Good afternoon, everyone. Welcome to our Long Options webcast. I' m Connie Hill. I' m happy that you would join me here today. I have a question for you, and I' d like you to respond out in the chat. OK, the question is this: When we' re talking about doing long options, sometimes they' re considered a low- probability trade. So are there some things we can do as a trader to help combat that? OK, that' s what we' re going to focus on here today in our webcast. I am joined in the chat by Cameron May. I' m happy Cameron' s here. He' s been trading options forever as well. So if you have questions, go ahead, chat those in. We want to help you get those answers.
If you' re listening to this on the recording and you have questions, you put your questions in the comment section. I' ll go back and review those throughout the day so you can have your question answered quickly as well. Now, let' s go through a couple of disclosures here. Cameron' s put in our X handles, I' m ConnieHillCS. He' s CameronMayCS. So we' ll post educational content throughout the day. So it is free. You can follow us and just not miss out on those comments and things that we might observe in the market. Let' s go through some quick disclosures here. Options carry a high level of risk and are not suitable for all investors. What we talk about today is for educational and informational purposes only.
Do not consider it a recommendation of any sort. We' re going to be using the paper money downloaded software to our system. That' s the most robust version that has a lot of tools for options traders. It' s a little bit different than the web and the mobile versions. Investing involves risk, including loss of principal. Past performance of any security or strategy does not guarantee future results or success. Now, I' m going to repeat as I go through a little announcement here, but I' m going to repeat. What can we do as traders to help combat the idea that sometimes these long option trades can be a lower probability trade compared to other strategies? All right.
Now, you guys, I' ve been promoting this, so I hope you have taken some action, all right, to come to some live workshops that we' re going to have. This weekend' s in Seattle. Mike Fairbone' s on his way up there right now. It' s going to be starting tomorrow and Saturday morning. Then we' ll be in Anaheim. Then we' ll be in Santa Clara the week after. The Anaheim. Okay, so we' ve got some good things going on. Cameron May will be at Santa Clara. I will be in Anaheim. I' d love to have you stop by and say hello, get to know you, maybe at a little bit more personal level. People love these events. We treat you well. We feed you, and they' re free.
I mean, how do you beat that? Many people, you know, you have free food. That' s all they want. We give you more than that, though. Alright. In our webcast here of long options, it's an intermediate level class. And so, there' s kind of some assumptions that you maybe already understand a little bit of long options. But I know it can be maybe the first option strategy that some of you learn. Okay? So, we always like to talk about concepts of long options. We always want to talk about price, time, and volatility, and look at some examples. I hit my button too quickly there. But just as far as what long options are, we' re buying a contract, either a call or a put, and we need the stock to move because we' re paying a premium for it, and we need the stock to move to at least cover that price so that, you know, if it covers that price, then maybe we can break even.
But ideally, we want it to go past there. Okay? That would be what we' d want. And as far as theta, remember theta is our time decay. And so, options have a limited period of time. Stocks don' t expire, right? But these option contracts do. And so, we need the stock to make a move for us within the period of time that we expect it to. We' re going to give it time to do. And then each day, time decay will decay that price of the option a little bit, a little bit every day, including weekends and holidays. Okay? So, keep that in mind. Options are also, or long options are also vega positive. What does that mean? Well, vega positive means if there are changes in employment, then it will be stated.
And if there are changes in employment or in property sales or any we know the alignment, unusual or unusual trend, at some point, and so we Let' s talk about some techniques here. Now, I' m going to come over to the chat and I' m going to look if any of you responded about maybe what we could do with this idea that long options many times are a low probability trade. All right. Well, we' re going to talk about it here. We are going to look at some new example trades. We' re also going to examine some trades that we did last week that are done. OK, and I told you last week I was hoping that they would be done by the time I got to class and they for the most part are.
Let' s go take a look at those. Let' s give you a review of what happened on them. Now, last week, in an effort to maybe have some quick hits, right, some quick little runs of this stock, we said, you know, let' s use the average true range. And we added on to our chart here the average true range, which really just takes the high and the low over the last 14 days and gives it an average. So we have an idea: Hey, is the stock moving a lot right now? Is it not moving a lot right now? And and we said, let' s take the ATR, let' s multiply it by one point five times and see if the stock goes in and hits that price - just basically one and a half times the ATR.
