seeing a little upward trend now remember what we said last week where we talked about interest rates right when we take a look at the T and X we said kind of one of the Canaries in the coal mine was that the interest rates were really diving down so it didn’t like that but the job of the investor is to trade what they’re seeing on the chart and if the word a break down it breaks down but the thing is what we’re seeing as interest rates have lease from that to four bottom February fourth we have been seeing rates come back up and that’s better but clearly the u.s. their rates are trying to reflect what other rates are doing around the world and that’s why the Fed is actually keeping them so long I mean if the economy is so strong why don’t you raise the rate because you’re trying to compete with others around the world you’re trying to make it where the US exporters are not selling their price their products at higher price levels and it with higher interest rates and creating currency problems so here’s the deal still low rates and when we also take a look at let’s say the the VIX you’re going to see the VIX that was it about eighteen we said this before when the volatility is up and some look at op as being above 18 for them that’s where investors might consider trying to maybe look for some potential opportunities if you took those volatility has actually been dropping back down and from volatility drops back down that typically means we see some upward trends coming back in that’s what we’ve been seeing and that volatility kind of unbelievable if it did but let’s say it comes back down to 12 okay pretty interesting there so when the volatility is high stocks near lows and supports when volatility is high w patterns are likely and that’s what we’ve been seeing now let me ask you this question so when we talk about the sector’s what three sectors I really want to say four but what four sectors really have been leading to the upside I’ll say for this time name the sectors that have actually been performing now this question this question is very important because if you’re not in these areas you’re gonna have a tough time performing well with the market name the four sectors that have been the strongest over the last week now it’s not getting the answer to that go ahead and type those in I also want to make references how do I really find that if you go to my Twitter page James Boyd right at the very top you’re gonna see the scripts and one of the things we actually see right at the very top is we’re using the one-week percentage this script right there to find out what’s the strongest over the last week so if you don’t have that script grab it and that’s how we’re answering the question okay now Lee said she says X okay and also X out Y so in this order it was industrials it was technology okay not surprised her it was health care probably a lot of biotech and also I XY which is consumer discretionary so our beat that industrials tech health care probably a lot of biotech and discretionary so those four areas were the ones that led to the upside we might be asking what happened with utilities they were flat on the weak but they weren’t up as high as the other ones okay now remember we always want to ask that question because we want to see where the relative strength is okay so with that in mind let’s kind of now take a look now are there any questions on the indexes at all the sector’s at all are there any questions there and I want to pause for a moment there to see if there are now also I want to give you a quick reminder that in some of the classes here today I posted yesterday on the home depot in terms of the patterns some of you I was thrilled with as far as identifying the patterns others said it was like a pterodactyl pattern or something like that talked about bowing yesterday talked about Amazon can flags actually happen on internet chart etc so just if you’re not getting that update make sure you grab that now I’ve just double checking for questions number one Lisa’s question is are you not using the ten-day EMA anymore just the whole 10 and the 20 well so Lisa if you overlay the 10-day exponential moving average and I want to this is why I want to pause because I knew there might be a question on that if we go into the Edit Studies box right there okay edit studies click on that what I’m now gonna do is I’m gonna go over I’m just going to type in H you ll now first off I think when you’re using a tool you should least know really what you’re using and why you’re using it okay and if you take a look at that right there as I just typed in hole okay moving average and you should click on that little question mark right there let’s do that and let’s click on the question mark and now what you’re gonna see is this um give us a description of what is it know the hole moving average is a study indicator used to address the problem of lagging specific to average studies we know moving averages lag okay one of the reasons why we always talk about the 10x minute exponential moving average is to stop getting the lag so the moving average follows the stock more closely it applies a weighted moving average mechanism to smooth data so here’s the deal a weighted moving average not like an exponential moving average if you put the ten two exponential moving average on with and let’s just do that okay so what I’m gonna do is let me kind of show you some visual I don’t want you to think I’ve left the reservation because we have not we’re still got a house on that reservation right here and let’s click on that moving average exponential here’s the 10 and if you don’t mind what I’m gonna do is I’m just gonna label that 10 day moving average I’m just gonna go a pink line and we’ve always talked about looking for stocks that we’re above the 10 period moving average let’s look and see if we’re saying something completely different well what you’ll notice is if we bring up a stock and I’m just gonna