Hey everybody, good to be here today. It's time for Long Options. My name is Brent Moors and we do this each week at this time. And I appreciate you. And we have a lot of new faces in the chat today. Those of you watching live, we're glad to have you. All you first timers, we're glad to have you and encourage you to type in questions. Connie's here helping me out in the chat. Connie's a colleague I've been working with for over two decades now, I think. So she knows all about what we're going to be covering today. So between Connie and myself, we'll do our best to help you out. And if you're watching on a recording, hey, we're glad to have you as well.
You can follow Connie and myself on X at BrentMoorsCS and ConnieHillCS. And remember, options do carry a high level of and are not suitable for all investors. And the information today is for general informational purposes only. It's not a recommendation of any security, chart pattern, or investment strategy. And the paperMoney software application, which is what we will be using today, is provided for educational purposes only. Schwab does not recommend the use of technical analysis as a sole means of investment research. All investing involves risks, including the potential loss of principal. For the sake of simplicity, the Examples in this presentation do not take into consideration commissions and other fees, but just keep in mind those are a real thing you need to be aware of.
And there's no guarantee of an execution of a stop order that it's going to be at or near the stop price. So we don't know what price it's going to fill at. Past performance of any security or strategy does not guarantee future results or success. Okay, y'all, let's move on to it. Because let me tell you what I want to talk about. What I want to get to today is kind of like common entry signals that people use for long options, long puts, or long calls. Either way, there's some commonalities. that we talk about in terms of these. And we have a lot of newer traders here today. So let's kind of talk about it because we're talking about buying calls or buying puts, some common ways that people do it.
So let me, I'm going to start off with just an example stock here. I'm going to bring up Merck, okay? This is a company pharmaceutical company you guys have all heard of. And if you just look at the pattern here, and so we're going to be doing technical analysis. And of course, there's more than one way of doing things. Technical analysis isn't the only way of doing things in the market, but very often what people will look for bullish. trades are number one they'll look at the. That's a common thing. You can use moving averages here. I have a 20-day moving average. I have a 50-day moving average. The red line and the blue line on the chart respectively. There stocks above that.
But even more so than that what you've seen is if you look at this stock it's gone up and come down and we kind of call this a bounce right there. You see that right where I'm pointing? That's kind of where it looks like it bounced, okay? So we're going to call that a bounce right there. It went up and then it kind of bounced down, and then it bounced up and then it bounced up. And you can see bounce. Does this? look like a Does this look like what it did in the past? I would submit, yeah, it kind of looks like that. Does that guarantee that it's going to do the same thing going forward that it did in the past? That is, go up like that or up like this?
No, it does not guarantee that, but that's the assumption we're going to go on. All right, that's the assumption we're going to go on there. So, that's the first thing I want to point out to you. When we're doing a long call, and this would be for a long put as well, by the way, we often look at bounces as potential entry signals. Okay, bearish bounce, if we're doing a long put, maybe we'll look for something that's in a downtrend and is bouncing down, okay. But in this case, we're in the middle of an uptrend, so we're more likely to go for the bounce up thing. Now there's different ways to do it. You can do, you can come up with target prices. What price could we come up with?
Well, we could say, oh, recently we just bounced. This was maybe a resistance there. We could use that as a target price. This could be kind of like a flag pattern. We could say, well, the stock, well, maybe I'll do this. The stock went up from there to there, and we could repeat that length and say that same length that we just went up from, from about 80 to 87. 50, that's about an 8, excuse me, a 7. 50 move. We could say I'm going to expect about a 750 move. You don't have to put a target price in, though. You don't. It, and typically in this class, we probably do more often than not, I would guess. But in this case, I want to make this pretty simple.