So let' s talk about Eat. It was one of our trades we did last week. And with Eat, we were looking at. Well, I' ll go over here to actually review our account statement. OK, EAT, we bought the option for three sixty five and we got out five days later at six thirty. Now, in terms of a gain, that was about a five hundred and thirty dollar gain for those two contracts. And percentage wise, it worked out to about seventy- three percent. Now, let' s go to the chart and see what we have. Kind of a weird thing. Let me reset that. There we go. Let' s go back to our charts. If I zoom in here, I like to highlight the day we get in in green and I follow it.
OK, and what did the stock do on the twenty- fourth, which was Monday? Friday it didn' t do a whole lot. OK, so we put the trade and didn' t do a whole lot. But the Monday it had a nice move. Then the next day, day what did it do? It gapped up, it dropped a little bit, gave us that red body of the candle, and at one point ran up to 7602. And after this, the stock had been trading for a little bit of time that day, that' s when it ran up; it hit our target, boom! We were out of the trade, that' s kind of what I' m saying: a quick hit that we want just something that moves quickly for us, and it' s kind of like we say thank you very much' for making that move, i m just going to take out whatever I get out of you and 73 on that trade, nothing you know not too shabby now, we had another trade as well.
B-I, bil,i on b-i Billy Billy here, this is a Chinese stock we talked about; there is some additional risk when trading foreign companies, okay? This stock had been downward trending for a lot, started to rise up. In fact, I think we saw kind of a large cup and handle pattern here. Let' s zoom in. What did this do for us? Well, we got in close to the end of the day. The day it had gapped up in price and it was closing lower than where it opened, but it was still up pretty decent. We did the exact same thing. The ATR on that day was about $0. 88. And we said, okay, let' s just look for 1. 5 times $0.88.
That Show much we want the stock to move. And if it does, great, let' s get out of the trade. What did it do? Well, it went there immediately the next day. It' s like, geez, could I just repeat that every single day? Right? Sometimes we take a trade and it does what we think it' s going to do. And sometimes it does it even quicker than we think it might. But when we set our trade up and we put automatic exits in there, we' re going to get a lot of money. And we' re going to get a lot of money. And we' re going to get We don' t have to try to catch it. Have you ever done that before? You put in a trade and you say, oh, I' ll watch it.
I' m watching the market. I' ll just watch it. Something that you might try doing is putting in those targets and those stops right when you put the trade on. Or if you' re hurrying to get into the trade, put it on shortly thereafter. Because then if it makes that move, fantastic. The system goes, it executes it for you and you don' t risk missing it. Have you ever had a stock move and you said, ' I' m going to watch it' and you missed it? Yeah, I' m going to put my hand up because that' s happened to me before. And so, in terms of probabilities of a trade, it helps us if we have known exits and put them in place, then we can let technology help us out there to execute something, especially if it' s maybe not a higher probability trade.
Now, let me come over and take a quick look in the chat. Make sure we' re okay as far as questions go. Okay. Looks like we are in good shape there. Thank you, Cameron, for doing that. All right. So we had two trades. How did this one turn out? We go to the monitor tab. Let' s bring up our Billy trade. And you can see, yep, we got in last Thursday on the 20th. We got filled at 126 with our 1. 5 ATR move. It went up quite a bit. And again, the very next day, we were hoping to get out in the neighborhood of about $2, going from 126 to $2. And it did. It executed for us a little bit later in the day, right?
12:51 is mountain time. So, you know, about this time of the day, 20 minutes earlier on that day. But getting out here, if you go and run the numbers, we on that one, we only did one contract. We could have done more in our account. But we had a gain of $75, which doesn' t sound like a lot. And I think this one, we were in a little bit of a hurry to get in. And so I just did one contract on it. But if we had position- sized and bought more contracts, yeah, we' d be seeing a lot more than just, say, $75. But it did turn out, as I ran the numbers there, that' s about a 60% gain. So we have a 60% gain.
We had a 70% 3% gain just from the two trades last week. Now, I showed you a chart last week that we didn' t have time to put the order in. But I put it in after a class was over, but before the market closed, so we could just kind of look at it and see what happened to it, okay? I don' t know if any of you did this as a practice trade in your paper account or not, but it was 3M. And on 3M, let' s zoom in to see what happened to it. So we have a 60% gain. We had a 60% gain. We had a 60% gain. We had a 60% gain. So we had a 60% gain.