bring up any stock and if you don’t mind I’m gonna bring up a stock called zhiling z– and if I bring up a stock like Xilinx and actually I’m gonna pick a stock excuse me micron if we were gonna look at a stock like micron and someone was gonna talk about let’s say the stock being bullish okay well first off what you’re going to notice is down here we had red line and then blue line that is your 10 H for the hole okay there it is 10 H for the hole now what you’re going to notice is why do we like the hole versus the 10 exponential moving average because what you’ll notice is on this day and that day you’re gonna see that that 10 day hole went from red to blue on that day the 10 day exponential I’ll just label this as 10 X for exponential you’re gonna see the price did not yet close above the 10 but the 10 day hole showed us hey we’re seeing a turn here the very next day the 20 I’ll label that as the 10 H the 20 showed we saw the 10 day Hulk it was up it was blue we saw the 20 it was up as well and you’re gonna see that on that day right there the price action got back above the 10 day exponential so with both when the price was above both 10 and 20 day hole moving averages the price was all above the 10-day exponential but why why would you use the different ones well because what you’re probably going to see on the bottom is the whole would probably give us out the 10-day whole would probably give us about a one to two day head start remember we said the 10 day haul was kind of giving the warning and trend could be changing now if that stock made a huge move in one day that’s probably not true but probably that 10 day haul is probably going to give us a 1 to 2 day head start and saying look a bounce or a breakout could be likely be prepared for that so we like the color coding of the lines to kind of give us a heads up that that bounce or breakout could be potentially imminent does that make sense Lisa in this example this did not give us that one or two-day head start it was maybe one day at most okay and that one day was really right there all right okay I just won double check just real quick okay good Thank You Kent for that update okay now James actually says base materials conglomerates and tech is what I’ve been focused on so here’s here’s now I’m not saying you’re doing this okay here’s the thing people can focus on let’s say reach they can focus on base materials the question is are you trying to focus on what you want are you trying to focus on where there’s relative strength it’s very important because if you’re focused on what you want to focus on you might be missing some potentially stronger moves so just understand that all right now let’s kind of go back to some examples here and what I’m going to do is let’s kind of go back to so good discussion on that remember and I’d like to see in the chat how many of you have been using the 10 day hole and the 20 day haul I would like to kind of see maybe some of the comments do you like it do you guys got questions on it go ahead and actually let’s type those in now what I’m going to do is we talked about the market in the sector update still bullish we saw that the market here in this case was in more of that continuation pattern now what I’m going to do is let’s talk about stocks and options and examples and what I’m going to do is I’m going to bring up one example there and I’m going to bring up a class portfolio management so we’re gonna go one and one ok one new example one Koerner pass example well bounce back and forth alright hello Marty so let’s do this so what I’m going to do is first I’m going to bring up the by do excuse me not by two I’m gonna bring up let’s say the Boeing example now I’m going to take the tend exponential moving average off because I think that’s a little overkill since we have a 10 on we talked about this on Twitter yesterday saying was the stock really breaking out of resistance okay diagonal resistance and what I’m going to do is I’m gonna go back to about right here now this was a past example that paperMoney account had a short wide put spread on it okay we talked about how the stock we did a short wide put spread so that way there would be a defined risk okay that was the idea and you’re gonna see that the stock did go to some new lows and there was even a funny question I laughed James why did the paper money account take this position in Boeing what we talked about how maybe there might be for the new CEO a kitchen sink Corner quarter and you’re gonna see that they did swing to a loss the new incoming CEO might kind of throw all that negative stuff in their current quarter which makes his bar pretty low maybe for the next upcoming quarters and or fiscal year now what you’re going to notice is when we draw resistance all we’re going to do is we’re just gonna go back and we’re gonna circle some of these recent highs here here okay there as I’m here here and if I go back one more let’s say there and there so when we draw resistance all we’re doing is we’re just circling some of the highs and if we circle some of the highs all we’re really doing in this case is we’re now just going back and saying can we connect the dots well if we go back and go here to here too here to here that’s probably where we’re seeing the angle of resistance the most recent resistance now what you’re going to see is over to the right if we go forward here you’re gonna see over the last couple days is the stock did break out of the resistance so on the short wide put spread I’m bowing yesterday that was hit out at an 80% maximum gain so that trade finished 80% maximum gain on 80% of the maximum gain on Boeing the target was hit yesterday so you’re going to see that in the monitor tab what you’re gonna notice is we don’t have any position on Boeing it was hit out that was as of yesterday okay and there was an order that came through today that wasn’t right it was the exit of the vertical spread I fixed that but that let’s hit out