TRADING STRATEGIES

TradeWise offers defined-risk option spread trade recommendations through a variety of different trading strategies. Subscribe to one or more strategies for just $20 each per month and begin receiving initiating trades, adjustments and closing recommendations specific to that strategy. On average, TradeWise attempts to recommend at least 2 new trades per month for each strategy, but is dependent on favorable market conditions. Trade recommendations are delivered right to your email inbox. Subscribers may also set up Autotrade with TD Ameritrade to have the trades automatically entered for you in your designated TD Ameritrade account.

 

The Collar, which is a covered call with a protective put, involves purchasing stock, selling a call on that stock and buying a protective put to define the overall risk

The Collar strategy employs the same strategy as a Covered Call by purchasing 100 shares of a large capitalization stock with high liquidity and then selling a call option on those 100 shares, collecting a credit. However, in addition to the Covered Call, the simultaneous purchase of a Protective Put defines the amount of risk in the overall position and guards against a large downward move in the price of the stock.

The Protective Put is typically about 10-20% out-of-the-money and its cost will typically be less than the credit received on the sale of the call. With the Protective Put in place, we are covering any downside move in the underlying below our protective Put.

The Collar strategy provides the opportunity to roll the options from month to month, thereby collecting additional premiums against the long stock position and reducing the cost and risk of each trade. This can work to the client’s benefit if it is anticipated that the underlying stock is going to continue to trade in a relatively narrow range. The client may also have the benefit of dividend payments on many of the stocks TradeWise recommends for this strategy.

In some cases, TradeWise may recommend a Collar with a call in a further-out month and a Protective Put in a month that is closer to options expiration. This can reduce the cost for the protection until the put expires. In the event a trade is initiated with the call and put in different months, it provides the opportunity to either close the trade or roll the long put. This will depend upon the pricing of the individual options and the price movement of the underlying stock over the time frame of the trade.

Typically the shares of stock purchased will be trading for less than $50 per share so for those who elect to Autotrade, an allocation of $5,000 should ensure participation in each recommended trade.

Of the various strategies recommended by TradeWise, the Collar entails the least risk but is the most capital intensive and there can still be no assurance that an individual collar trade will be successful.

The length of any specific Collar recommendation will typically be 20 to 180 days.

For additional information about this TradeWise service, please see the ADV Part II

Trade Advisory

November 13,  2019

 

TradeWise Strategy:   Collar Advisory

Underlying: Exelon (EXC)

Status:  Opening Trade

Trade:   BUY +1 COLLAR EXC 100 17 JAN 20 46/43 CALL/PUT/EXC @44.74 LMT [TO OPEN/TO OPEN/TO OPEN]

Trade Price:   $44.74 Debit

Underlying Price:  $44.54

Trade Risk:    $1.74

Trade Duration:  Medium Term

Buying Power Reduction:  $4474.00

 

Trade Explanation:  For the Collar Advisory in Exelon, we are buying (EXC) stock, buying the 17 Jan 43 Puts and selling the 17 Jan 46 Calls for a net debit of $44.74 to open.

 

Price Action: To initiate a Collar, for every 100 shares of stock bought,  sell 1 call option and buy 1 put option. For example: for each 100 shares of (EXC) bought, sell 1 contract of the 17 Jan 46 calls and buy 1 of the 43 puts. The total cost of the trade was the price paid for the stock and puts, minus the premium received for the calls.  EXC shares have pulled back over 8% since the beginning of October, and have begun to show signs of bottoming near a major support level.  

 

Volatility:  Volatility is elevated in EXC near a 63% historical volatility percentile despite the overall market remaining historically low.  

 

Probability:  The stock has upside potential after pulling back amid an investigation into its lobbying activities. There is a 60% probability of the underlying retracing back above $46 by expiration.  

 

Risk:  We are risking $1.74 to make a potential $1.26, plus an imminent  $0.3625 dividend on each individual collar.  Although the Buying Power reduction is high due to the stock, the long put acts as protection to the downside to limit risk. We will have an opportunity to roll the options from month to month, but only if it reduces risk. Our initial break-even price is $44.74 on this position. 

 

Trade Duration:  We have 65 days to adjust or close this trade at 17 Jan expiration.

 

Logic:  We are buying the Collar to take advantage of the recent downturn and a near-term reversal. An attractive entry point should provide a favorable opportunity for EXC to begin trading higher. We have begun to see some bottoming in the sector as winter sets in.  A dividend payment is already scheduled for tomorrow which will immediately reduce the cost basis by $0.3625 to better align the risk/reward ratio near even.  

 

We will continuously monitor all of our positions to determine if adjustments need to be made or when to close out of a trade.

TradeWise

 

Opening Trade Price:   $44.74 Debit        

Closing/Adjustment Price: 

 

***If you are placing the trade yourself, you can now copy and paste the trade from this email directly from the ‘trade line’ above to the Thinkorswim trading platform. Just use the clipboard icon under the ‘Order entry’ tab; Make sure to adjust the quantity if necessary***

 

**Follow us on Twitter @tradewise

 

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Trade Advisory

December 17,  2019

 

TradeWise Strategy:   Collar Advisory

Underlying: Exelon (EXC)

Status:  Closing Trade

Trade:   SELL -1 COLLAR EXC 100 17 JAN 20 46/43 CALL/PUT/EXC @44.70 LMT [TO CLOSE/TO CLOSE/TO CLOSE]

Trade Price:   $44.70 Credit

Underlying Price:  $44.85

Trade Risk:    N/A

Trade Duration:  Medium Term

Buying Power Reduction:  N/A

 

Trade Explanation:  For the Collar Advisory initiated on November 13th in Exelon, we are selling (EXC) stock, selling the 17 Jan 43 Puts and buying the 17 Jan 46 Calls for a net credit of $44.70 to close.

 

To initiate a Collar, for every 100 shares of stock bought,  we sell 1 call option and buy 1 put option. For example: for each 100 shares of (EXC) bought, we sold 1 contract of the 17 Jan 46 calls and bought 1 of the 43 puts. The total cost of the trade was the price paid for the stock and puts, minus the premium received for the calls.  EXC shares had pulled back over 8% since the beginning of October, and had begun to show signs of bottoming near a major support level.  

