Options Trading Newsletter - Issue #88
CALL OF DUTY...
CALL OF DUTY...
Last Saturday, everyone 18 years and able was called on for our nations' General Election. For those who had casted their votes, kudos....that you made it, to whichever person or party you have voted for.
Well, take this as a privilege that you get to vote for your own government which is tasked to take care of your country as some countries don't have the luxury of deciding. I did my part on voting for whom I think will take care of our country and for the better for my kids future as what we decide today collectively, will only bear fruit in years to come.
The same for you, what you decide to invest in today will also benefit your children mostly as it takes time for the benefits to come and is not immediate. Invest in yourself first and I would say knowledge is a good investment. Learn it, practice and most important implement it.
For me, trading and investment is a good way for me to build wealth in the long term for my family and hope you can find similar path. Some of you may tag along this path and lets get on this ride together as going there alone is kind of boring. Do let us know if you need a little help and push along the way...we are always open to any questions and suggestions, drop us an email if you have any @ support@mystylework.com.
SPX - 3965
Market seems to be undecided if it should go up or down as the whole week was a tug of war between the bulls and bears, closing only slightly down by 27 points. 4000 points seems to be another emotional hurdle to pass and seems that last week, SPX failed to do so. Also, the 61.8% Fibonacci resistance also remained strong and holding.
4100 levels or the daily 200 moving average are key resistance levels to monitor as we still have around 3 weeks before the next CPI and Fed Fund Rate hike. We need a bigger pullback retracement than what we saw last week, at least back to 3900 levels before we can see a bigger momentum bounce to break 4100/4200 levels.
This week, only unemployment claim data on Wednesday. This week's trading range is 3900 to 4050.
NDX - 11677
NDX failed to break above the neckline of the "W" pattern formed on the weekly and also daily charts. It closed below the neckline instead, so indication of more downside might be possible for this week. If it hits the weekly daily 50MA (around 11400) and bounces up, that would be a good sign of another rally up till the next CPI and Fed Fund Rate hike on 13/14 December. If the CPI reporting goes lower and the Fed Starts to taper off the rate hike to 50 bps or lower, the chances of a year end Santa Clause Rally to be more likely.
Nevertheless, the Fed Members who have been constantly speaking since last week, remain the stance of high rate hikes if the inflation is not curbed, continuing the cautious mode of the market players.
This week's trading range is between 11,400 and 12,200.
IRON CONDOR ON XLE (WINNER...)
We revisit the trade we entered on 18 October on XLE which was also discussed in detail on Traders Talk. There was basically 2 trade we did:-
Iron Condor (credit $1.52)
Bull Put Spread (credit $0.98)
The Iron Condor Trade, we closed with a profit of $1.07 (31% ROI on risk of $3.48), we collected almost 71% of the premium.
The Bull Put Spread, we closed with a profit of $0.97 (24% ROI on risk of $4.02), almost 100% of the premium collected.
We also explained in Traders Talk, why we added in another bullish leg on top of the Iron Condor which is due to our expectation that XLE will continue to rally from entry and the additional bullish leg will protect the IC trade from going into loss when XLE share price test the upper price level of the IC. As predicted, the price continue to rally from 82 to highest almost 95 the upper band of the IC. If there wasn't another Bull Put Spread, the trade would have gone into losses quite fast after entry but since we had, the trade was quite protected until the share priced neared the short call strike of 90.
We exited the Bull Put Spread and the bottom leg of the Iron Condor (Bull Put Spread) earlier, on 31 October and 9 October by buying back at only $0.01 each. The reason we exited early is to allow us chance to exit the trade when price retraces and that there would not be any lower legs which will offset profits on such retracements. Another option rather than exiting was to roll up the untested side (ie. the Bull Put Spread of the IC) to collect more premium and derisk. We did not take this step though as we were waiting for a retracement for an early exit.
XLE price remained above 80 stochastics since entry and started to have fatigue after 8 November, hence although the short call strike was ITM, we continued to hold closer to expiry date waiting for a drop in price back below 90 levels. We saw that the price may breakdown on the last 2 days till expiry and waited till last day when it actually went below 90 (only for a while) and we exited during that small window by buying back the call spread at $0.44.
What would we have done, if we are still ITM on the short call strike? We would have rolled the trade to another week at a small credit or zero cost to give us more time for a retracement to happen. Luckily, we need not do that and manage to exit.
Takeaways
Mix of 2 strategies in 1 single trade is possible (eg our trade on XLE is IC and BPS)
Structure trade based on support and resistance
Evaluate where the higher risk of trade is, in our case the upper level and hence we made an insurance by adding a Bull Put Spread to protect the risk.