target yesterday so Boeing has been completed now that’s just one pass trade I’m just showing you what happened the stock did breakout of resistance the question now it might be could we look for a new entry right could we look for that stock to actually pull back perhaps right you might consider roll not rolling it because you already exited it in the paper might account but if you thought that stock might continue might take a new entry now what I’m going to do is let’s take a look at we saw some stocks let’s talk about a new example let’s bring up a stock like Nvidia now in video you go back to about a year less than a year ago the stock was at 130 hundred $40 nvidia has been pushing its way to the upside okay and if you take a look at Nvidia I’m not gonna talk about Nvidia but we kind of use this as maybe the lead horse so to say a larger market cap in that space and what I’m going to do is we’re going to look at a couple stocks I’m gonna look at let’s say a stock like micron okay which kind of is a little bit perhaps more a little bit in a sideways trend I’m gonna look at a stock like AMD okay which is actually today been in more of a continuation I’m also gonna look at a stock like a mat now I’m gonna stop with the stock like a mat and that stock really has earnings tomorrow okay if you look at a stock like a mat while you’re gonna really notice is we had a prior hi we have a prior hi if we really zoom in on the stock you’re gonna see that we have let’s say some lows right there a higher low and the stock goes right up near resistance so when we look at the pattern here what you’ll notice is it runs up pulls back pulls back they’re higher low and now it’s right back this is what we talked about last week that little tilted up W okay where the low the recent low is higher than the prior low now I’m gonna start with a mat first if we look at a mount we might say jeez has quite a bit of risk we it’s a earnings actually is after the bell tomorrow if we go to a mat let’s kind of take a look at what the implied volatility is now if we take a look at the implied volatility sixty implied volatility tomorrow 60 okay 45 okay 41 and what you’re gonna see is the implied volatility drops off as we go further out in time now if this was your trade you were going to be the one paper trading this what type of strategy what you do would you buy the stock would you do a protective put on it would you do a selling strategy of an option what would you consider now I’m going to kind of think of one thing is if we does stop trade if we did that that’s the most bullish type of traders has the highest Delta number two what if we come all the way over here we did a short vertical put really other than selling a pot where we have a defined loss okay could we maybe do like say a selling of the put more bullish but more at risk higher credit okay then if we said well could we do it maybe like a long stock and buy the put we could buy the plot but the puts are probably going to be pretty expensive based upon what that implied volatility is now a lot of you are actually saying James look let’s practice may be selling the pot let’s use that higher volatility well let’s take a look at this if we go out about 40 or so days now in James why not three days well wonder if the stock has an adverse price move wonder if it goes down okay so what I’m trying to protect here is if the stock goes down we did let’s say Friday that’s not a lot of time to recover if you don’t mind to own the shares you might pick something that is that close but if you said James I want to kind of least give it a little bit of time if we were to go look good let’s say that’s 62 and a half and the stock is at about 64 that means the stock could go down about our dollar 50 to the strike or if we took something like say the 60 that really has about a two and a half percent premium which is pretty high considering okay so and that only has a 28 Delta so let’s take a look at this if we sell so well remember the position size in the portfolio was about $12,000 a position so if we did $12,000 12,000 the swerd really allow us to do how many contracts how many now Jim is saying maybe a short vertical put to define the risk and I think that’s absolutely an option clearly if we only sell the put we don’t have any built-in risk okay if we win more risk more directional we’d be doing two contracts because two times 60 would be about $12,000 worth of stock if we push the mid price to about a dollar 46 we are also going to set the buy back single order first triggers seq we’re gonna right click on that line and say in create opposite order and if we do that we’re gonna set the buy back and if we’ve set that buy back in this case what I’m going to do is a dollar 46 we could say buy it back in 50 percent less buy it back at 65% less 80% less if we took a dollar forty six times safe 65% less we’re going to buy that back and let’s say 51 cents all we did there is we took a dollar forty six times point three five okay so point three five that’s all we did that’s how we got 51 cents trying to sell it hi buy it back low okay that’s all we’re doing now we’re gonna go dated GTC there it is remember when we sell it sell a put that’s the obligation of buy the shares from now until expiration now until expiration and you’re gonna see the break-even expiration when we bring this up is going to be the key word is break-even at expiration it’s going to be 60 okay – $1 46 and that means at expiration we really own the stock somewhere right around about 58 40 54 scuse me fifty eight fifty four that means the stock could almost come down about ten percent okay and still be broken even that’s kind of interesting that it could almost fall about 10% to break-even that only happens when you probably are selling when the implied volatility is higher which it is if we send that order now what we’re gonna go ahead and do is we’re gonna send that remember that on that order since we have