We had a 60% gain. We had a 60% gain. We had a 60% gain. We had a 60% gain. $2 . 03. Okay? So looking for basically a $2 move times one and a half. So we' I' m looking for about a $3 move. And now this is a little bit more expensive of a stock. So on the Dow Jones, so it' s a mega, I' m going to say a large cap stock. Sometimes large cap stocks don' t have the same volatility. So we' re looking for a $2 move times one and a half. So we' re looking for a $2 move times that maybe some growth stocks do, or maybe some smaller cap stocks that are newly trading or something like that.
In any case, we went ahead, we put the trade in, and it hasn' t executed yet. Okay? So had two days, it went up a little bit. Two days, it pulled back a little bit. And then we' ve got a little bit of a bounce here today. Now, if this stock continues to just go flatline on us, we' re going to fill the time decay. So we' re going to fill the time decay. All right. We' re going to start filling that. So the question is now, is it appropriate to maybe increase our stock loss so that maybe we come out with some profit or partial profit, as opposed to maybe ending up in a loss scenario? Okay. Now we, I' ll show you what we' re going to talk about here.
So as we come over to the monitor tab and come back to our activity and positions, here' s our triple M trade. And we bought it for 380. We got filled on a little bit cheaper. Right now, it' s worth 444. It was actually worth more than that earlier today. It was up about 30%, which is nice to see it up 30%. But if we' re trying to say, you know, when we put this trade on, the price of the stock was, it' s gone up a little bit, not a ton, but a little bit. Okay. But usually when we select a trade, we' re going to see a little bit of a drop. So, we' re going to see a little bit of a drop.
So, we' re going to see a little bit of a drop. So, we' re going to in the money option. As we look at it, we' ll just take a look at this one and we say, well, what' s the Delta on it? Well, it was down here a little bit lower. I believe it was our at-the- money option. And many times that Delta is around about 50. Maybe it' s a little bit higher, a little bit lower. And then as it moves, then it becomes more in the money. And then the probability and the likelihood that that option could expire at least a penny in the money, if it goes up and it does so. You know, at a decent rate, then that delta increments and raises that probability for us.
But when we start out, many of these trades were starting at, you know, 50 -50, might go our way, might not go our way. Okay, so one of the things that we can do to combat that if we want to, is we can say, well, let' s go a little deeper in the money. Let' s put on an option that maybe has a higher probability. And then we already talked about putting in your exits. So whether you' ve got a winner, you' ve got a loser, you know when you want to get out. Now on this particular trade, if we were to sell it right now, it' s saying it' s good for $4 . 45,
which is a little bit better. What would you consider moving your stop loss up to? Would you consider putting it up to the cost of the option, $3 . 80? Would you, do it a little more than $3 . 80? So that if it kind of starts to peter out on us, it hasn' t made the quick move we' d like to have seen it make, then maybe we aren' Getting out at, you know, we actually initially put it in at 50% of the price of the option, is what we did. Okay, so let me look here real quickly. Let' s see. I think maybe we just have, some conversation going on. All right. We' ll let, we' ll let you continue your conversation. Okay.
This is what I' m going to suggest we do for this particular trade. Because we' re up on it, not a great deal, and it was up significantly higher before, we want to be inching up our stop loss as we go. This one, it hadn' t moved a whole lot, so I didn' t inch it very far. Okay. I haven' t really played with that. But let' s go ahead. Let' s say we re going to increase the price of our stop point, getting out if it' s not working out for us, for 10 cents more than what we bought it for. It isn' t that much away from where the price of is trading right now. We could get stopped out.
However, we' re going to start feeling the effects of time decay if it just continues to sit here and go sideways. Okay. So that' s what we' re going to do on this one. So we' ve got to go to our working orders. Find it. Here is our target. We' re going to leave that alone. Here is our stop that was about 50% of the price of the option. We' re going to cancel and replace that order. And then we' re going to come out here and we' re going to put in the value of 390. So, I mean, it could drop a little bit and just nick us out. And that' s a possibility. Is this the only way you could approach it? No, you know, you could do other things as well.