I'm going to make this example trade just; we're going to buy this, we're going to put in a stop price, and for that stop price, there are different ways to do it. Remember, stops don't guarantee an execution price. They'll execute at some price if it gets activated; it doesn't tell us what price exactly what it's going to be at, but we can do that. And one particular subset of a stop price is you could use a trail. stop I don't use trail stops that often in this webcast. If you're interested in this webcast, each week we teach it. You can go back in the. All you need to do is just subscribe to the Trader Talks channel on YouTube
45 days. Okay, 45 days, October 17th expiration that gives the trade time to work. And I'm gonna look at at the money stocks at 85. The at the money contract is the strike price which is listed right down here in the middle. That's closest to the current stock price. Okay, so the 85 fits the bill on this. I can, if I want to buy this, I can just simply do. I could simply right-click on it. I could buy by custom, by custom with a stop now. This would be a traditional stop and there's nothing wrong with the traditional stop. Very often, we'll put in a traditional stop there. Okay, it just automatically kind of says a dollar less than the current price. So, don't rely on that.
It doesn't know where you want to put in that stop but we could put that stop in, I don't know, at 2 or something like that and put in that stop there. The stop would be good till canceled. Change day to GTC on the stop line. That means it's not going to expire at the end of the day. If I left it a day, we'd have that stop in for about three more hours. Okay, that's probably not what we want. So, we're gonna do good. till canceled. Now there's a little variation on the stop, and that is you can go up here and you can go to Trail stop. I'm gonna click on trail stop. Now it brings up a trail stop, and that's a 50 cent trail stop.
Okay, I don't want that; I want to make that in terms of percentages. So, I'm gonna click on this little plus minus sign. Twice it gives me percentage. It says minus 1. Well, that is too tight, too tight. Okay, so I'm gonna go in 50. Now, John brought up a thing in the chat. John said, which is good and something I want to go to here. Doesn't it kind of depend on the volatility option? Yeah, the challenge with these are options are volatile, and you. may be saying you may be looking at this especially if you're new to options and saying Brent 50 I don't want to lose 50. This trade is gonna cost me 340. I don't want to lose 50, even if the 50, even even if the 50 were guaranteed.
Well, so I want to make it tighter, but the problem is this. Let's look at Merck here for a sec. Let me just go down. I want to show you something. If we take this trade, I'm just gonna, I'm gonna chart the option. Normally we just chart the underlying stock, but let's do something a little bit different here. I'm gonna chart the option. So I want to get that option symbol. So I'm gonna right-click on it. I'm gonna just copy that. the option symbol there. That's the easiest way, I think. Go to charts. Let me just paste that in there. So here we're looking at this particular option, and I just kind of want to let me just kind of zoom in here a little bit.
I just wanted you to see the volatility here on this. A few days ago, about a week ago, a little over a week ago, I guess, this was at 530. It dropped down to 230. Okay, and just a few days' worth of time, a few weeks ago, we were down at, you know, 150 or something. It shot up to 530. Do you see the volatility on options there? You don't. I mean, you can see that on stocks, but typically you don't see a stock drop 50% of its price in a matter of a week. Sometimes, but it's big news. But this is Merc. This is this isn't moving that much, so that's why we can't put these stops in super tight, especially with the trail stop. Okay, so what is a trailing stop?
A trailing stop is this: it looks at the price. Okay, right now the stocks that are around, or the option is around 335. Okay, right there 335. If this, as this goes up, and so, well, actually before it goes up, half of 335 is about, what, 170? Okay, I'm gonna round a little bit on this: 170. So our initial stop on this would be about 170. Okay, down down here somewhere. Okay, if this moves up, say it moves up to four dollars or something, my stop moves up with it. 50 of four dollars would be two dollars that would move that stop up to two dollars. So as the stock, if this option goes up in price, my stop automatically ratchets up with it. And that's what it turns up.
What if the stock, what if the option goes down? What happens? Does the trail stop lower? No, it doesn't because if it did, it would never trigger, right? So it only moves up as the option moves up. Now we can do these on stocks. We can do these on options, but in this case, just to show you something a little different, to show you something a little different, I thought we'd do a trail stop For our for our purposes in this class. I'm not going to go. any tighter than on my trail stop here on this. So let's go back to our order, and there was a question of, but when I did this, I did what's by custom.