two contracts we have a transaction fee of 65 cents apiece so that transaction fee would be a dollar thirty two sell it now right now we actually said sell it for a dollar forty six as we can see the price on that is right now about a dollar forty three well see if that can’t fill momentarily if it doesn’t we’ll go back in and adjust the price a little bit okay now the reason why I’m bringing those up is with such a strong move in Nvidia that can bleed into other stocks in the same space now remember we said AMAT okay we said NXP I as well NXPI there it is that’s another one so let me repeat Nvidia AMAT AMAT NXPI we also said AMD MU micron when institutional investors get into an area they’re probably not just getting into one stock they might get into some other names as well and almost to one other one that I would include in that would probably be a TVI those would be the ones we might be looking at if we were looking at semiconductors okay all right now what I’m going to do is let me kind of come back to one of the things we want to get out today is really identifying these consolidation patterns and then seeing the potential breakouts now what I’m going to do is I’m going to go back to a stock like Home Depot and Home Depot I posted about this on Twitter yesterday and we talked about this stock really kind of being up near an area of resistance now if you go back and look at let’s say Home Depot Ghana there’s the resistance right there the reason why we’re taking a look at this is this has a pretty steep from support to resistance that’s about $24 okay and what you’ll notice is it kind of really has and it’s not perfect it kind of has like a shoulder and then it drops down kind of as a base runs back up kind of creates another shoulder sorry for the drawing and you’re going to kind of see that we have shoulder head shoulder now is it in the eye of the beholder haha I think you could say that but it has kind of those similar characteristics of an inverse head and shoulders not typically inverse head and shoulders you see after the stock is sold off but you don’t normally typically see it like in an upward trend at all-time highs this could also potentially be viewed as maybe a cup and handle now the earnings on this stock are really right about where are they they’re right about 225 now think back to the question I said which is what areas have been the strongest well one of the areas is consumer discretionary okay well how does Home Depot apply well it’s in the consumer discretionary space all right so second trade we’re going to look at here is maybe Home Depot let’s look at its volatility and let’s look and see if we can’t see if we can’t trade Home Depot over the earnings come back to the trade page now first thing that you recognize is the volatility is dramatically different it’s not as high is what we saw in that previous example no now the one thing what you’ll notice is the implied volatility 20:19 and all the sudden the volatility here kind of balloons up so that earnings is probably closer right in this section because that’s where the volatility is the highest let’s double check I want to see when that earnings is it’s the 25th now what I’m going to look at is we’re going to look to buy the shares of the stock okay and this is gonna be a bigger example what I’m gonna do in this case the problem with this synthetic and actually you know what I don’t think that’s a bad way to kind of let’s kind of practice that okay so the first thing is when we talk about synthetics you know I’m going to keep this to the example of just a stock so you need to realize it is going to be a bigger stock position Lisa I liked where you’re going with that but I’m let’s hold off on that for slightly maybe a little bit lower price taller stock so step one is we’re gonna buy the underlying asset this will be a bigger position though number two it we’re gonna come down to single or your first triggers seq and we’re going to look to buy a put that would last over the earnings okay now the one that we’re going to look at here is we’re going to go out to let’s say 30 days to expiration or so and if we go out about 30 or so days to expiration we’re gonna go look to buy a put let’s say it between that 30 to 40 Delta okay now do we have to go the 235 no we could go less but the problem is that’s gonna be a little bit less one thing is let’s kind of run these numbers just real quick and this is very important when we run these numbers if we buy the stock at 241 and change and we buy the 235 put this is a married put okay buying the stock buying the put buying the put we have the right we control what happens okay well I have the right to Xu sell those shares at 235 from now until expiration okay well if we left click right on that 455 and you’re gonna see that that RR is about 1.8 for what you’re gonna see in this case is well buying the shares buying the put so the risk is really from about 241 if you don’t mind I’ll say 241 even numbers we have a right to sell those shares at 235 so the risk per share there is about six but you have to also remember is that in this case the right to buy that put is not free so grand total if we lose on this trade if the stock were to close be low aim at finally fils if the stock were to close below the strike price at expiration we’d really lose about a thousand fifty the cap okay now what’s going to see is we’re buying the stock buying the put and I’m going to show you the next example why we’re doing this is if the stock were to gap up it does not cap or upside in this type of trade we have a floor now in this case could we still set a target absolutely we could but now I don’t have to really worry about some big massive drop what happens if it really goes down a lot the biggest risk we have is we need to start to go up at least 450 to pay for the put if the stock goes up more than 450 from now into expiration it pays for the put and we could capture some of those potential