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AnonymousOne New strategy instead of Buying Stocks
One notable strategy worth focusing on is the synthetic long stock position, which utilizes options to mimic the risk vs. reward profile of a straightforward stock purchase. Below we will take a look into how traders can exercise this strategy to stretch their dollar even further.
Understanding the Synthetic Long Options Strategy
This strategy provides investors an opportunity to simulate the payoff of a long stock position at a reduced cost of entry. It’s also cheaper than buying a single call because the trade also involves selling a put.
To execute a synthetic long options strategy, a trader buys near-the-money calls while simultaneously selling puts — usually at the same strike price — which helps fund the calls. Since both the calls and the puts share the same expiration date, the strategy becomes profitable when the underlying security tops break even — the call strike plus the premium paid — within the options’ lifetime. As the security’s value increases, the calls also increase in value and the sold puts move out of the money.
How a Trader Can Utilize the Approach
Say two traders, Trader A and Trader B, are both bullish on Stock XYZ. Trader A decides to buy 100 shares of Stock XYZ outright for $50 a share, investing a total of $5,000. Meanwhile, Trader B initiates a synthetic long with options expiring in about a six weeks.
Specifically, he buys to open a 50-strike call for the ask price of $2, and sells to open a 50-strike put for the bid price of $1.50. Thus, after subtracting the credit of $1.50 from the debit of $2.00, it cost Trader B only 50 cents, or $50 (x 100 shares), to enter the trade.
In order for Trader B to profit from the synthetic long, the equity would have to rally above $50.50 (strike plus net debit) before the options expire. Had he simply bought the 50-strike call for $2, his position wouldn’t begin to profit until XYZ moved north of $52 (strike plus premium paid).
Winning vs. Losing With a Synthetic Long Strategy
Since both traders are bullish on the security, both expect Stock XYZ to rally above $50. Say Stock XYZ rallies to $55, making Trader A’s 100 shares worth $5,500. Trader A would make $500, or 10% of the initial investment.
Trader B’s 50-strike calls would have $5, or $500, in intrinsic value, while the puts could be left to expire worthless. After subtracting the net debit (50 cents) from the intrinsic value ($5), Trader B would pocket $450 ($4.50 a share at 100 shares) — similar to Trader A’s dollar gains, but a healthy 900% of the initial $50 investment.
Switching gears, losses can add up quickly in a synthetic long options trade. If Stock XYZ tanks to $45, Trader A would lose $500, or 10% of the initial investment. Meanwhile, Trader B’s calls would be deep out of the money, resulting in a loss of the initial investment of $50. Plus, Trader B would have to buy back the sold put — if it’s not assigned — for at least $5 (intrinsic value). At 100 shares, this would cost $500. In all, Trader B would lose $550 — similar to Trader A’s dollar losses, but 11 times the initial investment.
While the potential returns of a synthetic long options strategy are theoretically unlimited, more risk is attached than that of simply buying a call outright, since the synthetic involves sold puts. Thus, a trader should be certain the stock will rally above the break even price before implementing a synthetic long options strategy. If an investor is less sure a security will rally, he or she is better off buying a straight call.All trades that are published in the Alerts channel should have the same or very similar structure.
We are going to break down the structure and help everyone understand how to read them.
Here’s what a typical Call Out or Trade Alert looks like:
Here’s what this means:
1. Buy To Open or Sell To Close – indicates if the position is being bought or sold and whether it is an opening transaction or a closing transaction
2. $ sing with a ticker – indicates which asset or underlying security is being traded
3. Expiration Date – indicates which expiration is being used for the transaction
4. Strike Price(s) – indicates which strikes are being used as part of the trade
5. MID price – indicates the price between the BID and ASK at the time of the alertThe above Alert should be read as:
Buying To Open a position in $SPY for the expiration of 27th of May, buying 297/300 call spread where the current market price is 0.93 debit.
AnonymousWhat Do Resistance Levels Tell You?