Be ready and know how to manage the trade if it does not go your way. In our case, rolling the trade in time and wait for a retracement. We can keep the trade longer without rolling because of the extra bull put spread. If just purely the IC trade, we would have rolled over the trade end October or when the short call strike price is tested.
Go check out the Traders Talk to understand in detail the logic of this trade which worked well for us.
Tik Tok Videos
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Trade Digest On XLE using Iron Condor #optionstrading #optionsstrategies — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Trade Digest On XLE using Iron Condor #optionstrading #optionsstrategies". Iron Condor on XLE | Trading in Range Use A Neutral strategy | Iron Condor | .... Lazy chill out, romance overseas celebrity, 10 minutes(1019319).
5 ways to reduce cost of calls. The ultimate traders' guide. #optionstrading #optionsstrategies — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "5 ways to reduce cost of calls. The ultimate traders' guide. #optionstrading #optionsstrategies". 5 Ways To Reduce Cost Of Calls | options trading | traders | .... Lazy chill out, romance overseas celebrity, 10 minutes(1019319).
Trading options with 68.2% probability using Expected Move 😎 #optionstrading #trading101 — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Trading options with 68.2% probability using Expected Move 😎 #optionstrading #trading101". Expected Move | How to trade options | trading options | .... Corporate Uplifting Inspirational Motivational Pop Rock Piano Violins Theme Song.
mystylework.trade (@mystylework.trade) on TikTok — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade). Butterfly Trade | How to setup low cost high returns options trade | Learn to trade options | .... Lazy chill out, romance overseas celebrity, 10 minutes(1019319).
Winning Options Strategies everyday. Creating high probability low risk trades 😎 #optionstrading #optionsstrategies #elonmusk @tastytrade — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Winning Options Strategies everyday. Creating high probability low risk trades 😎 #optionstrading #optionsstrategies #elonmusk @tastytrade". Elon Musk | Stock trading | Another WIN 😎 | .... Sunrise.
Twitter shareholder's meeting for takeover by Elon Musk 13 Sep 22, 10am. Lets trade... #optionstrading #optionsstrategies @tastytrade — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Twitter shareholder's meeting for takeover by Elon Musk 13 Sep 22, 10am. Lets trade... #optionstrading #optionsstrategies @tastytrade". select Nov 18 expiry | Sell ATM call strike 43 | recheck ATM price on open on Monday | .... TikTok's song-like tropical house(974524).
J.Powell's Message yesterday in 1 minute... @tastytrade #optionstrading #optionstrading #stockmarket — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "J.Powell's Message yesterday in 1 minute... @tastytrade #optionstrading #optionstrading #stockmarket". Fed Message??? 🏦 | Responsibility For Price Stability.... | Inflation Target | .... Suns.
What to expect for this week's market.. #optionstrading #optionsstrategies — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "What to expect for this week's market.. #optionstrading #optionsstrategies". SPX down 141 points (3.37%) last Friday after J.Powell speech | Monday another 27 points drop | but we see some slight support at 4000 level above daily 50 MA | .... Change My Mind.
Option Trade on JD - watchlist at last Traders Talk on 9 Aug. Closed today $922 profit 🤑 #optiontrading #tradingstrategy — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Option Trade on JD - watchlist at last Traders Talk on 9 Aug. Closed today $922 profit 🤑 #optiontrading #tradingstrategy". Option Trade JD covered potential trade during 9 Aug Traders Talk Entry 9 Aug Exit 26 Aug Profit $922 | watch till end to see the trade we did 😉 | Option Trades Adjustments - Based on Price Actions | .... YOU'RE MY SUNSHINE.
Hawkish remarks by J Powell crushed the market - pullback expected until Next FOMC in Sept 21. Watch for key points raised #optionstrading #optionsstrategies — www.tiktok.com TikTok video from mystylework.trade (@mystylework.trade): "Hawkish remarks by J Powell crushed the market - pullback expected until Next FOMC in Sept 21. Watch for key points raised #optionstrading #optionsstrategies". Key Points For Traders | Here's what JP said.. | > rates will go up until inflation is down to 2% | .... Flip through.
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DISCLOSURES
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options: https://www.theocc.com/components/docs/riskstoc.pdf
MYstyework is an Online Financial Literacy Educator and materials provided is solely by MYstylework and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. MYstylework, through its contents, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. MYstylework is not in the business of transacting securities trades or an investment adviser.