gains as unrealized gains but we need the stock to go up at least 450 which is about 1.8 percent of the stock value now second trade we’re going to do here is going to confirm and said remember on the stock transaction we don’t have a transaction fee the transaction fee is really coming from the option one option one transaction fee sixty five cents now what you’re going to notice if that’s what we want to do we’re going to go ahead and send that order and they it is November when we buy the put it’s not a ceiling this is not a cover call this is a floor now I set this one up because it’s going to take us into the next trade ok let’s go back and say send that so now remember what you’re gonna see is that did fill there we go and you’re gonna see it on the bottom there now there was a trade that we did in the trade was Microsoft okay now let’s take a really good look at what we have so what type of position do we have on Microsoft what do we have yeah Microsoft so there it is Microsoft hundred shares a stock and we have plus one okay now I want you to notice is when you know 100 shares of stock we have a hundred Delta when we buy a put that’s negative Delta that’s trying to protect the shares so I want you to imagine that in one hand you had a hundred shares of stock and in the other hand you had negative one Delta one hundred negative one clearly this one is the stock is a lot bigger why is that well as the stock goes up higher and higher and higher above the strike what you’re going to see in this case is the put has less probability to close in the money as more time passes there’s less probability of too close in the money and that’s what we can see here we need to talk about this because on the shares we did the exact same thing with Microsoft what do we do well we bought the shares and then what we did is we bought the put all over the earnings now when we bring this up what you’re gonna see is one trade has benefited the stock the second part of the trade the put what you’re gonna see is hasn’t benefited it actually has lost now the protection has lost let me bring that back up the protection is lost okay so what you’re gonna notice is the stock is up 1952 but the put is lost 271 now here’s the deal as people we like to win on everything we do just admit it we do like to win on everything when this trade were okay with actually not winning on everything what we’re doing is we’re trying to make the net of the transaction the net of the transaction is 1650 well what was the purpose of the putt the purpose of the point was to define the risk that way if the stock went down we had a right to sell at that strike price that way we don’t have some unlimited loss down 2-0 so to say are a limited loss down to zero where there’s gap risk we wanted to cut the gap risk we did now what you’re gonna see is that that premium has gone from 280 down to 8 cents now this creates a problem now the put is not very helpful it only has about 2 Delta left now what I’m gonna do is let’s go to the chart let’s bring up Microsoft and let’s kind of bring up the example here of how do we really identify an exit point how do we identify in this case are we seeing sell signals or are we seeing for example how do we adjust the stop so when we go back and take a look at this what you’ll notice is we’re seeing the blue line remember the blue line is what that is the 10-day exponential ten-day hole moving average okay the Green Line is the 20-day hole remember if both lines are up and we see that we have the blue that’s the 10 okay if we see that those are both up blue and green we still see momentum and trend it’s still saying we don’t have a warning signal still showing us that it’s trending we don’t have anything to say sell that make sense if we were to let’s say could we move up a stop or could we place a stop well let’s kind of maybe use that hole let’s use the lagging one the 20 as maybe a potential support area well let’s gonna take that line well we’re is that line it’s about 180 510 well if we took a stop and said it maybe underneath there okay maybe what if we took that ten-day hole let me mark that so we can see it so what you’re going to see is as we move up up up up maybe that 20-day hole acts as far as a level of support if we set a stop right underneath that line let’s say less two to three percent it’s gonna give us a stop of 180 139 all right so now what I’m gonna do is gonna go back to the this page we’re just gonna right-click on the stock only now if we right-click on that stock we’re not selling now but we’re saying with stop the reason why we’re doing that in this case is we want to really make sure stock sell – 100 180 242 day – GTC just where are we gonna place a stop we’re gonna set the stop at 180 139 so what we’re trying to do is lock in some profits so that stock is right up about 187 stop at 181 where you kind of using that 28 hole as far as a way to set a trailing stop manually or just set the stop and type in the new number okay if that line were to continue up we’re trying to lock in some of those potential profits do we know what we’re gonna sell it no we just know that if the stock goes down to 180 139 if it does it’s gonna trigger sell at the market price the price could be filled though the stop could be filled lower than that that’s why it says market order okay confirm and send notice if it does sell if it does no transaction fee us-based listed stock send the order now what you’re going to notice is if we come back now we have a stop underneath that line okay there we go so here this is probably a very good time to take a look at stocks see where that moving average line is that might act as far as a level support and see if you can’t raise up the stops now the one thing I want last what I want to really bring up just real quick is to stop by D let’s touch on this so on the stock buy do what you’re going to notice is on buy do we have a short put now when we take a look at buy do you