 

EXC had begun moving higher shortly after we opened the position in mid-November, reaching a high of $45.84.  On November 13th , EXC went ex-dividend and because we were long the shares we received the $0.36 dividend.  Exelon has been volatile over the past month as the shares have trended lower, reaching a recent low of $43.57.  With the shares facing some resistance near $45, we are going to close the position for a $44.70 credit.  The net result of receiving the $0.36 dividend and $44.70 credit to close is a gain of $0.32, or 18.4% based on the original risk of $1.74.

 

 

We will continuously monitor all of our positions to determine if adjustments need to be made or when to close out of a trade.

TradeWise

 

Opening Trade Price:   $44.74 Debit        

Closing/Adjustment Price: $0.36 Dividend; $44.70 Credit to close Collar (Net gain= $0.32)

 

***If you are placing the trade yourself, you can now copy and paste the trade from this email directly from the ‘trade line’ above to the Thinkorswim trading platform. Just use the clipboard icon under the ‘Order entry’ tab; Make sure to adjust the quantity if necessary***

 

 

**Follow us on Twitter @tradewise

 

Please note: All TradeWise Advisory emails are price sensitive. Therefore, all recommendations, unless otherwise noted, are applicable for 'DAY' orders only, not good-till-cancelled. If a recommendation cannot be filled, we may choose to resend the email the following day along with any modifications. In addition, if a recommendation can only be partially filled, clients may receive a pro rata allocation.


*****Options involve risk and are not suitable for all investors. Customers must consider all relevant risk factors including their own personal financial situation before trading. Every investor who uses options should read and understand the publication Characteristics and Risks of Standardized Options. A copy can be obtained from The Chicago Board Options Exchange (1-800-OPTIONS) or from your broker. The investor considering options should consult their tax advisor as to how taxes may affect the outcome of contemplated options transactions. A prospectus, which discusses the role of the Options Clearing Corporation, is also available without charge upon request at the Options Clearing Corporation, 440 S LaSalle St, Suite 908, Chicago, Illinois 60605.*****

To unsubscribe from e-mails, please visit your Account Management page.

Note: You can always view all TradeWise content by logging onto the website at www.tradewise.com

All content ©2016 TradeWise| All rights reserved.

 

The Covered Call strategy consists of purchasing 100 shares of a large capitalization stock, ETF or index-based ETF ("underlying") and then selling one call option on each 100 shares for a credit.

The Covered Call strategy is designed to profit in two different scenarios. Upon selling a call, the credit received effectively reduces the cost of the trade, thus reducing the overall amount of money risked on the trade. If the price of the underlying moves above the strike price of the call, the client will likely be assigned and will be obligated to sell the underlying at the strike price at expiration. This will result in a profit, as the client will keep the profit realized from selling the underlying at a higher price than was initially paid, as well as the initial credit received for selling the call (less any applicable commissions and assignment fees).

If the price of the underlying trades in a relatively narrow trading range and stays below the strike price, the strategy provides an opportunity to roll the call option from month to month (buying back the short call and then selling a further-out month call), thereby collecting additional premium each month and further reducing the amount of money risked on the trade. The client may also have the benefit of receiving dividend payments on many of the stocks TradeWise recommends for this strategy. Of course, this is only possible if the client remains in the position and does not get assigned.

The Covered Call strategy may be utilized when an investor believes the underlying will either move up or remain in a relatively narrow trading range over the life of the call option. There is limited upside potential for this strategy, up to the strike price of the call. If the stock moves above the strike price of the call, the client likely will not keep the underlying shares as they will be called away and is obligated to sell theunderlying at the strike price as described above. Also, the strategy does not provide downside protection beyond the credit received when the call was sold, should the underlying lose significant value. In the event the underlying experiences a large down move of more than a 25% drop in price, TradeWise may send out a recommendation to close out of the trade. For Autotrade clients, TradeWise will attempt to close out the trade.

Typically the shares of the underlying purchased will be trading for less than $50 per share so for those who elect to autotrade, an allocation of $5,000 should ensure participation in each recommended trade.

This strategy is capital intensive and there can be no assurance that an individual covered call trade will be successful. As with any other strategy, any adjustments or rolling of the position will incur applicable commission fees.

The length of any specific Covered Call recommendation will typically at least 30 days.

For additional information about this TradeWise service, please see the ADV Part II

Trade Advisory

February 14, 2019

 

TradeWise Strategy:  Covered Call Advisory

Underlying:  Coca-Cola (KO)

Status: Opening Trade

Trade:  BUY +1 COVERED KO 100 18 APR 19 48 CALL/KO @45.90 LMT [TO OPEN/TO OPEN]

Trade Price:  $45.90 Debit

Underlying Price:  $46.31

Trade Risk:  $4590.00

Trade Duration:  Long Term

Buying Power Reduction:  $4590.00

 

Trade Explanation: For the Covered Call Advisory in Coke, we are buying (KO) stock and selling the 18 Apr 48 Calls for a net debit of $45.90 to open. 

 

Price Action:  To initiate this Covered call position, we buy 100 shares of the underlying equity (KO) and sell 1 contract of the 18 Apr 48 calls for a net debit of $45.90. Our total cost on the trade is the price we pay for the stock minus the premium received for the calls on this trade. KO shares are down 7% this morning after a mixed earnings result. We expect the shares to eventually stabilize and begin to retrace higher in the long-term as the shares appear to be reaching a solid support level.  

 

Volatility:  Volatility is higher in KO on the slide, which increases the credit collected on the short call in the strategy. Any increase in volatility should provide good opportunities to roll our short 18 Apr 48 calls to further-term months for additional credits in order to reduce risk.

 

Probability:  With the recent fall, we are giving ourselves a great probability for the shares to turn higher.  We have a cushion of over 2% to the downside before we reach our break-even.

 

Risk:   We are risking our initiation price of $45.90 on this position. We will have multiple opportunities to roll our short calls from month to month which will gradually decrease this risk. The company pays a quarterly dividend of $0.39 also, which can help reduce risk and potentially increase profitability should we own shares over the ex-dividend period. 

 

Trade Duration:  We have 63 days to adjust or close this trade by 18 Apr expiration. 