Resistance levels and support levels are two of the most important concepts in technical analysis of stock prices. Technical analysis is a method of analyzing stocks that assumes the vast majority of available information about a stock, bond, commodity, or currency is almost instantaneously incorporated in the price by market forces. Therefore, according to this theory, it isn’t profitable to make investment decisions based on this information. Instead, technical traders try to divine how stocks will move on a short-term basis by looking at the behavior of markets in similar, past situations.Technical traders identify both the resistance and support level so that they can time their buying and selling of a stock to capitalize on any breakouts or trend reversals. In addition to identifying entry and exit points, resistance can be used as a risk management tool. Traders can set stop-loss orders to follow the resistance level or use any breach as a trade trigger. The simply resistance level has to be redrawn as new price data comes but most platforms offer visualizations of resistance that can be dynamically calculated. Moreover, many technical indicators become proxies for resistance at different points of price action. For example, a simple moving average can be used as a visualization of resistance when the price action is below the line as in a downtrend.
Example of How to Use Resistance Level
Let’s say that you are studying the price history of the price of shares in the Montreal Trucking Company, with the ticker symbol MTC, and want to determine a time when it would be smartest to sell the company short. Over the past twelve months, the stock has traded between $7 and $15 per share. During the second month of the period you’re studying MTC, the stock climbs to $15, but by month 4 it has fallen to $7. By month 7, it climbs again to $15, before falling to $10 in month 9. By month 11 it climbs once again to $15 and over the next 30 days it fall to $13 before climbing again to $15.The Difference Between Resistance Level and Support Level
Support and resistance are complementary concepts. Resistance establishes the current price ceiling for the stock, commodity or currency, and support forms the floor. When the price action breaches either support or resistance, it is considered to be a trading opportunity.Limitations of Using Resistance
Resistance is more of a market concept than a true technical indicator. As mentioned, there are far finer technical analysis tools that incorporate the concept of resistance while being far more dynamic and informative than drawing a resistance line across recent highs. These include trendlines, price by volume (PBV) charts and the whole swath of moving averages that can be tweaked by time periods to offer a spectrum for resistance levels.
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What Is Support?
Support, or a support level, refers to the price level that an asset does not fall below for period of time. An asset’s support level is created by buyers entering the market whenever the asset dips to a lower price. In technical analysis, the simple support level can be charted by drawing a line along the lowest lows for the time period being considered. The support line can be flat or slanted up or down with the overall price trend. Other technical indicators and charting techniques can be used to identify more advanced versions of support.KEY TAKEAWAYS
The support level represents a price point that an asset struggles to fall below over a given time period.
Support levels can be visualized using different technical indicators or simply by drawing a line connecting the lowest lows for the period.
Applying trendlines or incorporating moving averages provides a more dynamic view of support.
AnonymousCash Account vs. Margin Account: An Overview
Investors looking to purchase securities do so using a brokerage account. Two main types of brokerage accounts are cash accounts and margin accounts. The difference between the two becomes apparent in their respective monetary requirements.KEY TAKEAWAYS
Cash account requires that all transactions must be made with available cash or long positions.
Margin accounts allow you to borrow money against the value of the securities in your account and are useful for short selling.
Cash accounts can benefit from a securities-lending approach.
Margin accounts must maintain a certain margin ratio at all times else the client is issued a margin call.
Cash Account
In a cash account, all transactions must be made with available cash or long positions. When buying securities in a cash account, the investor must deposit cash to settle the trade or sell an existing position on the same trading day, so cash proceeds are available to settle the buy order.1 These accounts are fairly straightforward.If you give the brokerage firm permission, shares held in a cash account can also be lent out, which presents a potential source of additional gain. This process is called share lending, or securities lending.2
There can be a lot of demand by short sellers and hedge funds to borrow securities, especially on securities that are typically hard to borrow. When you borrow capital or securities, you are required to pay fees and interest on the amount borrowed.
Depending on market rates and the demand for the securities, the exact amount of interest charged for borrowing securities will vary (the harder to borrow, the higher the interest). The most attractive securities to lend are those that are hardest to borrow for short selling, which usually means small-caps or thinly traded stocks, as well as shares that are already heavily shorted or have fallen in price.
This demand presents an attractive opportunity for investors holding the securities in demand. If you have a cash account with securities in demand, you can let your broker know that you are willing to lend out your shares. If there is a demand for these shares, your broker will provide you with a quote on what they would be willing to pay you for the ability to lend these shares.