If I just want to buy a stock or an option here, I can just click on this symbol, right, and it will bring up just a buy order. That fair enough, or if I click on the bid price, it'll bring up a sell order. Fair enough, the by custom enabled me to add in a stop loss at the same time. Okay, so there we go. That's what I wanted to do. So, so this is good till canceled. We're gonna put this in, we're gonna leave this just as is, as a just a basic trade here. We're gonna go through a bunch of other examples here today, but I just wanted to start you off with that. Feel free to follow up, follow along on the, you know,
price 340. We'll see. So let me go to, I'm going to confirm and send. Make sure you read all this and it's going to say, hey look, potentially wide markets, liquidity risk, options are volatile, they can move around on that. And I'm going to put this in my long single options category there. Okay, let me send that order. And we just sent it, it's saying it's filled. Okay, so we got a trade on Merck there. That's just a long call basic trade. On Posh, can use a trail stop and a normal stop at the same time. Yeah, I mean technically you could, it would be pretty unusual to. technically you could but you would you got to be careful when you are putting in say two separate sell orders you need to do it as an OCO order.
Because if you have two separate sell orders let's say you have an option you buy one contract or something and you sell one with the trail stop and you don't have an OCO and that other stop is still there waiting to sell another contract you don't want that. So it would be pretty unusual there Posh to do it that way. But yes you could you could. Okay let's move on. So we talked about a bounce entry is kind of our first type of example entry there. That's what we're looking for. And I would say probably In this webcast, if you go back, more often than not we use that entry more than any other entry. Okay? It's not a recommendation; it's just the reality of how we normally do that. Okay?
So OCO, what is, I use the term OCO. What does that mean? OCO means one cancels the other. In other words, if one order fills, the other one's going to cancel out. So we don't have both orders, both orders filling. We don't want both orders to fill there. Okay? So let me get, let me move on here. Let's go on, and let me look at another one. Because I gave you that bounce order, you don't have to. Let's look at another company that everybody knows: Alphabet, Google, right? Is this? bouncing No, not really. It's not bouncing. Does this have an upward trend? Yeah, this is a pretty stellar upward trend. I mean, when the stock has been above its 20-day moving average for, you know, really since the, with a few exception days since the, since mid-April, that's a pretty strong trend.
And we've seen that higher highs, higher lows, and whatnot. Do you need to use a bounce entry to get in an option trend? No, you don't. You could say, hey, Google Alphabet is trending up. My assumption is it's going to continue to trend up. That's, you know, you could say that. That's fine. Now, if you don't, if you think Google's at the end of the road there and it's not the trend's not going to continue; you want to do that, but you don't necessarily need to have a bounce to get in on this. But it's just a common rule that we use in this, you know it's a common-use rule technical traders use for bullish trades. So if you're going to do a trend trade, what do I mean by trend trade?
What I mean by trend trade is we're planning on sticking with this trade as long as the stock continues to trend up. Okay, so it may go up and down and up and down, but as long as a general trend is going up, we're not going to look to get out of this trade. So therefore, if we're doing a trend trade, we're going to buy a little more time. I don't want to buy out a month's worth of time on options if I think this is going to continue to trend up for three or four months. That probably then I'm hitting that expiration date. I got to roll it or close it or whatever. That doesn't make probably much sense. So I'm going to buy more time in this example for a trend trade here.
So we're going to buy more time. And we're going to I'm not going to put in a target on this one either. We'll put a target on the next trade we do. But on trend trades, typically in this webcast, we're not entering target prices because our goal isn't to get out if we hit a particular price. Our goal is to get out is to continue with this as long as it continues to trend up. Okay, so let's do it. Let's get, let me go to alphabet. Do you see the technical reason for this trade, though? The trend, that's it. We're not waiting on a bounce here or anything. I'm going to go out, I'm going to go out more than 45 days on this one, though. Let's go out 80 days here.