 

Logic:  We are buying the Covered Call to take advantage of the recent adjustment in the shares and the potential upside in this stock. A solid 3.5% dividend yield provides an appealing long/neutral opportunity. With this strategy, we have plenty of time for Coke shares to rebound as we look to take advantage of any stabilization near our strike.

 

We will continuously monitor our positions to determine if adjustments need to be made or when to close out of a trade.

 

TradeWise

Original Trade Price: $45.90 debit   

      

Closing/Adjustment Price: 

 

***If you are placing the trade yourself, you can now copy and paste the trade from this email directly from the ‘trade line’ above to the Thinkorswim trading platform. Just use the clipboard icon under the ‘Order entry’ tab; Make sure to adjust the quantity if necessary as the default in the Trade line above is a 1 lot***

 

*Follow us on Twitter @TradeWise

Please note: All TradeWise Advisory emails are price sensitive. Therefore, all recommendations, unless otherwise noted, are applicable for 'DAY' orders only, not good-till-cancelled. If a recommendation cannot be filled, we may choose to resend the email the following day along with any modifications. In addition, if a recommendation can only be partially filled, clients may receive a pro rata allocation.


*****Options involve risk and are not suitable for all investors. Customers must consider all relevant risk factors including their own personal financial situation before trading. Every investor who uses options should read and understand the publication Characteristics and Risks of Standardized Options. A copy can be obtained from The Chicago Board Options Exchange (1-800-OPTIONS) or from your broker. The investor considering options should consult their tax advisor as to how taxes may affect the outcome of contemplated options transactions. A prospectus, which discusses the role of the Options Clearing Corporation, is also available without charge upon request at the Options Clearing Corporation, 440 S LaSalle St, Suite 908, Chicago, Illinois 60605.*****

To unsubscribe from e-mails, please visit your Account Management page.

Note: You can always view all TradeWise content by logging onto the website at www.tradewise.com

All content ©2016 TradeWise| All rights reserved.

 
The “Directional” strategy is a defined-risk setup that looks to take advantage of a market move in one particular direction. TradeWise can make trade recommendations using either long single options, long/short vertical call spreads or long/short vertical put spreads in underlying securities (“underlying”) such as individual stocks, ETFs or Indices with high liquidity and generally with moderate volatility. The spread is considered a “Vertical” because the options are on the same underlying in the same expiration month but at different strike prices. The details of each specific trade will be stated in the trade recommendation email that we send you.
 
A Call Vertical spread involves simultaneously buying one call option and selling another call option at a different strike price in the same underlying, in the same expiration month. A Put Vertical spread involves simultaneously buying a put option and selling another put option, at a different strike price in the same underlying, in the same expiration month. Generally, we will be recommending, “selling” a vertical call or put spread, because there is a higher probability that the recommended trade will be successful.
 
We will generally recommend selling out-of-the-money Call Verticals or out-of-the-money Put Verticals but reserve the right to recommend individual calls or puts based on volatility. Upon selling the Vertical, an initial credit will be collected. There are three out of four market situations where this type of trade can be successful.
 
(1) If the underlying is moves sideways for a period of time while seeing a decrease in volatility;
(2) If the underlying moves away from the short strike; or
(3) If the underlying moves towards the short strike, but does not surpass the break-even point by expiration.
 
We may also periodically recommend ”Single” long Calls or Puts with a bullish or bearish bias as they are still considered a risk-defined trade. Selling premium against the original long position at a later date can be accomplished as long as the position remains risk-defined.
 
Suggested Allocation
A minimum of at least of $500 is required to Autotrade this strategy. There is no assurance that an individual Directional trade will be successful.
The length of any specific trade recommendation in the Directional strategy typically ranges from 5 to 50 days.
 
Potential Benefits
• You cannot lose more than your allocation (not including commissions charged by your broker-dealer or dividend risk).
• Potential gain on selling Verticals when the underlying remains in a relatively narrow trading range or on buying Singles/Verticals when the underlying moves in the desired direction.
• Investor education.
 
Potential Risks
• You could potentially lose 100% of your allocation per trade plus any commissions charged by your broker-dealer.
• Potential gains will be reduced or possibly eliminated by the commissions you pay your broker-dealer for the recommended transactions.
• There can be no assurance this strategy will be successful over time.

For additional information about this TradeWise service, please see the ADV Part II

Trade Advisory

May 6, 2019

  

TradeWise Strategy:   Directional  Advisory

Underlying:  American Express (AXP)

Status:  Opening Trade

Trade:   SELL -1 VERTICAL AXP 100 (Weeklys) 31 MAY 19 121/123 CALL @.57 LMT [TO OPEN/TO OPEN]

Trade Price:   $0.57 Credit

Underlying Price:  $118.75

Trade Risk:    $1.43

Trade Duration:  Short Term

Buying Power Reduction:  $143.00

 

Trade Explanation: For the Directional Advisory in American Express, we are selling the 31 May Weekly 121 calls and buying the 31 May Weekly 123 calls for a credit of $0.57 to open

Price Action: We are selling this $2 wide call vertical in the financial services company for a credit of $0.57. AXP has rallied from lower levels prior to earnings,  and the shares appear to be meeting resistance at this point. We expect the shares to either begin to consolidate or start reversing lower but we still have a cushion of $2.82 to the upside to allow for modest upside. We need AXP to continue to trade well below our break-even level of $121.57 for the best results.

 

Volatility:  Volatility has remained consistent in AXP since earnings were released 3 weeks ago. This gives us a good entry point on a short call vertical. Volatility could moderate with any consolidation in the stock price which would also have a positive effect on the spread. 

 

Probability: There is an 68% probability that AXP shares will expire below the short call on the 31st of May which offers an advantage to selling this shorter-term call vertical.  

 

Risk:   We are risking $1.43 to potentially capture up to a $0.57 credit should shares begin to stall out. The position is risk-defined and any adjustment or closing trade never increases the overall risk on the trade.

 

Trade Duration:  We have 25 days to reach 31 May expiration in this position. This is a short-term position and time decay will begin to increase quickly due to the time frame.

