Investors Observer Workshop. Wednesday, October 18, 4 pm ET

Transcription

1 Investors Observer Workshop Wednesday, October 18, 4 pm ET

2 Debby Clowney MBA, Chicago Booth BA, U. of Pennsylvania 20+ years options experience Worked on Wall Street Consultant for KPMG Workshop Coach: Debby Clowney Our goal today is to provide a workshop where we discuss how to translate the Trade Idea Generator s ideas into profitable trades. We will talk both concepts and practical tips to make and manage the trades. We encourage you to ask questions throughout the workshop. If you have a question, likely others have the same question. My colleague, Bobby Raines, will be joining us and fielding questions or bringing them to my attention as we go along. To get the most out of today s workshop, I will ask that you have your Trade Idea Generator launched and during the case studies that you follow along with me. Jot down names of stocks you would like me to review in the Firing Line portion of our workshop.

3 Disclaimer Today s webinar is for educational purposes only. Nothing in today s presentation should be considered a recommendation to buy or sell any security. All stocks and options shown are examples only. Any pricing or potential profitability shown does not take into account your trade size, brokerage commissions or taxes which will affect actual investment returns. Stocks and options involve risk and are not suitable for all investors and investing in options carries substantial risk. Past stock or option performance is no guarantee of future price appreciation or depreciation. Prior to buying or selling options, a person must receive a copy of Characteristics and Risks of Standardized Options available at:

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5 What we will do in our STATE OF THE MARKETS What will drive the markets from here? What is the S&P weekly chart telling us about overall trends? Zeroing in on the S&P daily chart How is the Nasdaq doing compared to the S&P? How are small caps (the Russell) doing compared to the S&P? What is the volatility index telling us? How should market conditions guide our trades?

6 NASDAQ continues in the new parallel channel it created when it dropped below its uptrend line. Recently, it has joined the other indices in hitting new highs.

7 SPY -- setting new highs. Comfortably above uptrend line

8 The Dow (DIA ETF) setting new highs. Strongest of the indices

9 International markets ex-us (VEU ETF) consolidating at new highs

10 Small caps consolidating after finally break out from being range bound consolidation 2 failed breakout attempts Successful breakout

11 All portfolio trades currently at max profit level

12 What we will do in our STRATEGY INSIGHT Understanding how earnings affect options Predicting a stock s price using option quotes before earnings Directional option trades vs hedged option trades before earnings daily A case study in Netflix options around earnings A case study in IBM options around earnings

13 DIRECTIONAL trades before earnings? Pro s If the stock makes a HUGE move in the direction that you predict you can make substantial gains

14 HEDGED trades before earnings? Pro s Can collect more premium since volatility rises on options before earnings

15 OPTION QUOTES ON NFLX before earnings CALLS PUTS How much does the market anticipate Netflix moving after it reports earnings? What did NFLX do after earnings?

16 How much more expensive were NFLX options before earnings? OPTION QUOTES ON NFLX before earnings CALLS PUTS

17 Netflix Mon night and Tues day What happens after hours often isn t sustained the next day NFLX has pulled back $15 from the highs it hit in the after market when it reported EARNINGS

18 IBM option price predictions before earnings Last night Closing price Today $25 for a 155 call expiring Friday would now be worth $605!

19 IBM action around resistance (includes after hours prices) Price Action since IBM reported Support resistance levels from weekly chart A good earnings report will often test old highs Note how IBM rose to the 155 resistance AH Note how IBM rose to the 160 resistance next day Can it break through or do old highs become resistance How much would you have made buying IBM today at the open? 0

20 Important icons on your chart Most important Linear Regression, i.e., the channel the stock is trading in

21 Important icons on your chart Comparing a stock to... the market its sector its competitors All Stock Futures Forex CFD Bitcoin Index Economy Quandl You can check a market index type in a sector description or ETF symbol type in a competitor s company name or symbol

22 Featured Trades

23 Investors Observer s Option Trading Framework 1 FIND Early exits with full profits Early exits partial profits 5 EXIT Featured Trades Trade Finder 2 CHOOSE Charts News Strategies 4 MANAGE 3 ENTER Entering and managing a diagonal Order types What you need to know about your broker

24 A current diagonal trade in our Model Portfolios How much should you pay for this diagonal? 35.40, ie $3,540 How much do you expect to sell the diagonal for? 37.50, the difference between the 2 strikes = What profit are you looking for? $2.10, i.e., $210 per contract

25 How do we calculate the annualized target return? Step 1: Target P&L divided by entry price =2.10/ =5.93 % Step 2: Figure out how many days in the trade Step 3: Create the annualization factor Step 4: Annualize the percent return on the trade Option expiration date entry date = = 42 days = days in the year divided by days until expiration = 365/42 = 8.7 = % from Step 1 times Factor from step 3 = 5.93 * 8.7 = 50.35

26 Why is TIG not finding a diagonal trade for RHT? Sometimes every long leg of the diagonal is too expensive or has too wide a bid ask spread

27 NEXT WORKSHOP this 4pm TIME 4 pm Eastern time

28 FIRING LINE What names would you like me to analyze? We can look at the support and resistance lines on these charts Also, a thank you! to the many of you who are completing our survey and letting us know what topics you would like covered in the future, and what is most helpful or what is confusing in our presentations. -- and let us know whether or not your are interested in earning more about candlestick interpretation.

29 Q&A