But in this situation where the expectation is that it would have made the move for us already, and it hasn' t quite made it that far, it could get there in a day or two' s worth of time. Maybe it has a bump tomorrow. That would be nice and get us out. So we would try to get out close to that 390. Remember, when the option gets to that price, it triggers a market order. Market orders are never guaranteed at this price. We expect them to just get filled at whatever the next price is that they can get. All right. Send it off. Here it goes. I' ll tell you next week what happened with this. All right. Let me take a quick look here at the chat.
Jerry says, other coaches indicate placing a stop can be filled unexpectedly when the market first opens. That is true, right? First thing when the market' s open, one of the things you notice is that the prices are just kind of bouncing around. And you' re right. You absolutely could get triggered out of a trade because of that morning activity. If you felt comfortable doing it, maybe you' d say, okay, I' m not going to change that stop loss until the market opens tomorrow and gets through that really bumpy period of time. We' re not going to be together when we' re doing that tomorrow, so we' ve got to take action on it right now. Alright. We had two trades that worked out for us from last week at a 1.
5 times 8. 5. So we' re going to take action on it right now. Alright. We had two trades that worked out for us from last week at a 1. 5 times 8. 5. So we' re going to take action on it right now. Alright. Well, sometimes it' s like, well, could we get a little bit more mileage out of a trade like that? And so we' re going to try and experiment today. And I have several examples I' m hoping we have the chance to go through. And I think we will with the time we have left. Number one, are the markets overall more bullish or bearish? Hopefully you' re noting, yeah, we just hit new highs again last week, right? SPX has been pretty strong.
So the S&P 500 has been pretty strong. The S&P 500 and stocks in that kind of a category would be, you' d say, yeah, they' re not all of them. Okay. But overall, as an index, it' s going up. If we were to look at the NASDAQ, if we look at NDX, we' d note the same thing. Yeah. Last week, it had another high, pulled back a little bit, trying to bounce out of it. It' s only up 0. 16% right now. It was up a little bit. And what about the Dow Jones? We pull that one up. That one does not have the same strength that we would be seeing in the SPX and the NASDAQ. Now, triple M is a Dow Jones stock. All right.
So, you know, the index overall is not moving quite as aggressively and as positively as the other two indexes that we looked at. Okay. So some here might say, well, if this index isn' t doing strong, maybe we look at the S&P 500. And if we look at the S&P 500, we look at the S&P 500. For stocks that maybe are on the Dow or I' m going to say the Russell 2000, which are kind of been the weaker indexes for us. Okay. So keep that thought in mind. We' re going to do one bearish trade. The reason we' re going to do a bearish trade is because this stock has really been struggling and it has a pretty an entry point that some traders would like. Okay.
Let' s take a look at it. Let' s go to JBL. All right. Bring that up. Let me ask you, did you guys either in the recording or here live, have you run the early morning movers scan that I taught you last week? I' m curious to know. I mentioned to you that I run it pretty much every day and I post some of the results that come out of it and also posted some of the early morning movers bearish. Now I' ll have to tell you that I Ve done a lot of the early morning movers scan. I' ve done a lot of the early morning movers scan. I taught a class earlier this week on Tuesday in exploring think or swim, where I kind of showed you some of the ins and outs of the bearish version of early morning movers, as well as that bullish version and some other ideas of how to use the tools under the scan tab.
I' ll put a link to it out in our show notes when I do my post-production work. Well, here we have JBL. You can see they had a decent drop. Their last earnings, they had another earnings - what day was that? That was the 20th, so last week, last Thursday. And I put in what I would see as a support area. And instead of drawing it with a price line, this time I decided to do it with my rectangle drawing tool, okay? Because it really is a range. And what we' re kind of seeing here, JBL, I mean, it had a nice run and we' re like, maybe there' s a higher high there, right? Higher than maybe the previous one. Yes, high. But then what did it do?
It broke through that support area. Today it' s forming a lower low. So definitely some weakness. All right. What is its ATR? Well, right now it' s $4. 03. We could do one and a half times an ATR again and just kind of see if we can see some consistency with that. Or we could push the boundaries a little, which we' re going to do today. We' re going to go 1. 75 times the ATR. We' re going to go 1. 75 times the ATR. We' re going to go 1. 75 times the ATR and look for that kind of movement. Okay. So let' s show you how that would look and how that would work here. Let me pull up the calculator. And I' m going to just type in 4.