 

Logic:  We want to take advantage of the recent rise in AXP by initiating this downside to neutral trade recommendation. The shares will hopefully begin to pull back to allow for faster time decay ahead of expiration. The shares should reject this current level near their 52 week high and begin moving lower off any continued delay on an elusive trade deal with China. We will monitor the position closely and look to take action if there is an extreme move in either direction  

 

We will continuously monitor all of our positions to determine if adjustments need to be made or when to close out of a trade.

 

TradeWise

 

Opening Trade Price:  $0.57 credit         

Closing/Adjustment Price:  

 

***If you are placing the trade yourself, you can now copy and paste the trade from this email directly from the trade line to the thinkorswim trading platform. Just use the clipboard icon under the ‘Order entry’ tab; Make sure to adjust the quantity if necessary as the default in the Trade line above is only a 1 lot***

 

*Follow us on Twitter @TradeWise

Please note: All TradeWise Advisory emails are price sensitive. Therefore, all recommendations, unless otherwise noted, are applicable for 'DAY' orders only, not good-till-cancelled. If a recommendation cannot be filled, we may choose to resend the email the following day along with any modifications. In addition, if a recommendation can only be partially filled, clients may receive a pro rata allocation.


*****Options involve risk and are not suitable for all investors. Customers must consider all relevant risk factors including their own personal financial situation before trading. Every investor who uses options should read and understand the publication Characteristics and Risks of Standardized Options. A copy can be obtained from The Chicago Board Options Exchange (1-800-OPTIONS) or from your broker. The investor considering options should consult their tax advisor as to how taxes may affect the outcome of contemplated options transactions. A prospectus, which discusses the role of the Options Clearing Corporation, is also available without charge upon request at the Options Clearing Corporation, 440 S LaSalle St, Suite 908, Chicago, Illinois 60605.*****

To unsubscribe from e-mails, please visit your Account Management page.

Note: You can always view all TradeWise content by logging onto the website at www.tradewise.com

All content ©2016 TradeWise| All rights reserved.

 
The “Range Bound” strategy consists of four possible trade types – “an Iron Condor” a “Double Calendar,” a “Double Diagonal” or a “Straddle/Strangle Swap.” The underlying securities (“underlying”) will be highly liquid individual stocks, ETFs and Indexes (e.g. the SPY, IWM, or DIA) with medium correlation to market movements (beta). The “Range Bound” strategy is the most complex of the strategies we recommend. Accordingly, it is important to have a clear understanding of all previous strategies listed in order to comprehend the nature of a 4 legged spread as it involves simultaneously buying and selling options with more than one strike price, expiration date or sensitivity to the underlying asset’s price.
 
An “Iron Condor” is an option strategy involving a single complex option spread. It entails the simultaneous sale of an out-of-the-money call “vertical” and an out-of-the-money put “vertical,” in the same month in the same underlying (see the “Directional Spreads” strategy description for additional information about verticals). A call is out-of-the-money when the price of the underlying is lower than the option's strike price: a put is out-of-the-money when the price of the underlying is higher than the put's strike price. When looking for an Iron Condor to recommend, we are seeking a calculated probability of approximately 70-80% that the short Call Vertical and the short Put Vertical will not close in the money at options expiration. Only one side of the recommended trade can possibly close in the money since it is structured by means of a vertical on the upside, and a vertical on the downside. An Iron Condor is designed to profit when the underlying remains in a reasonably narrow trading range during the expiration cycle positions that we recommend.
 
The trade recommendations that we make for an Iron Condor will typically involve collecting a credit upon initiation of the trade. The goal is to keep the initial credit collected upon initiation, which will occur if the underlying stays between the short Put Vertical strike price and short Call Vertical strike price. Depending on market movements and the time remaining to options expiration, we may recommend adjustments to the trade. In some instances, TradeWise may also recommend purchasing Iron Condors in an environment of extremely low volatility with the debit amount being the maximum risk on the trade.
 
A “Double Calendar” is the purchase of two Calendars, buying a call calendar above the strike price of the underlying and buying a put calendar below the strike price of the underlying. The Double Calendars that we recommend will always involve paying a debit upon initiation of the recommended trades. As the shorter term options that were sold decay and lose value, the idea is that we recommend you buy those shorter term options back by rolling to subsequent cycles, collecting a credit, and therefore reducing the amount of risk on the trade. If our recommendations are successful, upon rolling the two Calendars, you will collect a credit for either a put Calendar roll and/or a call Calendar roll.
 
“Double Diagonal” - Unlike the Double Calendar, where the strike prices will be the same in both the front and back month, in the Double Diagonal the front month strike prices will be different than the back month strike prices. A Diagonal spread combines a Calendar spread (since the options expire at different times) and a Vertical spread (since the strike prices are different). A Double Diagonal is simply two diagonals. When the diagonals are rolled (collecting a credit on each one), the resulting position will be an Iron Condor. At that point, we will be looking for the same conditions as in the Iron Condor strategy The biggest difference between the Double Diagonal and the Iron Condor is that the Double Diagonal requires more buying power because of the make-up of the trade.
 
A “Straddle / Strangle Swap” is the sale of a shorter term at-the-money call and an at-the-money put, which is known as a “Straddle.” This is coupled with the purchase of a longer term out-of-the-money Call and an out-of-the-money put, which is known as a “Strangle.” The call and the put are typically the same distance away from the price at which the underlying is trading. The goal is to roll the short strikes for credits.
 
Suggested Allocation
A minimum allocation of at least $1,000 is required to Autotrade this strategy. There is no assurance that an individual trade will be successful.
The length of any specific trade recommendation in the “Range Bound” strategy typically ranges from 1 to 50 days.
 
Potential Benefits
• You cannot lose more than your allocation (not including commissions charged by your broker- dealer or dividend risk).
• Potential gains are possible when the trade remains in a defined trading range.
• Investor education.
 
Potential Risks
• Any large moves to the upside or to the downside before we have a chance to recommend adjustments could potentially result in a loss of 100% of your allocation plus any commissions charged by your broker-dealer.
• Potential gains will be reduced or possibly eliminated by the commissions you pay your broker-dealer for the recommended transactions.
• There can be no assurance this strategy will be successful over time.

