Weāve seen a lot of high-dollar stocks take off recently and if you ever thought about trading these expensive namesā¦
Listen up.
I want to show you an alternative that allows me to take advantage of these stocks without breaking the bank.
If you donāt know what Iām referring to ā itās options, and I want to show you how I trade them with a real-money case study.*
Donāt worry, Iām not going to be talking about anything complex here.
I just want to show you how I pair chart patterns and utilize options to express my opinionā¦
And why I think it can help you become a better trader.
[Case Study] Why Itās Important To Aim For Base Hits
On Friday at 11:33 AM ET, hereās what I sent out to subscribers.
AMZN bull puts. sold 3130 / 3100 vertical put spread for 14.40. risking 7,800 to try and make 7200 max, goal is 50% of the 7200
I adjusted my order some because i couldnāt fill the advance notice range i sent out earlier via the RagingBull APP but same trade really.
Hereās a look at the daily chart in AMZN (as of Nov. 20, the day I got into the trade).
AMZN was right near the 89-day exponential moving average (EMA), and it looked as if that would hold as support.
Now, I was actually bullish on AMZN, so instead of purchasing shares at such a hefty price tagā¦
I decided to sell the $3130 / $3100 put spread expiring on Nov. 27.
So this meanst if AMZN stays above $3130 on expiration, I would collect all the premium. The best part is I didnāt really need AMZN to explode higher.
I just needed the stock to get above $3130 and stay there. Of course, with this trade, I donāt have to hold onto it, and I can get out whenever I want really.
Now, on Tuesday at 9:02 AM ET, hereās what I sent out.
I intend to manage this position today meaning if itās not above my $3130 / $3100 spread Iāll take a small loss. What I donāt want to do is ride this, between strikes (currently $3110) into Wednesday, get caught in a gap down on the QQQ and be at max loss here āhopingā the market reverses. Basically I need some breathing room today or Iām playing defense. See how itās just starting to get under the trendline Iād be referencing? Needs to get back above that today for me to consider holding.
When it comes to these plays, itās important to manage risk and thatās what I did here. When I saw I was actually up money on the trade in the afternoon, I locked in my gains. I believe it was a prudent action to take.
You see, weāre heading into a holiday, and since the market is extendedā¦ I wouldnāt be surprised if thereās a pullback in some of these names.
Notice how I just spotted what I believe to be a simple chart setup. I found an area I believe AMZN can stay above and used options to execute my stance on the stock.
Right now, Iāve found pattern recognition to be most beneficial to my trading.
If you want to learn my three favorite chart patterns and how I use them to attack the marketā¦ then youāll want to attend this training session here.
Youāll discover how chart patterns can make you a better trader and why itās important to focus on price action.
0 Comments