options report .pdf

8/10/2019 OPTIONS REPORT .pdf

1/40

www.TradeTheMarkets.com 1

My Favorite Option Trades

John F. Carter

TradeTheMarkets.com


2/40


Options

There are hundreds of books written aboutoptions.

There are hundreds of strategies a trader can dowith options.

For my style of trading, theses are the strategiesthat I like to follow.

Lets Dive In . . .


3/40


Strategy #1

Directional SwingsTrades That Last a Few Weeks


4/40


Buying Options Main thing is to have a setup on the

underlying stock. Squeeze on the daily chart works really well.

Think of it this way you are just using theoption as a CHEAPER WAY to buy the stock. $16 for an option is a lot cheaper than $160

for the stock.

1 option = 100 shares of stock. $16 option =$1600 out of pocket cost. Key is buying IN THE MONEY strike prices


5/40



6/40


Buying Options

Squeeze fires off long on MA at $170 July options at this point only have 1 week

left. TWO OPTIONS: Buy DITM July Options like $155

And if trade is still valid at expiration sellthese options and then buy the Aug 155s. Or just start off with the Aug 155s.


7/40


Buying Options

Exit strategy same as stock Im lookingto scale out.

Stop on option is 50% of the value. $16 option, then $8 stop. First target is 50%, for 1/3. So $24.

Second target is 100% for 1/3, $32. Last hold on for squeeze loss of

momentum, TTM Trend change etc.


8/40



9/40


Buying Options

1 option at $17 = $1700 cost 1 option at $55 = $5500 in proceeds

Proceeds $3800 per contract


10/40



11/40


Strategy #2

Directional SwingsTrades That Last a Few Days


12/40


GS Call Option Trade Setup

This is one of my favorite trade setups. It generally lasts 1 to 2 days.

The signal is taken off the hourly chart but it has to be in alignment with the dailychart.

BONUS if its also in alignment with theweekly chart.


13/40



14/40



15/40



16/40



17/40


GS Call Option Trade Setup

I want to go in the money on the calls withan option delta of at least (or very close to)70.

In this case, the Nov 155 calls had a deltaof 68, which is close enough to 70.


18/40



19/40


20/40



21/40


Strategy #3

Directional Day TradesTrades That Last a Few Hours


22/40


Criteria for Directional Day Trades

There is an established swing high or lowon the stock that has been established.

We are approaching that swing high orlow.

There is a squeeze setting up on a 15minute chart.

Target is a 1.272% extension of that swing


23/40



24/40


Mastercard (MA) Example

SETUP:Stock jumped up after earnings and

then pulled back.


25/40



26/40



27/40



28/40


29/40


Strategy #4

Selling Credit Spreadson Weekly Options


30/40


31/40



32/40


Criteria for SellingWeekly Credit Spreads

Looking to sell the at the money strike,and but the next one out for protection.

This generates a credit Ideally able to sell for half the strike. So

on a stock with $5.00 strikes, then sell for$2.50.

More likely it will be lower than that. $1.50and above is ok


33/40



34/40



35/40


Criteria for SellingWeekly Credit Spreads

Exit? In a perfect world the spread expiresworthless and you collect the whole premium.

In the real world, once you make about 70% ofyour profit target, its a good idea to just get out.

So if you sell a spread for $2.00 (so your maxprofit is $2.00), and it gets to the point where thevalue is $0.60 cents its a good idea to take themoney and run.

At $0.60, there isnt much more upside to yourprofit but there is $4.40 worth of downside! GET OUT!


36/40


Strategy #5

Implied Volatility (IV) CrushOn Bad News


37/40


Criteria for BNIVC(Bad News Implied Volatility Crush) Looking for stocks that are gapping down

on bad news. Earnings or some other sortof bad news.

Typically the bulk of this down move isalready priced in pre -market before thecash session opens.

Panic at the open Implied Volatilityexplodes for the first 5 to 10 minutes oftrading.


38/40


39/40



40/40

options report .pdf

Documents