Okay, let's go out 80 days. So, it's a little longer term. Longer term contracts are going to cost more. You're buying more time. There's more potential between now and November 21st for this stock to go way up than between now and October 17th, something like that. So, let's do this. I'm going to go here and I'm going to go in the money a bit. And this was kind of at the, let's see, stock's at 208. What's the at-the-money contract? Well, the one closest would be the 210. Okay, let's go to that 200 strike. I'm going to go to the 200 strike. I'm going to pay attention to my bid price and my ask price, make sure they're not too far apart from each other. They're about 20 cents from each other, which is only about a little over 1 of the price of the the ask price of the option. So that's not bad. Okay, we definitely want it less than 10, but that's that's fairly nice. Okay, so if I want to buy this,
well, let's go back to the chart. I'm not gonna do a trail. So we gave you an example of the trail stop, but typically more often than not, we're not gonna do a trail stop on this. For this, my stop is I'm gonna put it below this 20-day moving average. This 20-day moving average seems to have acted as support. There, there, there, not so much there, but in the past, it seems to have. So I'm gonna go a little bit below that. I'm gonna go 1 below that. That 20-day moving average right now is about 203, 1 below that. You know it's gonna be about 2 below that. So about 201, 201 is gonna be where my stop is. 201, do you see where?
Now it's not gonna be a true stop because we're gonna put it based on the stock price, not the option. I'll get to that. in just a But let's do this. Let me go to the Trade tab. I'm going to go to my strike price. I'm gonna this is a call here again. On the left side of the I'm gonna go to the ask price. Now, as I mentioned before, I could just left click on this, and it brings up just that buy order. Okay, I'm not gonna do that. I could right click on this, and I could just click on Buy Single Option. Again, same thing does the exact same thing. But in this case, I wanna put in my entry order and my exit order at the same time.
Therefore, I'm going to right click on it, I'm going to Buy Custom, and then it gives me some choices. It doesn't have every possible choice on there. What I'm gonna do though is I'm gonna tweak it a little bit, okay. So I'm gonna click on Buy Custom with Stop. Now I have an order to buy and I have an exit order. My exit order is gonna be good till canceled because, again, I don't want this to in two or three hours from now. So now I said I wanted to get out if the stock goes below 201. Remember, that was 1 below that 20-day moving average, okay. So how do I do that? Because this price doesn't have anything to do with the stock price. This is the option price.
I wanna get out if the stock price goes below 201. Well, you can do that. I'm gonna change this order from Stop to Market, good till canceled. And I'm gonna go. to this little gear here. You can't even see the gear if your cursor is over on the other side of the. But if you put your cursor over there, it will appear. So you click on that, and it brings up a on that window. It says Conditions, bottom half of the window. And the conditions are that I wanna submit this order to sell out of this if when at least one of the following conditions is met. The condition is Alphabet, Google Marks. Mark is just the price, okay? Mark is just the than or equal to we said 201, oops, 201.
All right, I'm gonna save this. Now you gotta, you know, you can do consider what your risk is on the trade when you do this. Because remember, stops. the stops aren't guaranteed. And this isn't technically a but it's doing a similar type thing. It doesn't guarantee what price we're gonna get out at. What's my max loss? My max loss is, you know, better part of 2, 000 on that. Well, it's an expensive option, okay? It's an expensive option, that's why. This is not factoring us getting out if the stock gets out at a certain time. This is the most we can lose. You gotta factor, you gotta consider it that way. If we have that order in, it's probably unlikely we're gonna lose the full amount, but you just, you know, there's just no guarantees on that, all right?
So what I'm gonna do is I'm going to, again, I'm gonna make this. I'm gonna put this in my long single options category, and I'm going to send that order. And there we go. So that's two examples. Let's go and do another example here, okay? We talked about doing a bounce entry. We talked about doing a trend entry, and we're doing okay on time. Let me give you another one here. I'm gonna pull up USB, okay? USB, right? So, the US Bank Corp, right? So, trend is going up. But let's say we're looking for a... Well, are we bouncing? No, we're not bouncing. The stock's going down right now. Now, there are other ways you can look at this, if you like.
You could throw on an indicator like an RSI or MACD or something, and I suspect. what an RSI would tell you if you enter one is it's probably pointing down right now. Let me just pull it up. Yeah, do you see that RSI right there? It's pointing down. That's just kind of showing downward momentum. So it's a little bit more unusual to enter in if you're like looking for a bounce trade on that. So a lot of people like to wait for the bounce you enter a trade. Let me just get out of that. Can you enter a trade or let me restate that? Can you enter an order for a bounce trade in anticipation of the bounce before the bounce has even happened? You sure can.