For additional information about this TradeWise service, please see the ADV Part II

Trade Advisory

May 8, 2019

 

**For our Autotrade Clients, we initiated a 50% allocation only due to the upcoming earnings announcement; If you would normally trade 10 spreads, you only received 5 on this trade**

 

TradeWise Strategy:  Range Bound Advisory

Underlying:  Disney  (DIS)

Status:  SELL -1 IRON CONDOR DIS 100 (Weeklys) 10 MAY 19 140/142/130/128 CALL/PUT @.72 LMT [TO OPEN/TO OPEN/TO OPEN/TO OPEN]

Trade Price:  $0.72 Credit

Underlying Price:  $135.50

Trade Risk:   $1.28

Trade Duration:  Short Term

Buying Power Reduction:  $128.00

 

Price Action: We are selling this Iron Condor in the entertainment giant for a credit of $0.72 on a 50% allocation. For an Iron Condor trade, we sell an out-of-the-money Call Vertical (140/142) and Put Vertical (130/128) simultaneously. The shares have seen a surge following the popularity of their Avengers blockbuster film which was released just last month. We expect the shares to consolidate somewhat following their earnings event and remain within a range as the expected move is about +/- $5.00 at this stage. We need the shares to continue to trade between our break-even levels of $129.28 on the downside and $140.72 on the upside.

 

Volatility: Volatility is elevated due to earnings and the IV Percentile Rank for DIS is at 62%. The event risk increases the credit received on a short Iron Condor and expands the selected width of the short strikes. We expect volatility to fall sharply after the report, which should contract the value of this short-term neutral position especially due to the shorter time-period.

 

Probability:  There is a 75% probability that DIS shares will be below the $140 level and an 78% probability that it will be above the $130 level at 10 May Weekly expiration this Friday. This trade offers a good Risk/Reward scenario with the amount of credit collected vs. the probabilities weighed for this position.

 

Risk:  We are risking $1.28 to make a potential $0.72 on this Iron Condor. The position is risk-defined and any adjustment or closing trade never increases the overall risk on the trade.

 

Trade Duration:  We have only 2 days to 10 May Weekly expiration in this position. This is a short-term position and time decay will melt quickly due to the condensed time frame should the underlying price remain between either short strike.

 

Logic:  We want to take advantage of inflated option pricing with volatility levels  by initiating this neutral strategy ahead of earnings. The short strikes are near the expected move of $5 priced in by the options market, with a $10 width between the short strikes.The shares will hopefully remain safely between our short verticals for the best outcome as we will be aggressive in adjusting or closing the trade at some point by the end of the week due to the condensed time frame.

 

We will continuously monitor our positions to determine if adjustments need to be made or when to close out of the trade.

 

TradeWise

 

Original Trade Price:  $0.72 Credit

Closing/Adjustment Price:  

 

***If you are placing the trade yourself, you can now copy and paste the trade from this email directly from the ‘trade line’ above to the Thinkorswim trading platform. Just use the clipboard icon under the ‘Order entry’ tab; Make sure to adjust the quantity if necessary as the default above in the ‘Trade’ line is only a 1 lot***

 

*Follow us on Twitter @tradewise

 

 

 

 

 

 

Trade Advisory

May 9, 2019

 

**For our Autotrade Clients, we initiated a 50% allocation only due to the upcoming earnings announcement; If you would normally trade 10 spreads, you only received 5 on this trade**

 

TradeWise Strategy:  Range Bound Advisory

Underlying:  Disney  (DIS)

Status:  Closing Trade

Trade:BUY +1 IRON CONDOR DIS 100 (Weeklys) 10 MAY 19 140/142/130/128 CALL/PUT @.24 LMT [TO CLOSE/TO CLOSE/TO CLOSE/TO CLOSE]

Trade Price:  $0.24 Debit

Underlying Price:  $135.15

Trade Risk:   N/A

Trade Duration:  Short Term

Buying Power Reduction:  N/A

 

Trade Explanation:  For the Range Bound Advisory in DIS issued yesterday, we are selling the 10 May Weekly 128 Puts and 142 Calls and buying the 10 May Weekly 130 Puts and 140 Calls for a net debit of $0.24 to close.  

 

We sold this Iron Condor in the entertainment giant for a credit of $0.72 yesterday, on a 50% allocation. For this Iron Condor trade, we sold an out-of-the-money Call Vertical (140/142) and Put Vertical (130/128) simultaneously. The shares had seen a surge following the popularity of their Avengers blockbuster film which was released just last month. We expected the shares to consolidate somewhat following their earnings event and remain within a range as the expected move is about +/- $5.00 . We needed the shares to continue to trade between our break-even levels of $129.28 on the downside and $140.72 on the upside.

 

DIS reported positive earnings after the close yesterday, but the expenses involved in launching the company’s streaming service have kept the shares from moving higher.  With the shares trading relatively unchanged, we are going to take action and close the iron condor for a nice $0.24 debit. This locks in a great $0.48 gain on this 50% allocation overnight . We want to be proactive closing the trade in light of the ongoing trade negotiations as any resolution could easily move the underlying closer to either strike by expiration tomorrow.  

 

 

We will continuously monitor our positions to determine if adjustments need to be made or when to close out of the trade.

 

TradeWise

 

Original Trade Price:  $0.72 Credit

Closing/Adjustment Price:  $0.24 Debit to close the Iron Condor (Net gain = $0.48)

 

***If you are placing the trade yourself, you can now copy and paste the trade from this email directly from the ‘trade line’ above to the Thinkorswim trading platform. Just use the clipboard icon under the ‘Order entry’ tab; Make sure to adjust the quantity if necessary as the default above in the ‘Trade’ line is only a 1 lot***

 

*Follow us on Twitter @tradewise

 

Please note: All TradeWise Advisory emails are price sensitive. Therefore, all recommendations, unless otherwise noted, are applicable for 'DAY' orders only, not good-till-cancelled. If a recommendation cannot be filled, we may choose to resend the email the following day along with any modifications. In addition, if a recommendation can only be partially filled, clients may receive a pro rata allocation.


*****Options involve risk and are not suitable for all investors. Customers must consider all relevant risk factors including their own personal financial situation before trading. Every investor who uses options should read and understand the publication Characteristics and Risks of Standardized Options. A copy can be obtained from The Chicago Board Options Exchange (1-800-OPTIONS) or from your broker. The investor considering options should consult their tax advisor as to how taxes may affect the outcome of contemplated options transactions. A prospectus, which discusses the role of the Options Clearing Corporation, is also available without charge upon request at the Options Clearing Corporation, 440 S LaSalle St, Suite 908, Chicago, Illinois 60605.*****

To unsubscribe from e-mails, please visit your Account Management page.