If you accept, your broker will lend your shares out to a short seller or hedge fund for a higher rate and pocket the difference, as well as satisfy another customer’s demand and generate commissions. For example, your broker may give you an 8% interest on the loaned shares while lending out at 13%. Depending on the size of your position, it can be a nice additional source of return. This method also allows you to keep your existing long position in the security and benefit from its upward movement.
this type of service is not automatically provided by all brokers, and even those that do provide this service may also require a minimum number of shares or dollar amount.
Margin Account
A margin account allows an investor to borrow against the value of the assets in the account to purchase new positions or sell short.3 In this way, an investor can use margin to leverage their positions and profit from both bullish and bearish moves in the market. Margin can also be used to make cash withdrawals against the value of the account as a short-term loan.For investors seeking to leverage their positions, a margin account can be very useful and cost-effective. When a margin balance (debit) is created, the outstanding balance is subject to a daily interest rate charged by the firm. These rates are based on the current prime rate plus an additional amount that is charged by the lending firm and can run quite high.
An investor with a margin account may take a short position in XYZ stock if he believes the price is likely to fall. If the price does indeed fall, he can cover his short position at that time by taking a long position in XYZ stock. Thus, he earns a profit on the difference between the amount received at the initial short sale transaction and the amount he paid to buy the shares at the lower price, less his margin interest charges over that period of time.
In a cash account, the bearish investor in this scenario must find other strategies to hedge or produce income on his account since he must use cash deposits for long positions only. For example, he may enter a stop order to sell XYZ stock if it drops below a certain price, which limits his downside risk.
Margin accounts must maintain a certain margin ratio at all times. If the account value falls below this limit, the client is issued a margin call, which is a demand for deposit of more cash or securities to bring the account value back within the limits.4 The client can add new cash to his account or sell some of his holdings to raise the cash.
Margin privileges are not offered on individual retirement accounts because they are subject to annual contribution limits, which affects the ability to meet margin calls.
The securities in your margin account may be lent out to another party, or used as collateral by the brokerage firm at any time without notice or compensation to you when there is a debt balance (or negative balance) on the account where you have accessed the margin funds. If the account is in a credit state, where you haven’t used the margin funds, the shares can’t be lent out.5The borrowers of stocks held in margin accounts are generally active traders, such as hedge funds, who either are trying to short a stock or need to cover a stock loan that has been called in. Investment firms that need an underlying instrument for a derivatives contract might borrow your margined stocks from your broker. The brokerage firm may also pledge the securities as loan collateral.
Additionally, if your margined shares pay a dividend but are lent out, you do not actually receive real dividends because you aren’t the official holder. Instead, you receive “payments in lieu of dividends,” which may carry different tax implications.6 When your shares are lent out, you can also lose your voting rights.
Here’s a visual example of potential Support and Resistance:
SPX at 3009
I’m looking to put on an Iron Condor with 49DTE.
This Iron Condor is going to add negative delta and will benefit from a slight pullback over the next few weeks.
We’re looking for 2 credit spreads that will pay a total credit of 5.80-6.00
We’re going to place short strikes around 30 delta and keep spreads at 10 points wide.
Credit: 6.00
Buying Power Reduction: 4.00
Profit Target: 1.20-1.50
Stop Loss: loss of 2.00
POP: 40%Order Ticket Type Asset Duration Strike C/P Buy To Open SPX 17JUL 3145 Call Sell To Open SPX 17JUL 3135 Call Sell To Open SPX 17JUL 2865 Put Buy To Open SPX 17JUL 2855 Put Total Credit: 5.80 – 6.00
AnonymousPlease use password of Active123 when asked for one. You can download the file if you want to.
AnonymousPlease use password of Active123 when asked for one. You can download the file if you want to.
AnonymousPlease click on the link below
Please use password of Active123 when asked for one. You can download the file if you want to.
AnonymousPlease click on the link below
This is the link
https://1drv.ms/w/s!AkuKZC38PtiSnooRlVvS1CBKk0_aMw?e=iI17mR
Please use password of Active123 when asked for one. You can download the file if you want to.
Anonymous
AnonymousRisking 75 cents per butterfly to make up to $3 or about 400%
Anonymous
Anonymous
VIRT Chart with Logic