So what am I looking for for this bounce to happen? What I'm gonna look for is I'm gonna look for this stock to bounce above. I'm gonna say today's high, okay? So today's high, I'm just putting my cursor. All right, my cursor is, and by the way, you could do this. You could say, well, this was kind of an old resistance, new support, we're kind of right there. Do some traders anticipate the entry and just get in there? Yes, some traders could do that, but we're gonna wait for that bounce. I'm gonna look for the high price of the day. High price of today is 48. 49. Let me just jot that down so I don't forget that down. Forget that 48. 49. How do I know that?
I put my cursor over the candle and I look over here where it says H for that particular. Day the H says 48, 49. That's the high price of the day. I want this stock to bounce above that because, keep in mind, I'm gonna zoom in just a little bit so you can see it a little bit easier. Keep in mind right now the stock down here right where the end of my pencil, my virtual pencil, is right there. That's where I am right now. I'm assuming we never know; I mean, the market could have a good big turnaround, but I'm assuming that it's probably unlikely today we're gonna bounce above this high. But if tomorrow we get a nice green candle, well, that's an entry.
So we can put in a trade to get in if we bounce above that level 48, 49. Okay, well, how far are we? Looking for this to go up. Let me just kind of zoom out again here. What I'm gonna do is I'm gonna do a kind of what we call a flag, a flag pattern here. So here's what I'm gonna do: I'm gonna just take a and I'm gonna draw a line from the latest move, bounce up, move up from low to high right there, okay? We just move, adjust this just a little bit. I'm gonna duplicate that; I'm gonna right-click on it. I'm gonna duplicate it. I'm just gonna move this from our low, and I'm gonna say what if the next move up was similar to this move up.
Then we have a target of around 51 and a half, 51 5, okay? Do you see how I did that? Let me just go through it really quickly one more time. again though The principle of a flag pattern is this It goes up and then it kind of goes down like this okay Then it goes up and then it goes down like this And then in this case we're expecting it to go up We don't know it's going to and it's gonna do Our theory is something similar as to what it's done in the past No guarantees but I'm gonna take the length of how far it went up in the past And I'm gonna say well if it goes up the same amount this time That's how we're coming up with the target price on that So there's my target price And then let me get out of this then what I'm going to do is I'm just gonna get out if we break below today's low okay Well what was today's low?
Today's low was 47. 95. I'm gonna give it a little wiggle room though, okay? I'm gonna go 1 below that. So I'm gonna take on my calculator 47. 95 times 0. 99. That gives me 1 below that 47. 95. That gives me a stop at 47. 47. Now here's something for you to keep in mind though: When I look at this again, I'm gonna zoom in just a little bit here on this. Let me try that again. We're not getting in here and having our stop here, or even at the 47. 49. We're only getting in if the stock bounces up here. So by the time we enter the trade, the stop will actually be a decent gap down from where the stock is. So let's do that trade.
I wrote down those numbers I just did. Just as a quick review, we're getting in when we break above this high right here. That's going to be 48, 49. Our target price is going to be 51, 50. That was the end of top. That was our target up there. And our exit point is going to be 47, 47 if we enter and things go against us. So here's what I'm going to do. I'm going to go to my trade tab. And this is going to be, I'm going to go a little shorter term on this. I'm going to go, well, let's go, how long? How long are we going to be in this trade? Well, I don't know. Last time it did this flag pattern thing, it took about two weeks or so.
The time before it did this thing, it took about two weeks. or so. So, I'm going to assume it's going to take about two weeks or so. Now, that means I don't want to buy two weeks of time; I want to give it a little more wiggle room there than that. So, I'm going to go out. Let's go out about a month and just double check. Sometimes, when you go to these weekly options here, the ones that are listed with this yellow weeklies next to it, their liquidity is a little bit less. Okay, so we're going to double check that bid-ask spread. Seems okay, actually. That's about 7 cent difference between my bid price and my ask price: 129 to 136. Seven cents, well, 13 cents on a 130 option would be about 10.