Note: You can always view all TradeWise content by logging onto the website at www.tradewise.com

All content ©2016 TradeWise| All rights reserved.

 
The “Time Spread ” strategy involves:
 
• The simultaneous sale of a shorter term call option and the purchase of a longer term call option, at the same strike price, in the same underlying, which is known as a “Call Calendar”; or
• The simultaneous sale of a shorter term put option and the purchase of a longer term put option, at the same strike price, in the same underlying, which is known as a “Put Calendar”; or
• The simultaneous sale of a shorter term call/put option and the purchase of a longer term call/put option, at a different strike price, in the same underlying, which is known as a “Diagonal Spread”.
 
The underlying investment (“underlying”) can either be an individual mid to large cap company or an exchange traded fund (ETF) based on the major Indices (e.g. SPY, DIA, IWM) with high liquidity and medium correlation to market movements (beta).
 
The structure of a Time Spread will always be short (selling) the shorter term option and long (buying) the longer term option. The positions that TradeWise recommends can be initiated as either a net debit or credit depending on the structure. Both the short and long position that is recommended will be entered simultaneously, so that they are not done as two transactions, known as either a “Calendar spread or a Diagonal spread.”
 
When recommending a Time Spread, we generally want to see the underlying trading at or near the strike price of the option position. As option expiration gets closer, the shorter term option should decay (lose premium) faster than the longer term option. This would ideally provide the opportunity to buy the short option back for less than it was sold for and then either sell the long option in the back month to close the position or possibly collect additional premium by rolling the short strike to an additional expiration cycle.. We will monitor the recommended trade and will seek to make further recommendations intended to take advantage of such opportunities and/or suggest when to adjust or close the trade.
 
Suggested Allocation
A minimum of at least $500 is required to Autotrade this strategy. There is no assurance that an individual Time Spread trade will be successful.
The length of any specific trade recommendation in the Time Spread strategy typically ranges from 5 to 50 days.
 
Potential Benefits
• You cannot lose more than your allocation (not including commissions charged by your broker-dealer or dividend risk).
• Potential gains are possible when the underlying remains in a defined trading range and credits generated by rolling the options exceed the debit paid at inception.
• Investor education.
 
Potential Risks
• Any large moves to the upside or to the downside may negatively affect this position.
• If the underlying should move too quickly and there is not a chance to roll, you could potentially lose 100% of your allocation plus any commissions charged by your broker-dealer.
• Potential gains will be reduced or possibly eliminated by the commissions you pay for the recommended transactions.
• There can be no assurance this strategy will be successful over time.

For additional information about this TradeWise service, please see the ADV Part II

Trade Advisory

May 16, 2019

 

TradeWise Strategy:   Time Spreads Advisory

Underlying:  Walmart (WMT) 

Status:  BUY +1 CALENDAR WMT 100 (Weeklys) 14 JUN 19/24 MAY 19 102 PUT @.68 LMT [TO OPEN/TO OPEN]

Trade Price:  $0.68 Debit

Underlying Price:  $103.15

Trade Risk:  $0.68

Trade Duration:  Medium Term

Buying Power Reduction: $68.00

 

Trade Explanation: For the Time Spread Advisory in WMT, we are selling the 24 May Weekly 102 Puts and buying the 14 June Weekly 102 Puts for a debit of $0.68 to open.

 

Price Action: We are buying this 3-week-wide, slightly bearish, $102 Put calendar in the retail giant. The shares have jumped nearly 3% today off a solid earnings result.  We feel the move has run into some significant resistance at current levels and any modest reversal lower could benefit the outcome. 

 

Volatility:  Volatility is near the lower end of the spectrum which discounts the entry cost. This gives us a good price to potentially see expansion in price.  Any increase in volatility should benefit the calendar as it is a long Vega strategy.

 

Probability:  Calendars take advantage of the underlying trading at or near the strike in the trade. We have a probability of 80% that WMT will touch our strike into 14 June expiration. This gives us plenty of time for Time Decay (Theta) to work in our favor as our short options lose value faster than our long puts.

 

Risk:  We are risking our initiation price of $0.68 on this calendar position.  We have the opportunity to roll  the short strike 2X if we choose, along with a closing trade. This will allow us to gradually reduce risk and potentially increase gains. We could always close the entire position at any point without adjusting the trade. Each weekly calendar roll has the potential to trade above $0.45 so we have a good risk/reward profile on the trade.  

 

Trade Duration:  We have 8 days to roll or close this calendar at 24 May expiration with 29 days total in the trade.

 

Logic:  With the shares perhaps topping over a short-term time frame, this calendar offers a positive risk/reward scenario off any slight fade. As we move closer to our short option expiration, the near-term options can quickly decay (theta) while our long month options should remain firm.  Again, this works best when WMT trades near our $102 strike. Multiple Weekly options listed in the stock provide better flexibility to roll under the best available conditions. Any further conflict in the trade war with China may also become beneficial to the overall strategy. 

 

We will continuously monitor our positions to determine if adjustments need to be made or when to close out of the trade.

TradeWise

 

Original Trade Price:  $0.68 Debit          

Closing/Adjustment Price: 

 

***If you are placing the trade yourself, you can now copy and paste the trade from this email directly from the ‘trade line’ above to the Thinkorswim trading platform. Just use the clipboard icon under the ‘Order entry’ tab; Make sure to adjust the quantity if necessary as the default above in the Trade line in a 1 lot***

 

**Follow us on Twitter @tradewise

 

 

 

Trade Advisory

May 20, 2019

 

TradeWise Strategy:   Time Spreads Advisory

Underlying:  Walmart (WMT) 

Status:  Rolling Trade

Trade:   SELL -1 CALENDAR WMT 100 (Weeklys) 31 MAY 19/24 MAY 19 102 PUT @.30 LMT [TO OPEN/TO CLOSE]

Trade Price:  $0.30 Credit

Underlying Price:  $101.75

Trade Risk:  $0.38 remaining

Trade Duration:  Medium Term

Buying Power Reduction: N/A

 

Trade Explanation: For the Time Spread Advisory initiated on May 16th  in WMT, we are selling the 31 May Weekly 102 Puts and buying the 24 May Weekly 102 Puts for a $0.30 credit to adjust.