0. It' s 4. 04, blah, blah, blah. 4. 04 times 1. 75. So we' re looking for movement, not twice the ATR, but a little bit more than one and a half. Okay. So we' re going to do 1. 75. Let' s see on this one. So I' m going to put on JBL that we have an ATR, 1. 75 times that ATR is 7. 07. Okay. Let' So go put together a trade on that. Now, as we come over here to the trade tab, one of the things you' ll notice is that it doesn' t have weeklies. It' s not a big enough stock to have a weekly. It' s not as much activity. Now, it' s traded over a million shares today, which is good.
Now, as we' re looking at maybe which options we might look for, if we' re looking for just a little move on the ATR, and we saw breakthrough support today, which some traders would use as an entry point, then the expectation is, well, we' ve got to give it time to drop. Plus, we need to give it an extra month or 30 days or 28 days worth of time to help push off time decay issues and have plenty of time for the stock to react. Therefore, we' re going to go down to the August options. Maybe if we were doing some selling strategies, we still might incorporate July 19, but we' re going to come out here to August. We' re going to come over here and check out the options.
Now, open interest is not tremendous here yet, but I' ll tell you what I was a little bit encouraged at. We' re looking at, we' re going to do just the very first one in the money. So the delta is a little bit higher than 0. 5. Okay. It' s a 0. 53. If you were really concerned, you' re going to go down to the August options. Now, if you were concerned about maybe having a higher probability on the trade, maybe buying something with a higher delta, like say the 115 strike. Now, we have our open interest here and it' s not tremendous. One thing that was encouraged here though, is 43 volume activity. So even a little bit more than what the open interest started out this morning.
So it looks like maybe there' s a little bit of activity there. In the case of this thing, in our class, we don' t want to lose more than a $50,000 on any trade. Okay. We' ll do two contracts here, but we can' t do more. Okay. And we' re also going to put on a 50% stop loss. So mechanically, we' Re just going to say buy custom. We' re going to choose that OCO bracket, put it here. I should have done that first, put it at two contracts, and then we' ll just buy it for $5. Let' s put in our stop loss. Okay. Our stop loss, we' re going to use 50% of the price. Why 50%?
Well, you don' t have to use 50%, but if you put something like say 10% or 15 or 20, it might stop you out pretty quickly because of how quickly the prices change on options, right? Stock moves a little bit and that option price moves exponentially. Okay. So here, let' s go ahead. Let' s put it down for 250. We don't, we' Re not guaranteed that price, but our expectation is for it to get filled pretty quickly, hopefully near that range. And then here, what do we need to do? Well, we need to look for that ATR move. What helped us last week? You guys remember what helped us last week? There' s a couple of ways we could do this.
One, we could use the field price calculator and we could say, okay, calculator, do 1 . 75 times the ATR. And then what value would that option be? We' re going to do that again. I want you to get really comfortable using the theoretical calculator. So we' re going to do that again. And then we' re going to do that again. So we' ll start out here. Again, I' m going to expect these stocks to make a quick move and be done before we meet together next week. Okay. Well, that's what we're going to expect. Now, let' s see. One, two, three, four. We will not be meeting next week because it'll be Independence Day. So I' m going to hope they wrap up before the holiday. Okay.
But let' s go ahead. Let' s put our time in here to account for our time decay. We' re going to have to go here to July. I' ll put us in here Friday. Okay. Again, I' m going to expect that we would be out sooner, but we' ll put in Friday because of the holiday. And then, what do we expect? We expect, we're looking for the stock to drop. So you need to put a minus in there. $7. 07 to be 1. 75 times our ATR. Now, it' s a bearish trade. Many times when stocks are dropping down, sometimes that volatility will increase. And we could go back to the chart. We could bring in implied volatility. We could maybe adjust it a little bit.