So, we're about 5 difference. That's kind of reasonable there. Okay, Riceburg said you can go 38 days. Yeah, we can go 38 days, no problem. That's certainly not a problem there. On this, eight cents, kind of the same deal here on this. And I'm going to go pretty much at the money here. But here's what I'm going to do. I'm going to go with Riceburg's suggestion. Okay, appreciate your feedback there. I'm going to go in the money a little bit. Yeah, I've got a 53 delta. Stock's at 48. Let's go. I'll go to the 64 delta on this, going to double-check my bid-ask spread. I'm going to right-click on it. Again, we're going back to that buy custom. And I'm going to buy custom, and I'm going to go with a I'm just going to say with stop.
We're going to tweak that a little bit, but you'll see what I'm going with. Now, am I getting in right now? No, I'm not getting in right now. Remember, we're only getting in if we break above today's high. I'm going to make this a market order. Actually, I'm going to make all these good till canceled orders right off the bat here. Okay, I'm going to make this a market order, and I'm going to put in some. I'm going to say I only want to get in if USB marks greater than or equal to. Remember, you got to switch your sign here. That's a greater than or equal to. And we said I wrote it down 48, 49. 48, 49 technically 48, 49 was the high. so deferred to go above that.
Let me go a penny above that 48 50. That's my entry. Okay, that's my entry point. Let me click on save here. And there we go. Okay, so let's go and take a look at this. Now, what about my exit point? What about my... well, we have two exit points. Again, I'm gonna make it a market, again good till canceled. I'm gonna click on my gear. I'm gonna click here and I'm gonna say we wanted to get out if my target, it was 51 50. USB marks greater than or equal to 51 50. Okay, but I'm gonna put in a second condition. I'm gonna click right below. You can, when you look at it this way, you don't even see, well, there's no second line. Again, you put your cursor.
down there. It will appear. Click on it: USB marks less than or equal to, and this was going to be our exit if it goes south on us. 47, 47, 47, point four seven. There we go. Let's click on that. Unsafe now. Let's click confirm and send for a sec. Risk is this, if the whole thing goes completely south about 200. Here's what I'm gonna do: I'm gonna do two contracts of this. So let me just do that. Come on, let me make this a little bigger so you can see. We're gonna do two contracts of this now. Let's confirm and send. There's my buy order with conditions. The conditions are it breaks above that high. Here's my sell order. Well, I'm gonna get out and mark it if only.
If USB marks at or above 51, 50, or below 47, 47, so make sure you read this screen and make sure it it makes sense. There's many, many times I've caught myself doing something that just doesn't make sense, because when I've looked at this, and there's conversely, there's been times I've made mistakes because I haven't looked at this carefully. Make sure you read the red stuff as well. I'm going to send that trade. We just sent that; it's thinking. Why is it thinking? Because we haven't met the conditions yet. The condition was we bounce above here, so this likely, you know, there's a chance this will fill tomorrow, okay? Um, and let me go here. let's go to Um let's do another one. Let's take another look at another Various type.
I've been doing all these uh these bullish trades. Let's look at AMD here. There's another kind of class of trade. And you know we talked about bounces; we did one with that, you know. We said we're not going to wait for the bounce, but the trend is up. We did a couple where we did one where it was bouncing. We did an example where we're looking for it to bounce, but it hasn't bounced yet. And of course you could do puts on all those; you could do bearish trades or bearish bounces. I think that illustrates it. But there's another class of trade entirely of entry. and that is um a breakout. A breakout? What's a breakout? A breakout is when a stock breaks above or below a particular level that we're gonna deem it as either a resistance level or a support level.
I'm gonna call this as a support level, okay? That's kind of a support level. We broke above it was kind of potentially a broke above it. Bounce, bounce, bounce, bounce, bounce, bounce. And then today we broke through it, okay? So that's what we consider a breakout trade. So this is a support level because we were above it. If we were looking at a resistance level, let's say we were saying well up here is a resistance level. If we were breaking above. that that would be more of a bullish trade. In this case, it's more of a bearish trade. In that case, now sometimes people say, well, look, I don't want to get in yet. I wanna wait for this to stay below that level for two or three days, okay?
I have no qualms with you doing that. They want a little more confirmation, so to speak. Sometimes people will look for a higher volume on this. But in this case, I'm gonna call this a valid support break, and I'm gonna look for a bearish trade on this. In this case, this is a long options class. I'm gonna look for a long put on this, okay? And I'm gonna say, look, I'm just gonna let this go. I'm not gonna necessarily put a target on this but I am gonna put a Where am I gonna put the stop Well if I'm gonna do a stop based on the stock price, then I'm probably gonna say this old resistance, resistance back here which became new support this is now old support is now newer resistance line.