 

We bought  this 3-week-wide, slightly bearish, $102 Put calendar in the retail giant for a $0.69 debit. The shares had jumped nearly 3%  off of a solid earnings result.  We felt the move had run into some significant resistance  and any modest reversal lower could benefit the outcome. 

 

WMT moved lower and through our $102 strike price late last week.  The shares have move higher today, and are presently trading just below our ideal $102 level.  We are going to take advantage of the positive price action and roll our short 24 May puts into the 31 May cycle for a $0.30 credit.  This lowers our overall risk by 44% with a roll and closing trade still available.  We will look for the shares to continue to trade near $102 to help expand any future adjusting or closing trade with 31 May expiration in 11 days.

 

We will continuously monitor our positions to determine if adjustments need to be made or when to close out of the trade.

 

TradeWise

 

Original Trade Price:  $0.68 Debit          

Closing/Adjustment Price: $0.30 Credit for the 24 May/31 May roll (Remaining risk= $0.38)

 

***If you are placing the trade yourself, you can now copy and paste the trade from this email directly from the ‘trade line’ above to the Thinkorswim trading platform. Just use the clipboard icon under the ‘Order entry’ tab; Make sure to adjust the quantity if necessary as the default above in the Trade line in a 1 lot***

 

 

**Follow us on Twitter @tradewise

 

 

 

 

Please note: All TradeWise Advisory emails are price sensitive. Therefore, all recommendations, unless otherwise noted, are applicable for 'DAY' orders only, not good-till-cancelled. If a recommendation cannot be filled, we may choose to resend the email the following day along with any modifications. In addition, if a recommendation can only be partially filled, clients may receive a pro rata allocation.


*****Options involve risk and are not suitable for all investors. Customers must consider all relevant risk factors including their own personal financial situation before trading. Every investor who uses options should read and understand the publication Characteristics and Risks of Standardized Options. A copy can be obtained from The Chicago Board Options Exchange (1-800-OPTIONS) or from your broker. The investor considering options should consult their tax advisor as to how taxes may affect the outcome of contemplated options transactions. A prospectus, which discusses the role of the Options Clearing Corporation, is also available without charge upon request at the Options Clearing Corporation, 440 S LaSalle St, Suite 908, Chicago, Illinois 60605.*****

To unsubscribe from e-mails, please visit your Account Management page.

Note: You can always view all TradeWise content by logging onto the website at www.tradewise.com

All content ©2016 TradeWise| All rights reserved.

 

The Volatility Strategy will use a variety of TradeWise Strategies. We aim to take advantage of this product by offering clients a way to participate in event-driven markets and short-term volatility trading strategies. Because of the event-driven nature, the Volatility Strategy will allow clients the opportunity to trade many different option strategies in a short-term time frame in all market sectors.

 

The Volatility Strategy is most appropriate for experienced option traders. TradeWise clients using this strategy must be extremely attentive to their positions as changes to underlying prices and days to expiration will have a larger impact due to the shorter time frame.

 

We will use any combination of monthly, quarterly or Weekly option cycles when trading the Volatility Strategy. We generally look for short-term opportunities of approximately 1-60 days. Since we will be using the various strategies listed in this Form ADV Part 2, please see the strategy descriptions listed above to review the details of each strategy. We will look for news-based events for directional trades or high volatility for market-neutral positions. We generally look for high volatility underlyings so that there is the opportunity to sell short-term options that decay at a very fast pace due to the shorter time frame to expiration.

 

We will use the following strategies: buying single options, buying or selling Vertical Spreads, buying Calendars, buying Diagonals, buying Double Calendars/Diagonals, buying Butterflies* (see description below) and buying or selling Iron Condors. The strategy implemented by TradeWise on any particular trade will depend on many variables such as the underlying, beta, volatility, timeline and event. The same risks will apply to the trade recommendations in the TradeWise Volatility strategy as detailed in the descriptions of the individual strategies within this Form ADV Part 2. Each trade recommendation that we make will define the strategy that is being used, as well as outline details on the various dynamics of the individual trade.

 

For the underlying, we will recommend options in equities, ETFs and Indices.

 

* A butterfly is a 3-legged, complex option strategy, comprised of two verticals. It is the simultaneous sale of one call vertical spread and the purchase of another call vertical spread, with a common short strike. Therefore, a butterfly will consist of 4 contracts, but only 3 legs due to the overlapping short strikes. The same would be true of a put butterfly spread.

 

Suggested Allocation

A minimum of at least $1,000 is required to Autotrade this strategy. There is no assurance that any individual recommendation in the Volatility Strategy will be successful. We recommend that clients who use this strategy have a strong working knowledge of the other TradeWise strategies as described above.

 

The frequency of TradeWise trade recommendations in Volatility will be similar to the other TradeWise strategies. However, the frequency may increase or decrease from time to time, as the recommendations are more dependent on specific market events such as earnings season.

 

Potential Benefits 

 

•Short-term defined risk in that the client cannot lose more than their allocation (not including commissions charged by your broker-dealer or dividend risk).

 

• May appeal to the active trader as these options trade more frequently and for a shorter time frame than the other options used in different TradeWise strategies. Potential Risks

 

• You could potentially lose 100% of your allocation per trade plus any commissions charged by your broker-dealer.

 

• Potential gains will be reduced or possibly eliminated by the commissions the client pays for the recommended transactions.

 

• Weekly options are often more volatile due to the shorter time to expiration and Weeklys will lose time value at an accelerated rate compared to monthly options.

 

• There can be no assurance this strategy will be successful over time. 

