Sunday, March 5, 2017

Low Risk Trade 



In my post last week, I had highlighted a detailed case study on  $CMA   where you only risked less than   $1,000   to gain   +45%   in 12 sessions.  I gave my reasonings behind the decision to carry out a   Low Risk Bullish Debit Call Spread   on this stock instead of buying the stock.  The financial sector had been leading since the  'follow  thru'  day after the elections on Nov 9th and most stocks were extended beyond their ideal buy points.  It is risky to chase the stock once they get beyond the  +3%  past the proper buy point.  Utilizing   Options Spread Trade   on extended stocks is one way to profit from the momentum that we have in the market under current environment. 


Low Risk Trade on  $AVGO


In my post on January 23rd, I had highlighted  $AVGO  as one of the stocks on   My Watch List   that week.  The stock was trading at  $191  at that time and currently it is  +14%    The stock has been trading along the   8 day ema (exponential moving average)  ever since it appeared on my watch list on January 23rd.  It consolidated for 3 weeks in February to give us another opportunity to add to our position when   IBD(Investors Business Daily)   identified   $208.85   as a   3 weeks tight base   entry point.  Earnings was being reported on March 3rd and that precluded us as traders to exercise the stock position until after the earnings report.  Stock is now extended beyond  +5%  past its ideal buy point after the earnings report.  The stock is still trading along the   8 day ema   and the market is still in a confirmed uptrend.  The question that most traders ask now is   "Is there a way to still profit from this extended stock?"    My answer is  "Yes"


Bullish Credit Put Spread on  $AVGO


$AVGO   trades over   $600 million  (daily volume of shares X price of stock) daily.  It is a very liquid stock and there are weekly options available on them too.  This allows us plenty of opportunities to do a very short term trade to profit from the momentum that we are experiencing in the market right now.  Here are the trade details that one can exercise on Monday morning (not a recommendation but an exercise to practice virtual trade to learn from)

Trade:  Buy 8 contracts Mar17 $212.50 put and Sell 8 contracts Mar17 $215.00 put for a Credit of  $510:$990  Risk 

Manage Trade:  Monitor the trade to lose no more than  -50%   of the risk  ($445)  and close out the trade when  +80%  ($400)  of credit is attained.  We are looking for the stock to stay where it is or move just  +3%  from its current price in the next 2 weeks.  Close out the trade for loss if the stock moves  -3%  from its current price


Mentoring Service


If you would like to learn:

"How I Build My Stock Watch List and How I Execute and Monitor Trade"


Contact us at ...


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Happy Trading!

Amin









DISCLAIMER



Do not take a position unless you are prepared to sustain a TOTAL LOSS. Your loss could include the money you invested as well as commissions and transaction charges.


The Information I provide is for education and informational purposes only. The Information provided is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice. The Information provided is general in nature and is not specific to you or anyone else.


YOU SHOULD NOT MAKE ANY DECISION, FINANCIAL, INVESTMENTS, TRADING OR OTHERWISE, BASED ON ANY OF THE INFORMATION PRESENTED WITHOUT UNDERTAKING INDEPENDENT DUE DILIGENCE AND CONSULTATION WITH A LICENSED PROFESSIONAL. You understand that you are using this Information AT YOUR OWN RISK.