But what' s interesting here, even though maybe it was starting to have some sharp drops, the average true range actually kept kind of dipping back. Now, more recently, because it has had some bigger candles in the last 14 days, we saw it pop up here. A little. For simplicity today, I' m not going to adjust the implied volatility. Okay. We' re not going to. All right. So let' s see on July 5th, if it does move 1 . 75 times the ATR, what the value of that option might be. We' re going to have to look at it over here in the Theo price column, and that says $9. 37. So that' s what we' re going to pop in here. $9. 37. Now, if it moved there more quickly, hopefully we wouldn' t have as much time decaying. It might turn out to be a little bit more profitable of a trade because it would have, we' d be hitting our target a little bit early. Okay. So we' re going to watch it and follow it. Now, let me just check the chat - see if there' s any specific questions on this before we send it on its way.
Let's see. John, I' m going to look at your question here because some others might be wondering this as well. John says, ' I know when markets open, things are up and down. But sometimes I want to place a trade the night before. Is using a limit order best for that? I' m going to say, and this is kind of what Cameron said a little bit, it' s hard to say exactly what' s best as it is more so your understanding of how the limit order works, how a market order works, how a stop limit order works, right? Understanding that which ones might trigger a market order, like here on our stop loss. Here we' Okay, so you' re saying, all right, if the price of the option gets to 937 or higher, trigger a limit order.
Let' s have it fill the trade at 937 or better. The thing that when some traders don' t like to do market orders at night because of that jumping around and sometimes getting kind of a poor fill. Okay. So you have to kind of, experiment with it, experiment with that in your paper money account. And you might try different things. I' ll deal with really want it to be maybe based on the price of the stock rather than the price of the option and taking that into consideration as well. Okay. So I know that' s a pretty common question. We re going to throw this in our long options bucket so that we can track it there. Alright. We got filled a little bit cheaper, $ 490. We' ll take it.
All right. I' ve got a couple of bullish stocks that are making some pretty interesting moves today. Okay. Well, I' ve got to type all the letters here. We' re going to look at Carvana next. Okay. What have we got going on with Carvana? It kind of had an interesting breakout here. Kind of depends on where you put your support and resistance. And I went out here to three years because I wanted to see, well, what would maybe the next target be here for Carvana? Right. It was up here at $370 just three years ago. Right. And it got clear down here to the 355 last year. And this year it' s had quite the recovery, hasn' t it? So I wanted to kind of say, you know, what might be a realistic target?
Is it going to have resistance just a few dollars away? Just kind of getting acquainted with where it might be technically. Okay. So that could be if you weren' t using ATR, that could be used as a range, but it' s also going to be a realistic target. So I wanted to kind of say, you know, if you were using ATR, that could be used as a range, but it' s also good to know that maybe it' s just busting through some resistance right now. Let' s go back to our six-month chart. So it gapped up, pulled back, ran up to that resistance again, pulled back. And, you know, two days, three days ago, it looked like maybe it broke through, but maybe you wouldn' t, weren' t so sure.
And you' re like, well, let' s see some confirmation, getting a little bit more of that confirmation here today. So some traders might like that for a breakout entry. So we' re going to do, what is that ATR? What is it right now? 7. 29. Now this is a stock that actually is quite volatile. All right. If I look real quickly on the trade page and we open up where it' s beta is, beta gives us an idea of how volatile a stock is. So average volatility of a stock on the S &P 500 is one. Something that' s 20% more volatile would be a 1 . 2. Okay. So this is almost a two beta, so it' s almost twice the average volatility.
That means options are going to be a little expensive when we see implied volatility here. Yeah, they are going to be a little bit expensive, which makes it an even better idea to have a quick move and not let time decay kick in for you. All right. So let' s go back here. We were on the chart. One point, or let' s see, 7 . 29. Is the ATR times 1 . 75. Let' s see what kind of a move that' s going to look like. So on Carvana, we' re going to look at 12. 75 is what we want to increment the price of the option where we' re using our Theo price calculator. So as we hop over here, one thing I should have mentioned to you, we talked about it last week, but there could be some people that weren' t here with us last week.
And that is you need to have a selected column called theoretical price. It' s called Theo price. It needs to be selected as a column in order for this calculator to show up. Okay. If you don' t have it on, this is completely blank. Okay. So you have to choose that column. You can easily do that by customizing your layout here. Okay. So I' ve got one Delta open interest volume probability and Theo price. So here, let' s see the stocks at 132. So we' ve got 130. It would be kind of considered our at the money as well as having a little bit of intrinsic value. So it gives us a little bit higher Delta here that can help for, you know, to help combat maybe a low probability trade is being able to get a little bit higher Delta on it.
