Trading Stocks The Safe Way

[MJ DeMarco]

Thanks for posting and the transparency!

 

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[Big Z]

Thanks MJ for the comment. Doing my best to give value here to the community.
For tomorrow the new trade will be on BAC (Bank of America). Again I want to make it clear that I am NOT taking these trades in my real account. I am only showing them here for education only. However I am making sure that whatever fill I post is realistic based on the market prices.
BAC close at 31.12 Given that, My limit price for tomorrow will be 31.20, if we trade below that price I will assume that the trade was filled at 31.20
In addition I will assume the purchase of the 31.00 strike March 23 expiry Put option for a price of 1.15.
total cost of the trade will be 31.20 + 1.15 = 32.35
Right to sell at 31.00
Max Risk 1.35 or 135.00 per 100 shares. 4.17%
I will update as the position develops.
Thanks
Z

 

[Big Z]

Trade is looking good so far. BAC closed today at 32.72 above the cost basis and the Put still has some value in it with 2 weeks left of time value. A little more up move and I will be adjusting this.

 

[Big Z]

BAC trade: closing it out today since the put option expires. This trade was positive but did reverse with the market sell off. The final tally on it is a 135.00 loss.
I could roll this put option and increase my cost basis banking on a rebound, but I would rather pick another stock that may have more potential.
First trade of 67 loss and second trade of 135.00 brings the total right now to -202.00.
This is a good example of how trading this way keeps the losing trades small, which is one of the main goals with this technique.
I could have played this a little safer by selling some call options when the stock moved up and it would have been a lower risk situation, but I felt that the stock might break out to the upside.
Now its time to move on and choose another stock to evaluate and set another position.

 

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[Big Z]

Plan for tomorrow is to short CELG if we trade below 89.04. I will also be buying a call option to protect the position, capping the loss in case there is one. The limit sell order will be 89.00 and I will post the call option strike price and expiration tomorrow when I see the prices.
This is the same as buying a stock and buying a put option to protect it

 

[Big Z]

The CELG trade did not trigger. I will set it up for tomorrow. Stop in if it trades below 89.60 with a limit of 89.55. I will buy a call for protection and determine the strike and expiration sometime tomorrow.

 

[Big Z]

CELG is up again today and so this trade did not happen.
New trade today.
Long FND @ 56.38
Long FND May 18, 2018 55 Put @ 2.85
Short FND Jul 20 , 2018 60 Call @ 3.00
Net Cost 56.23
Max Risk until Put expiry is 1.23 or 123.00 per 100 shares.
This is a collar strategy and will need adjusting as the trade moves. Also I expect that this position will be on for some time.
Again this trade to showcase the trading strategy (in this case a collar) and not a trade I am actually taking.

 

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[Big Z]

Adjustment to the FND Trade
Buying back the Jul 60 Call for .60 cents today. Originally sold for 3.00
Selling the May 18 55 for 6.00 originally bought for 2.85
Buying the the Jun 50 Put for 3.00
New Cost Basis 53.83 (56.23+.60-6.00+3.00)

 

[Big Z]

Another adjustment to the FND trade.
Selling the Jun 50 Put for 5.30 originally bought for 3.00
Buying the Jun 45 Put for 2.15
New Cost Basis 50.68 (56.23-5.30+2.15)

 

[Big Z]

Selling FND today for 51.68 plus selling the put for .05.
Cost basis is 50.68-.05 = 50.63.
Profit on the trade 51.68-50.63= $1.05 per share.
This trade took a while, but I was able to hold it through out the whole down move because I had my capital protected. I was able to lower my cost basis and this allowed for a profit on the trade, even though the stock was down $5.00 from the entry.

 

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[Kak]

Cool thread! Subscribed.

I am starting to experience the fact that companies I believe in and so called "riskily" jumped in to single stock exposure harder than I am "supposed" to has yielded pretty good results.

I did things the "SAFE" way for too long, the upside doesn't justify the risk to me. I was spinning my wheels and not getting anywhere.

More aggressive opportunities, more often than not, at least for me, provide upside that cushions unforeseen (and they will happen) downturns.

The biggest thing I have learned managing my own portfolio is that sheep always eventually go to the slaughter.

 

[Big Z]

Tomorrow , Buying NBL limit order of 34.85 or better.
Also buying the Jul 20, 35.00 Strike Put. Limit order 1.30.
Cost basis is 36.15 unless I get better fills. This will depend on the opening.
Will post updates.

 

[Big Z]

Cost Basis is 36.10 on NBL

 

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[Elif]

Can you elaborate on what exactly you will be teaching? I've already purchased a few books and Udemy courses on the subject. I may be interested if you are offering something I have not already covered with those courses. $250 is a lot of money to drop on a vague description

 

[Big Z]

Can you elaborate on what exactly you will be teaching? I've already purchased a few books and Udemy courses on the subject. I may be interested if you are offering something I have not already covered with those courses. $250 is a lot of money to drop on a vague description

I am not charging anything. This thread has turned into an educational thread only. Nothing is for sale.

 

[Elif]

I am not charging anything. This thread has turned into an educational thread only. Nothing is for sale.