what you’re going to notice is the stock okay that not the stock but the option value was 355 the mark value right now is let’s say 125 so if we have let’s say that difference between what it was sold for and what the mark was do you think we maybe have enough potential profits right there what percentage are you trying to get well if we had about two dollars and 30 cents all of that 355 we probably have right at right now 65% of the profits right now now the only amount of money we can make left is the remaining 35% which is a dollar twenty-five now when we go back and take a look at let’s say by do what you’ll notice is it’s also done a W pattern it also broke out of the area of resistance a downward sloping line okay downward sloping line let’s kind of take a look at this downward sloping we see the red line go from red to blue okay what does that tell us again momentum change potential we go forward one day now we get that 20 period the lagging line goes red to green and what you’ll notice is it’s kind of been using just lately bounced off the 20 hits we’ve talked about using as some potential support and it’s bouncing back up okay now here’s the thing no one’s going to shoot us an email and say take us take to take the profits nobody why did you get in the trade we’re not trying to collect Baidu we’re trying to see if we can’t trade or investing Baidu when we do a so put strategy we’re trying to make up potentially off the premium and or buy the stock at a relative discount well in a stock let’s say like Baidu if we thought that stock trend could keep going we might roll that option okay but if we said James I just want to try to make some income all we would need to do and by the way there’s only 10 days left if we wanted to just try to take those gains we could say create closing order buy that back buy that back and we’d be trying to really buy it back at about a dar 28 and go confirm and send now when we buy this back again we’re trying to sell it hi buy it back low okay dollar 28 okay plus 65 cents we’re now gonna send that order okay so let’s kind of recap something for just a sec what trades have we taken so far today well number one is we sold puts on amen number two trade we actually did here today we bought the shares on Home Depot and we bought a protective put on it okay do you realize when we sell a put we’re trying to buy the stock at a relative discount when we buy the stock and we buy a put clearly we own the shares well we’re trying to do is use options as a stock investor now what I’m going to do is Chuck’s question is do you see the change in the whole moving average the same day or next well if you want to kind of really see probably more accurate okay the lines do they change today or do they wait til the next day if you want to see that what I would tell you to practice and chain for yourself is probably change these lines to where it’s not a style of a straight line but change it to like a highway strip or a dot because if you change it like that you’re gonna net then you would see the change today okay it wouldn’t lag till the next day change the line you can do that by clicking on the gear right there click on that change the style not to where it’s a line but Chuck if you want to see more accurate or to the exact day do a highway strap or a dot that way you could see it I mean as soon as possible okay and you’ll see that there is a slight difference with that if you do that all right now let’s go back to our agenda okay so we talked about the market of the sector update number two we talked about stocks in opposite examp we also talked about some class portfolio management there and now what I want to touch on just let’s take five minutes it’s just talk about portfolio math and in the end we’re gonna kind of look at some number of stocks that we could also maybe one more that we could add add to the class portfolio I think this last section is very important a lot of people say to me James I want to be an investor what I found is a lot of people don’t necessarily know really what their returns are so I want to kind of make sure we kind of track what’s going on with this portfolio I have prepared to talk about this so let’s kind of just kind of get a quick recap what this portfolio has really been doing and let’s take a quick look at it okay so first off what I’m going to do is let’s take a really a look I’ve just we got to playing screen so that’d be perfect I want to kind of get a quick take on really the trades that have been done in the portfolio so far okay want to give us a quick update so first off we’ve had about six trades that have closed well actually seven now if you include Baidu okay I’m going to give you some quick numbers so first off McDonald’s was the first trade that trade on McDonald’s was about seven hundred sixty dollars okay ba which I said earlier closed up ba was actually about a trade where I had about two thousand eighty knee we had a long synthetic on me you guys know that we talked about that for two or three weeks knee was about fourteen ninety as far as gains Intel for example was also a long stock over the earnings Intel was about a thousand eighteen Facebook a loser had 28 shares of Facebook I’ll put in parentheses that lost three hundred and twenty three dollars it actually went down and hit the stop did a short example on Tesla Tesla was about a our gain and on the Baidu I’ll just put this because we just did this Baidu was really in this case about a two hundred and forty dollar realized profit now so these are the trades that we opened and closed they’re done okay now what I want to kind of do is I’m not going to kind of be prepared to talk about Baidu but let’s just talk about these numbers initially so out of these trades there’s really been about five out of six that have been winners to losers so that actually means in this case that if we had five out of six we really have so far about 83% win 17% loss do not get wrapped