So we' re going to do this 130. We' ll put it on a 50% stop loss. We don' t want to miss a risk more than a thousand dollars in any trade. Now by putting a stop in, it' s not going to guarantee that, but that' s what we' re trying to do. Okay. So we' ll put a stop here. So let' s do this. Oh, oh, oh, let' s use the calculator first, Connie. Getting all excited. Let' s still keep it at January or July 5th. Let' s go ahead and put in a positive 12 . 75 is what we' re looking for the stock to move. And then we' ll look at the theoretical price. So this stock, or this option could go, would pay maybe 1950 or maybe a little less.
And it' s saying theoretically if it went up that high by next Friday, the value would be about 25. And I' m just going to write the value in here. We' re going to go with 25 . 84. Okay. It' s wiggling around. I know, but we' re going to put that in as our target. Oops. I didn' t put a T here. Here' s our target. So let' s do it. Right here. Let' Sorry, click buy, buy custom. Sorry. Go buy custom with OCO bracket. Let' s, the bottom' s intended to be our stop. So let' s go ahead. We' re going to put that in at what? Let' s say $9. 50. Right. That would be half of 19. 19, we' ll call it. Okay. Make that good till canceled.
We' re going to make our target good till canceled as well. And what are we going to put in here? We' re going to put in this $25. 84. All right. So we' ll get that in there. And really, we' re going to watch it every day. If we can significantly move up our stop loss, maybe below the day' s low, maybe it moves a little bit tomorrow. And then we take this $9. 50 price and we either adjust it, playing with a theoretical calculator, or we come in here and we say, okay, we' re going to put in this $25. 84. So we' re going to put in this $25. 84. And then we say, let' s base it on the price of the stock. Okay.
If the price of the stock went up five bucks, then we might go out and adjust our stop loss by $5. And I' m just using that as an arbitrary amount. Okay. But we do want to keep on top of it and look at it every single day. We' re going to let the system grab it for us if it does what we want it to do, what we expect it to do. All right. Here, we said we could just do one contract. So we' ll leave it at the one contract. We ll put this in our long options bucket. We' re going to send it on the way. All right. We got filled. Andy says, any problems with earnings? Valid question. Okay. They had earnings May 1st.
So they shouldn' t have earnings until when? Around August 1st. Our expectation is hopefully it' ll just make this move for us. It' s not a huge move, but we' d like it with this breakout. And some extra volume here today to continue to rise. And if it doesn' t, we' re going to stop ourselves out on it. All right. Let' s take a look at one other here. Before I do that, have all of you subscribed to our Trader Talks channel? I sure hope so. When you do it, it helps you find our information. Okay. We have new people joining us all the time. And I know those of you that I consider our veterans, you' ve probably already subscribed, which is fantastic. When you do, I went to the wrong tab.
When you are on our Trader Talks channel, you see what' s coming up and some of the classes that just recently finished. So we' re here in our long options. After I' m done, we' re going to have Ben Watson, gettoknowschwab. com. All right. He' ll follow me. So you can see some of the recent webcasts that have taken place, or you can look at a special watch list that we' ve designed for you. For example, those of you who are moving from Street Smart Edge to Thinkorswim, yeah, we' ve got a series for you to help you out. We also have a virtual workshop that we are running right now as well. It started the first night was last night. And we' ll have one here again tonight.
And then I take that back. It started Monday. All right. We' re actually through the workshop. Okay. We' ll start a new one on Monday. In any case, it helps you find our information. Okay. Click the little subscribe icon in the bottom- right -hand corner to subscribe. All right. One additional thing, I believe that I saw a survey out in the chat. We I will send surveys out to you from time to time, just trying to monitor, get your polls, get your input on things. So if you would, before you drop off our class, go ahead and click on that link. Two easy questions. You just fill in the radio button. Bop, bop. Okay. That will probably take you maybe 10 seconds. Okay. If you want to respond to the other couple of questions, do so.