 

For additional information about this TradeWise service, please see the ADV Part II

Trade Advisory

March 1, 2019

 

**For our Autotrade Clients, we initiated a 50% allocation only due to the underlying; If you would normally trade 10 spreads, you only received 5 on this trade**

 

TradeWise Strategy: Volatility Advisory

Underlying: Boeing  (BA)

Status:  Opening Trade – 50% allocation

Trade:  SELL -1 VERTICAL BA 100 (Weeklys) 5 APR 19 455/457.5 CALL @.88 LMT [TO OPEN/TO OPEN]

Trade Price:  $0.88 Credit

Underlying Price:  $443.50

Trade Risk:  $1.62

Trade Duration: Medium Term

Buying Power Reduction: $162.00

 

Trade Explanation:  For the Volatility Advisory in BA, we are selling the 5 Apr Weekly 455 Calls and buying the 457.5 Calls for a credit of $0.88 to open on a 50% allocation.

 

Price Action:  We are selling this neutral/bearish $2.5-wide out-of-the-money call vertical in the aerospace manufacturer. Shares have rallied over 50% since a 52 week low of $292.47 at the end of December, as some trade tensions seem to be thawing. The shares are extremely overbought at these levels. We have a cushion just over 2% to the upside before BA reaches our break-even of $455.88.

 

Volatility: Volatility has lowered and will be expected to remain low considering the overbought levels.

 

Probability: There is a 64% probability that our short $455 strike will be out of the money at 5 Apr expiration. This fits in our guideline of over 60% for short credit vertical positions. Time Decay (Theta) also works in our favor as our short vertical loses value over the life of the trade.

 

Risk:  We are risking $1.62 to make a potential $0.88 on this short vertical position.  We profit in three out of four scenarios: if BA trades lower, remains at current levels or still trades slightly higher but remains below our break-even level at expiration.

 

Trade Duration:  We have 35 days to adjust or close this trade by 5 Apr Weekly expiration.

 

Logic:  We have good probabilities for the amount of credit collected vs. the risk in the trade. We feel that BA will reverse at this level with shares over-extended given the extreme climb. We also expect to see some potential profit taking as the stock is now up over 50% since the December lows. We will look for any viable opportunity to adjust the position in order to reduce the original amount of exposure capped at $1.62.  Only a 50% allocation was utilized due to the contra-trend nature of the position.  

  

We will continuously monitor our positions to determine if adjustments need to be made or when to close out of the trade.

 

TradeWise

 

Original Trade Price: $0.88 Credit       

Closing/Adjustment Price:  

 

***If you are placing the trade yourself, you can now copy and paste the trade from this email directly from the trade line to the thinkorswim trading platform. Just use the clipboard icon under the ‘Order entry’ tab; Make sure to adjust the quantity if necessary as the default in the ‘Trade’ line above is only a 1 lot***

 

*Follow us on Twitter @tradewise

 

 

 

Trade Advisory

March 7, 2019

 

**For our Autotrade Clients, we initiated a 50% allocation only due to the underlying; If you would normally trade 10 spreads, you only received 5 on this trade**

 

TradeWise Strategy: Volatility Advisory

Underlying: Boeing  (BA)

Status:  Closing balance of the Vertical

Trade:  BUY +1 VERTICAL BA 100 (Weeklys) 5 APR 19 455/457.5 CALL @.26 LMT [TO CLOSE/TO CLOSE]

Trade Price:  $0.26 Debit

Underlying Price: $418.50

Trade Risk:  N/A

Trade Duration: Medium Term

Buying Power Reduction: N/A

 

Trade Explanation:  For the Volatility Advisory initiated on March 1st in BA, we are buying the balance of the 5 Apr Weekly 455 Calls and selling the last half of the 457.5 Calls for a debit of $0.26 to close. 

 

We sold this neutral/bearish $2.5-wide out-of-the-money call vertical in the aerospace manufacturer as shares had rallied over 50% since a 52 week low of $292.47 was recorded at the end of December with some trade tensions thawing. The shares were extremely overbought at these levels. We had a cushion just over 2% to the upside before BA would reach our break-even of $455.88. We finally saw a large reversal in BA to the downside develop on the 4th of March. This lowered the price of our spread significantly, which prompted action to close 50% of the vertical for a $0.51 debit.  This locked in a $0.37 gain on half of the position while lowering our overall risk by over 61%.  

 

Shares of BA have continued to slide with nearly a 2% drop coming in today's session.  We want to capture the ideal price action to close the balance of the spread for a $0.26 debit in order to secure a solid profit on the trade with 29 days still remaining. With an average closing price of $0.385 obtained, a solid gain of $0.495 will be registered off the original 50% allocation. The entry point proved to be the exact turn-around point as the trade immediately worked in our favor with a 5th straight down-day taking place in today's session.   

 

We will continuously monitor our positions to determine if adjustments need to be made or when to close out of the trade.

 

TradeWise

 

Original Trade Price: $0.88 Credit       

Closing/Adjustment Price:  $0.51 Debit to close 50% of the Vertical; $0.26 Debit to close 50% of the Vertical (Avg. Closing Price of $0.385=$0.495 Gain)

 

***If you are placing the trade yourself, you can now copy and paste the trade from this email directly from the trade line to the thinkorswim trading platform. Just use the clipboard icon under the ‘Order entry’ tab; Make sure to adjust the quantity if necessary as the default in the ‘Trade’ line above is only a 1 lot***

 

 

*Follow us on Twitter @tradewise

 

 

Please note: All TradeWise Advisory emails are price sensitive. Therefore, all recommendations, unless otherwise noted, are applicable for 'DAY' orders only, not good-till-cancelled. If a recommendation cannot be filled, we may choose to resend the email the following day along with any modifications. In addition, if a recommendation can only be partially filled, clients may receive a pro rata allocation.


*****Options involve risk and are not suitable for all investors. Customers must consider all relevant risk factors including their own personal financial situation before trading. Every investor who uses options should read and understand the publication Characteristics and Risks of Standardized Options. A copy can be obtained from The Chicago Board Options Exchange (1-800-OPTIONS) or from your broker. The investor considering options should consult their tax advisor as to how taxes may affect the outcome of contemplated options transactions. A prospectus, which discusses the role of the Options Clearing Corporation, is also available without charge upon request at the Options Clearing Corporation, 440 S LaSalle St, Suite 908, Chicago, Illinois 60605.*****

To unsubscribe from e-mails, please visit your Account Management page.

Note: You can always view all TradeWise content by logging onto the website at www.tradewise.com

All content ©2016 TradeWise| All rights reserved.

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