up in that number that number does not tell you everything what you really want to know is what is your average win relative to your average loss well we have in this case about 5,600 okay 5,600 of wins and each win is about 11:30 – trust me this is not the stuff people talk about because they don’t want to talk about it then it makes you wonder why second thing is when we look at the loser we had one loser and the loser was 323 that was the loser and obviously that one loser would be your average okay and I need to write L for loser that was the face book trade so the at these were the wins this was the loss average win 11:32 I’ve what average loss right there we good on that now remember is I also need to kind of make mention we’ve been in a bullish market so we have a higher win relative to loss that can change if the markets were to change direction okay number two are there any questions on that go ahead and type those in let me say one more thing on this I want to touch on one of the other things that happen sometimes is people want to grow their accounts but they not might not be able to remember or know how do they track what’s happening so first off what did these accounts start with well it started with $175,000 that’s what okay now this morning if you don’t mind I’m just going to take the number I have from this morning so I can be as accurate as possible the portfolio this morning was about a hundred eighty one thousand one fifty okay now if we take a look at this this was the starting value this is where the CV that’s the current value the fair value of all those assets well if we take a look at this is if we were going to close the account on out if we did okay all we’re now going to do is just take the ending value what’s the ending value well 180 150 150 alright all we’re not then going to do is just take the starting value which in this case it was one hundred and seventy five thousand okay and we’re just going to subtract out by one and it will give us the percent now here’s the deal if I ask you are you on tractor meets your financial goals if you don’t track the rates of return then what’s happening then you’re probably not on track let’s just be honest okay so we’ve taken where the current portfolio value is we still have positions open that’s where it was adds up this morning and this is where the starting value was so if we look at the numbers actually this morning the portfolio had appreciated about three and a half percent now here’s something kind of important understand with that it was three and a half percent from the beginning of the year the one thing to also remember is we haven’t invested fully all the money yet that was three and a half percent and we were only this is the net liquidating value this is the cash this morning when I ran these numbers and that’s before we bought Home Depot we had only invested 42 percent cash 42 percent cash and we had 50 excuse me we had only invested 42 percent of the cash and we had 58 percent still sitting in cash so we were only really 40 percent invested and that 40 percent increased the portfolio value about three and a half percent now that we’re just talking about balance levels okay so we still had about 60% that we could still invest but that 40% still pushed the portfolio value up three and a half percent in 41 about 41 calendar days now let’s kind of go to this last point so we said ending value or that where that is currently over where the beginning value is and subtracted by one that will give you the percent now one thing that I also think it’s important in terms of identifying this might be the hardest you might have never seen this before but when we look at if you were to annualize those returns see the bigger picture now if we take a look at this if we took I’m gonna take the one plus the return okay what was that return so far not all the positions are close well the return so far was really about about three and a half percent okay so let’s just kind of put some parentheses there one plus the return well one plus three and a half percent but we want to annualize that so all we’re now going to do is we have we know we have 365 days in the year and so far we’re in 41 days so if we took really 1.03 five to the power of that number right there it’s really going to give you that we’re really annualized if we could keep that going it’d really be right at about 36% that’s assuming that we don’t add more positions in other words if we could keep that return going and utilize that 36 okay now I’m not saying we’re gonna do 36 I’m not promising we’re gonna do 36 all I’m doing is I’m just taking what the portfolio balance has done so far I’m looking at how many days in the year and how many days are we in so far to the power and it’s going to give us annualized about 36 percent okay guys and guess I mean if you’re gonna run a business you got at least look at the numbers right fair if someone asked you what are your returns average wins average loss expectancy what are your what do you return so far what are you what are you analyzing so far these are things you need to really know okay so all we did is we took the rate of return let me kind of remark that I think it was a little maybe not as clear we’re just taking that the balance returns so far not too hard and all we’re doing is we’re taking the number of days in the year 365 dividing up by the number of days we’ve been in the market about 41 days so far okay so this is like ^ and whatever you really get is about a number and you subtract that by one now give you to about 36% that’s clear so what I’d like you to do is kind of look at your balance in your paper money account now look at that return okay 365 divided by 41 will give you a number subtracted by one that’s actually going to give you what is the annualized that’s saying if you kept going at this rate what’s that annualized return that you’re on not saying you’ve reached it but if you kept it going okay