And I' ll also encourage you to use it as your platform to communicate with me. If you' re saying, hey, could we look at this maybe in a future webcast, or I' m really struggling with this concept or whatever that might be, tell me so I can incorporate it into one of our upcoming lessons. Okay. So use it for that purpose as well. All right. Let me see if there was any questions. Thank you, Cameron, for reposting that out there. All you have to do is click on that. Now, I don' t know if we' re going to have enough time to go through all of this next example, but I' m going to try. Let' s do one that maybe isn' t quite as expensive. I' ve got a couple of choices here.
This is kind of an interesting one here. It' s Credo Technology. What is it doing today? It' s having a big breakout. Its ATR has been climbing here, so it' s making some bigger moves. We love to see bigger moves, right, if we' Re looking for something to move for us. It looks like it' s going to be about average volume today. Ideally, we' d like it to be bigger than average on a breakout, but the stock is in a decent uptrend. So this is going to be our next example. ATR, okay, it' s a little bit lower priced stock, 31 bucks. So ATR, it is $1. 39. Again, we' re going to multiply that by 1. 75. We' re going to see if we' re testing it too much, right?
Last week we did $1. 5. Today is $1. 75. So see our DO, we are going to be using a $2. 43 on that for its ATR times 1. 75. Let' s go to our trade tab. Let' s play with our DO price calculator. We' re going to leave July in here. We' re not going to look for a $12 move on this. But we are going to look for a $2. 43 move, okay? That' ll give us price of the stock getting to about $33. 59. And if it doesn' t, by July 5th, this is the theoretical price, although never guaranteed, right? These things aren' t guaranteed. But if things were to go well. Okay, now this one has a lot of open interest here.
I like that it' s a little bit deeper in the money, a $63. Helping to maybe help that probability of the trade be a little bit higher than just a 50% or 48%, right? It' s about 63% that it would expire at least a penny in the money, theoretically. And so let' s go through. Let s just do our trade here. So we' re going to do the same thing by custom with OCO bracket. Hope you' re getting used to it. We can do here, I should have done this first. We can do here three contracts. So we' re going to, okay? Three times 320 would still put us below our $1,000 we' re willing to risk in any trade. So our stop loss, let' s get that in there.
That' s going to be what? $1. 60. That' s our 50% stop loss. And then our target, we' re going to use what was calculated for us. And that' s going to be what? That' s going to be $4. 60. $4. 60. Good till canceled on both of those. It' ll trigger a market order if it gets to that option price or lower. Hopefully it gets filled at close to that if it were to drop down on us. I' m going to hit confirm and send. We' re going to send it to our long options bucket. We' re going to send it on. Okay. How many of you are starting to feel a little bit more comfortable with using the average true range?
Knowing, hey, what kind of a move are we looking for? We' ve done one, we' ve done one and a half. We' ve done 1 . 5%. We' ve done 1 . 75% today. Sometimes people might use two. You might say two is too greedy, Connie. All right. We' ll do some experimenting with that. You know we will. All right. Hope you' re getting more comfortable there. And what I' m going to encourage you to do this next week as you see opportunities, practice using the Theo Price, if you like. Practice using that average true range. And I would say these are just kind of singles and doubles. And I would say these are just kind of singles and doubles. All right. We' re not trying to hit a grand slam home run.
The stock takes off, you know, way big. We' re just looking to capture a little bit of the move there. All right. Let' s head on back here. Why a 50% stop loss? We talked about this maybe a little bit. Just the idea that when a stop, when a price of an option gets to about 50%, it' s harder for it to recover. It can recover, but many times it just is difficult. So that' s where some traders will draw the line. Hey, maybe you like 40%. Maybe you do something deeper in the money and you like 30%, right? That' s something for you to be able to experiment with. I appreciate you asking that. Kathy says, yeah, I' m comfortable with it. Good. I hope so.
Well, we' re wrapping up now. We talked about long options. We talked about price time of volatility, how they impact an option. We' re going to follow those three new trades. And again, I m hoping by the time we get together in two weeks that they will already be out of the trade as well as our Triple M. We should be out of the trade by then, too. All right, you guys, thank you for filling out that survey for us. We always appreciate it when you take the time to do it. Cameron, thank you for helping us out here. And thank you to each and every one of you. Again, at the top of our art, it' s going to be Ben Watson getting to know Schwab. com. We' ll see you back here in just a few minutes. Bye-bye.