Okay, Great!

 

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[Big Z]

Although this is off topic. I felt that this was a good article relating to the "Find your Passion" mentality that MJ talks about.
How to Really Find Your Passion - The Atlantic

 

[Big Z]

NBL Stock closed at 34.68.
Cost Basis is 36.10
Had the 35 put, which I exercised for a 1.10 loss on this position.
Another small losing trade, but that is acceptable.
Will look for another soon.

 

[Big Z]

Recap of the four trades taken so far.
Minus 67
Minus 135
Plus 105
Minus 110
Total Minus 207
Always protected from a devastating loss to the account. Low Risk trades that have the potential to give a big return. All we need is one good one.

 

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[mom]

Stick to high priced, liquid stocks.
No pink sheets, pennies, illiquid stocks etc.

Chose ones with outstanding fundamentals.

Then there are certain stocks with certain momentum that usually make good % gains in the months ahead...

Look at stocks like SQ,ETSY,ZEN....nice steady trends. Ignore daily/weekly gyrations etc...

But i do not think stock investing is fast lane at all....unless you start your own mutual fund or something.

 

[Big Z]

Stick to high priced, liquid stocks.
No pink sheets, pennies, illiquid stocks etc.

Chose ones with outstanding fundamentals.

Then there are certain stocks with certain momentum that usually make good % gains in the months ahead...

Look at stocks like SQ,ETSY,ZEN....nice steady trends. Ignore daily/weekly gyrations etc...

But i do not think stock investing is fast lane at all....unless you start your own mutual fund or something.

Thanks for the feedback. I appreciate that you took the time to read and contribute Here to this thread. Its been quiet since I have been busy. But I do have a two trades on right now that I plan on showing the details soon.

 

[Big Z]

I currently have two trades on right now , but for the sake of transparency I am posting a trade from today. Long KR at 58.58 and long 1 Oct 12, 58.50 Put at .72
Max Risk per 100 shares is .80 or 80.00
KR reported earnings and got hammered. I think its an over reaction and it should bounce. I have about 29 days to find out. If I'm wrong the most I can lose is 80.00 or 1.4% percent.

 

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[Big Z]

Trade Update. 100% return on the risk in one week. Closed out KR today for a 80.00 Profit. I originally had a typo on the prices I put in . The Cost of the stock was 28.58 not 58.58 and the put strike price was 28.50.
Original Cost was 29.30 (28.58 + .72)
Sold the Put and the stock for 31.10
Profit 80.00 per 100 lot position
Risk was 80
Return on Risk 80/80 = 100%
Will Post Next Trade When I have time.

 

[Big Z]

I would like to make a comment on on percentages and money management. This is just my opinion and how I use money management for my portfolio. There is always risk of loss when trading and this is something that needs to be in every persons mind when investing or trading the markets. I do the following:
1. Risk no more than 2% of my entire portfolio in any one trade. e.g ($30,000.00 x .02 = 600.00)
2. Never have more than 5 positions on at any one time. This limits the max potential at risk to only 10% of the entire portfolio if you are only risking 2% on any one trade. E.g. 2% x 5 = 10%
3. Try to risk the same dollar amount per trade. It's not a good idea to risk 2% on one trade 1% on another and 3% on another. Why? because if your 1% risk trades makes 100% return, your portfolio just increased by 1%, and if your 3% risk trades loses 100% then your portfolio loses 3%. You would need 3 of those 1% risk trades to make up for that one. So to keep things even I like to put on the same exact % or $ risk per trade. This way the winning trades will take care of the losing trades.

For the most part some trades will make over 100% and very few if any trades should lose more than 100%. (Although it could happen as you roll the options to reduce cost basis but it is rare and totally in the traders control). Having said that over the long term (1 year at least) things should work out for a up sloping equity curve.

I hope this helps.

 

[Big Z]

New Trade today.
HLF
Buy Stock at 55.19
Buy Oct 26, 55 Put strike at 1.35
Total Cost 56.54
Total Risk per 100 shares is 154.00

 

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[Big Z]

Rolled the long put from the 55 strike to the 53.00 strike for a credit of 1.25.
New Cost Basis is 55.29 , New Risk is 229.00

 

[Big Z]

Rolled the 53 strike put to the 51 strike put for a 1.15 credit.
New Cost Basis is 54.14. New Risk 314.00

 

[Big Z]

Taking the opportunity to exit this trade at 54.54 and the Put at .09 for a credit of 54.63
Total Profit .49 or 49 per 100 sharers.
The timing was bad on this ,but having the put allowed me to lower my cost basis and exit out with a small gain. Instead of panicking out when it was almost 5.00 against me.

 

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[Big Z]

Some Stocks I am looking at this week for possible trades.
1. BAC Short
2. COP Long
3. SQ Short
4. GDDY Short.

To trade the short side safe, I would short the shares and buy a call option for protection.
To trade the long side safe, I would buy the shares and buy a put option for protection.

Z

 

[ALC]

Quick one for Traders here, what are the consequences of a Recession on your day-trading ? (decision making, volatility, patterns..)