Using Our Trade Alerts
One of the best features of the Simpler Trading service, the trade alerts, enables you to trade more efficiently. Trade alerts are posted in our Gold Room, as well as emailed and texted out. Please note that if the trader placing the trade feels that the trade is too time sensitive, or if they are concerned about traders imitating their action without fully understanding it, they will not text out the trade.
Trade alerts are not meant to be followed blindly. You’ll find them useful once you have a basic understanding of the way that John, Henry, Bruce and Chris trade, since they’re the ones who text out the alerts. Our Welcome Packet will give you a good introduction. We have a wide variety of traders who trade live, but no one follows them all! Start by selecting who fits your trading personality and risk tolerance. After you narrow that down, check out the calendar on our main page and sit in on the room sessions you’re interested in. Once you feel comfortable with each trader’s style, then you can begin taking their trades.
Even if you’ve been trading options for years, branching out into more complex option strategies can be daunting.
To make use of our text and trade alerts, we want to make sure they make sense.
The following examples include explanations of trades that Henry typically does, along with instructions for how to enter the trade in ThinkorSwim. Though the examples are written in TOS, the orders are read the same, regardless. The following examples cover long calls, iron condors and his signature strategy – the unbalanced butterfly.
Options Chain – This alert means that Henry bought 1 FB call for $4.65 each, and this is the price he was filled at. The strike price is $141, and they will expire on May 5th, 2017. This is an opening position for the trade. Henry typically buys long calls when he is looking for a big move, using call debit spreads instead when he is bullish but looking for a smaller move. He buys calls when he doesn’t want his gains capped by the spread.
To enter the trade in TOS, you right click on the option chain in the same row as the $141 strike on the call side. Select buy, then choose single. At this point, you can choose how many you’d like to buy. This is the same for buying puts, except for you select the opposite side of the options chain.
Order Entry – Make sure you’ve entered your order correctly – selecting the quantity you’d like, as well as double checking the strike price and expiration date. If the price you’re getting varies greatly from what Henry stated he got filled at, you may be entering the trade too late.
Order Confirmation – After you hit, ‘Confirm and Send,’ you’ll see this order confirmation dialog. Never take a trade if the risk/reward is not acceptable to you for your personal account. If you’re not comfortable with the risk/reward, just pass on that trade.In this trade you’re risking $465.00 total per contract. If it all looks good, hit send.
Put Credit Spreads
Options Chain – Frequently, Henry sells at the money put credit spreads on bullish setups. This is a more conservative way to play than buying long calls. It is also higher probability, lower risk way to make money with options. Your risk is defined, and the stock doesn’t need to move a ton to collect your premium – just stay out of the money. Choosing at the money strikes leads to a favorable risk to reward ratio.
Order Entry – Because we are selling this vertical, it makes it a credit spread – we are taking in a credit for selling this to someone. It is our hope that the premium we sold will decay, allowing us to buy it back at a cheaper price before expiration, or having it expire worthless.
The order says SELL – so we want to sell the first strike listed in the order – $305 – and buy the lower strike for protection, which is $300. Right click on the bid in the options chain in the row that says ‘305’ scroll down to sell, and click vertical. Make sure you’ve entered your order correctly, and the credit is close to what the trade alert states.
Order Confirmation – After you hit, ‘Confirm and Send,’ you’ll see this order confirmation dialog. Never take a trade if the risk/reward is not acceptable to you for your personal account. If you’re not comfortable with the risk/reward, just pass on that trade.
This trade has a great risk/reward ratio, because you’ll be risking about $316.00 per contract that you enter to make a max profit of $184.00. Henry targets 50-80% of max profit on most spreads he has sold. If it all looks good, hit send. Since you’re taking in a $1.84 on this trade, simply calculate what a 50% profit would look like, and plan your exit. A 50% profit on this trade would mean attempting to buy back the spread at about $0.92.
Options Chain – When you sell an iron condor, you’re just selling a call credit spread and put credit spread at the same time on the same underlying. Selling an iron condor means we are collecting premium on both the call side and put side, and don’t want the underlying to move much – so we can collect the premium as theta decays. The goal here is that the underlying stays stagnant so the premium we sold will go down in value, and we can buy it back before expiration at a lower price.
In this case, we are selling a call credit spread (selling the $150 strike and buying the $155 strike), and also selling a put credit spread (selling the $130 strike and buying the $125). If you’re confused about which one is the call side and which is the put side you can look at the price of the stock. NFLX is at $141.41. The calls will generally be above the stock price, while the puts are below. Also, in the order, the calls are listed before the puts.
Order Entry – After you selected ‘SELL’ and ‘IRON CONDOR,’ now you can change your strikes. Because you’re selling the iron condor, the first call strike listed is the one you sell ($150), and you buy the $155 strike. On the put side, the first strike listed is the one you sell ($130) and you’re buying the $125 for protection. The credit you bring in for doing this is $1.06 per contract. Once your order looks right, you can confirm and send.
Order Confirmation – Always check your risk. Each trades risk/reward parameters may not be acceptable to you. In this trade, we are risking $788.00 to bring in $212.00 – and remember, we rarely target the max profit. Generally, selling iron condors is a great strategy for when the market is chopping around.
Henry’s signature trade is the unbalanced butterfly. He likes this strategy because it maximizes profits (when compared to a spread or iron condor on the same setup). Because this strategy is an unbalanced fly placed for a credit, you only have risk in one direction.
Order Entry – When you enter the trade, make sure that you enter the strikes and quantities properly. In the order, Henry states ‘BUY +1 1/3/2 ~BUTTERFLY NVDA 100 (Weeklys) 28 APR 17 97/100/103 CALL @ -0.18’ This means you’re buying one butterfly, but the quantities of the strikes are unbalanced, and are in order with the strikes in the alert. Therefore, you will buy one of the $97 strike, sell three of the $100 strike, and buy two of the $103 strike. When you place the order, make sure you’re getting a similar credit to what Henry got.
Order Confirmation – Check out the risk on this trade. For one contract, you are risking $282 to make a max profit of $318. The best part about this trade is that you only have risk on one side. Your risk mainly lies above $100, because this is where your short strike is. Price action below $97 will result in you still collecting the original credit you took when you placed the trade ($0.18.). Henry likes these trades because you only have risk on one side – in this case, the upside.
The ideal situation in this trade is a pin right below $100. This will ensure that your short strike ($100) expires worthless, so that you can collect the most premium possible, while still holding the intrinsic value of the $97 call.
If you have any questions as to why or how Henry placed a trade, please review his corresponding chatroom achieve session. Henry always gives meticulous descriptions of his trade setups. You can also find updates in the Presenter’s Post area of our chat room, through text/email alerts and in our premium nightly videos.
Henry (as with all our traders) takes trades that appropriate for his account and risk tolerance. The trade alerts are meant to demonstrate what he is doing in his account. Each trade will not be appropriate for every trader. Please know where your risk tolerance lies, and only take trades appropriate for you. Trades posted in the Presenter’s Post area of the chat with entry orders will have an exit order placed there as well, but please note that we cannot guarantee alert delivery. As always, please have your own plan in mind when using trade alerts.