If we break above that, that would be a potential exit point. Fair enough? So I could put my exit right up there if I wanted to. Now I don't have to, I can also just put a stop based on the option price, 50 or something like that, option price. But in this case, I'm gonna do it based on that. So I'm gonna say, well, I'm gonna wait for it to go 1 above this level. And so that level is 162 43 is where I drew it 162 43 times 1 01 I'm going 1 above it gives me 164 05 164 05 that's gonna be my exit point on this based on the stock price. If I go to AMD, this is potential. I'm gonna go out, we'll go out a little bit longer.
I'll go out 45 days on this, okay? Again, I'm gonna go in the money just a little bit, okay? And the stock's at about 160. This is the at the money. I'll go to the 165. It's a put trade; we're bearish on this trade. My spread between my bid price and my ask price: 10 cents there, okay? That's the primary thing I'm looking at when I'm trying to determine liquidity. Secondarily, you can look at open interest if you want. Here's your open interest. okay Here's your open interest look for your open interest. I don't care about the volume column; I care about the open interest column right there. In terms of your liquidity there, and for this class, that's what we're gonna do there on this. Make sure you have enough people with trading it.
And usually that's gonna be reflected. The most accurate reflection of that is that bid-ask spread is a good sign on that. Okay, let me go back to Delta here: 53. Let's see, we said 53 Delta. Going to right-click on this, I'm going to buy custom again with stop. Here's my entry price; we're gonna get in right now. We're not waiting because we had the breakout. And stop. Now, if I wanted again, it's gonna be good to cancel. If I wanted to do this, stop at 50, I could do that. I could just divide this by two. Two, if I wanted to, that's no problem. That'd be 50 or something, maybe a little bit more than that. I could put a 6 stop in there, but a 10 stop would probably be too tight, right?
50 stop, 60 of this purchase price is possibility; 80 is probably, I think, for a lot of traders too tight there on this. Let's put this again based on our stock price, okay? We said we were gonna get out if the stock goes above 164. 05. Right now, it's at 160. 70. Remember, we want the stock to go down. This is a bearish trade. So, I'm gonna click on. my gear I'm going to click down here I'm gonna say if AMD marks greater than or equal to 164. 05 164. 05 That's my exit on this I'm gonna save that and there we go Now I gotta wrap up here in just a bit let me just mention this This entry price right here when you're doing a single option long call or long put in this case we got a long put the default here is gonna be on the natural price Now it's
hold on one sec the default is to put it at the natural price Fair enough If you just go to which isn't really the topic of this webcast though the default is gonna be at the mid price Ideally you get in closer to the mid price but if you put it in at the mid price it's less likely to get. Natural price you're much more likely to get filled, but it's not as advantageous of a price. Right? So in this case, they're only five cents apart. It's not a big deal, but if they're farther apart, very often what I'll do is I'll just kind of switch it and put it in kind of halfway between the mid price and the natural price. Okay, I'm hoping that makes sense there.
Let me get on my little drawing tool there. And let's go here. It's jogging around, it's moving around. I'm gonna confirm and send. We're gonna put this in our long options category there. Okay, all right, I'm out of. Let me just mention this as I am wrapping. up Folks, you know we have a lot of webcasts here. I teach this webcast each week. And if you like webcasts, just subscribe to the Trader Talks channel. On the video, if you're on YouTube right now, and look in the bottom right portion of that page, of that video, there's a little icon or something. You can put your cursor over that and subscribe. If you've already subscribed, don't click on it because you'll unsubscribe. But that's the way to not miss this stuff. I'll be back same time next week. Coming up next, we've got getting started with technical analysis. Bob Armstrong's teaching that webcast. So getting started with technical. analysis, make sure you check that out. Thanks, everybody, for your time spending with me today. And thanks, Connie, for helping me out in the chat. Thanks, Bree, in production. And we'll see you all same time next week. Bye-bye, everybody.