all right so very important I want to give us a quick update I don’t think it’s fair to talk about positions positions positions positions if you never really talk about how’s the portfolio doing I mean just putting on more positions isn’t necessarily health why I mean if you’re managing a portfolio it’d sure be helpful to identify how are you doing relative to the benchmark now that kind of that kind of begs the question okay second piece we want to do with this is kind of compare now if we were to use this portfolio and say let’s compare the portfolio let’s kind of imagine that someone had a portfolio where they had just invested in the whole entire index they put a hundred percent in the index okay what we need to find out now is well and if we were to compare this paper on the portfolio to the benchmark let’s say the benchmark for this was the sp500 well if we go from here to here what you’re going to notice is if you invested all of the money okay in the benchmark and we did not have all of the money in the benchmark we didn’t have all the money invested yet if you invested all the money in the ESPY the S&P is 3.65 ok 3.65 the class the paper money portfolio was up 3.5 and that’s all in with 42% invested to get the three point six five on the benchmark you had to have a hundred percent invested so pound for pound dollar for dollar the clasp or the paper or a portfolio has not done it’s almost matched the market but using half the money interested now James could we maybe add more positions and try to increase the potential well that’s what we’re talking about right but to see that I need you to see the differences okay so we’re looking at the portfolio relative to the benchmark so far three point five the benchmark is three point six five assuming you uh you literally invested the whole portfolio in the benchmark okay now Chuck says but trades do carry over weekend well Chuck so remember when we kind of wrote the example remember when we did three six five divided by 41 how many days have there been so far in the year double-check me if I’m wrong I’m probably pretty close there’s been 41 days okay so we have 31 days in January 10 days or eleven days here in February we’re 41 42 days into the year that’s including the weekends okay all right no I’m including the weekends I’m looking at the number of days this is obviously looking at the number of days in the weekend and so’s this one okay now what I’d like you to do is kind of look at your own numbers kind of see where you are how are you performing relative to the benchmark break some of the numbers down how many wins two losses number two like you actually look at that expectancy average wind average loss like you to actually look at if you could keep up those potential returns not saying you’re gonna make that but if you could keep that on track what’s the annualized number and then compare that to the benchmark if you said my benchmark is the S&P 500 well there you go compare it okay now uh just for a quick yeah I’m actually using the 365 I’m using the 365 I know some people might use 252 days I am including the weekends okay if you talk to portfolio managers a lot of them not all they they would use the annualized returns that would be 365 if you just want to look at the trading days give you a different number I’m looking at the fiscal year the whole year okay including weekends okay if you want to use let’s say the number of trading days in the year to be 252 okay approximately so with that said I’m out of my time here today this portfolio math I think is it’s important you’re gonna see us talking about it you’re gonna see us talking about good trades bad traits you’re gonna see us that sometimes we’ll have more losers than winners sometimes okay we can but we’re gonna keep updated with how many trades have gone through we’re averaging about one trade a week entry and exit okay it’s really what it’s coming down to one trade a week the other ones are still going now we talked about the market hoops we talked about the marketing sector update we talked about that we talked about sector or not stock stock an option of the examples consolidation to breakouts class portfolio management we did make some adjustments in about two of those and we also talked about that portfolio math let’s take a quick kind of count pull out the calculator if you will kind of see how the class portfolio is doing we have some improvement here that we could do in terms of investing some of the other money but so far that class portfolio with using half the money is mimicking SP returns with half the money which kind of says that that pound-for-pound return is quite high okay currently now also want to give us a quick reminder that you could check out other classes on the t v– ameritrade you can check out a whole portfolio management camera may actually does a class on friday we’re talking about managing an option portfolio man has been a long-term portfolio my mic Fairborn or managing and building an ETF portfolio patent lolly these are great classes I’m showing you the numbers here today because I want you to see not just how this one trade did but how is the portfolio performing and that’s why they call it whole portfolio management okay so feel free to check out those other classes I also want to give us a quick reminder that coming up just shortly we will be having a class on from Pat lolly and active trader strategies and also remember that with what we covered here today in order to demonstrate the function of the platform we need to use actual symbols we did remember that TD Ameritrade does not make any recommendations determine suitability of any security or strategy and remember that any investment decision you making yourself direct account is solely your responsibility stay tuned for Pat Mullaly he’ll be coming up just shortly have a great day and Pat will be coming up just shortly thank you you

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