Sunday Night Weekly Recap SEP 22, 2024

How was your weekend? Make me proud and tell me that you got outside and went for a big walk out in nature. If we are counting steps ( it’s an American thing for those that don’t live here, we seem to think that counting the steps makes a difference, it was a marketing ploy sold to us by Fit Bit ) I got in a little over 9 miles on Saturday, and a lot of it was reallyyyyy biggggggg HILLLLSSSSSSSSSSSSSS

Hills are like hurdles, and we just cleared 2 giant ones this past week in the way of the FED announcement and Triple Witching. I mentioned that on Friday, we get a “reset” here. And we need to be cautiously optimistic as we move forward. Some big names made some big moves this last week, pullbacks would not be unhealthy.

GE has been in our rotation for quite some time. GE was actually the very first stock that I ever bought on my own, that was in June of 2008. Wowww….
Friday we looked at the One year chart with daily bars, tonight lets zoom in a little closer and take a look at it this time with a 6 month chart with daily bars.

Do you see how price consolidated at the bottom right side of the box prior to lift off? We had some Options on GE back then, those have now expired. GE has been good to us. What we are lookin at is it’s sustained strength and the fact that OI on the Calls side for the Options is increasing.

When my kids were little, my house was the corner house everyone came to hang out at. One family had a cute cute cuuuuute little girl. She would always say “It’s a tricky trap, it’s trickeeeeeeee” 😃 Well that’s GE and several others right now, they’re in a tricky spot, and we do not want to get “trapped”……. Technically speaking.. We don’t want to buy at the top of the breakout after fresh ATH’s before a weeks worth of pullback. ( if that happens ) So what do we do since our bias is to the long side? For this one it’s Bull Call Spreads. And not to go all in at once but incrementally. It’s important to know that GE reports earnings on OCT 22, 2024, before the bell.

Something else noteworthy about GE is it’s DTC is 6.7
Anything above 5 suggests a possible Gap Up in the making

Since we’re not sure if we want to play this through earnings yet what an investor could consider is buying the 190 Call for OCT 18, 2024 and selling the 200 Call for the same date.
Those 190 Calls are offering a Delta of 0.45, an O.I. in excess of 13K, and I.V. of 25
We like those stats
The 200 Calls give us a Delta of 0.18, O.I is at 5,500 and the I.V. is sitting at 24
The Mid is $2.96 so that’s $296.00 per contract

While this is a lower risk investment ( a 2 on our scale of 1-5 ) if an investor wanted greater security he / she could consider selling the 195 instead of the 200’s
The price at the Mid for those would then be $1.82 or $182.00 per contract

Should GE experience a burst of energy and have a big break to the north side investors could consider dropping the short strikes then selling the next short strike that is OTM.
For advanced investors with a higher appetite for risk going naked or blind once price exceeds their short strike could be an option provided that price continues to move swiftly in their favor. At that time that would elevate the risk level from a 2 to a 4, but the investor would already be deep enough ITM to have wiggle room.

This week I heard from several of you asking about the upcoming Premium service, and some questions’’ about Options basics…

We’re hoping to launch soon. In the meantime lets look at a few of the basics we here at theoptionscoach.net use when investing with options

We have our own actual physical 17 point checklist that we utilize before entering any investments.
What I want to share tonight is a few starter tips
If I were brand new to options, or been doing them a while but whiffle waffling back and forth, knowing what I know now, these are a few of the things I would do. These 3 things here, plus a few more, are all something that I only wish someone had told me when I was starting out. I’m being serious, they are that important

1st: O.I. It’s an unwritten rule when buying Options to have a minimum O.I. of 500.
If I were brand new, all over again, I would not even think of considering anything with less than that. Liquidity matters

2nd: Bid / Ask, good golly Miss Molly this one bit me once or twice in the past. So if the Bid / Ask is big enough to drive a truck through it, stay away. The tighter the Bid /Ask the easier it will be upon your exit. Yes you can usually get in much cheaper with loose spreads, but exiting? Not even possible some times.. Think I’m joking? In the beginning I would take the loose trades for the cheaper costs. Lets say I placed $1,000.00 on a trade, then it goes up to $1,700.00, I was up 70% or $700.00 in one day!! Whoo Hooo!! Until I couldn’t close it, not even for $1.00 profit because no one wanted to buy it back….. Yes, that happened……

3rd: Expiration Dates. This is a sneaky way that Market Makers try to get us. All of us…
Lets say that your stock XYZ has Options for APR 2025 that you like at the 100 strike. You buy those Options in JAN of 2025 but they don’t have Options on them for FEB or MAR of 2025, you can get “trapped” or have a hard time exiting those investments in the meantime. You may also have to take a “pay cut” selling them for less than what they’re worth. The same holds true if your stock doesn’t have Options right after the EXP date. ( you won’t be able to “roll” if need be) Unless your a proven veteran Options investor, those are not your friend. One good thing is that they’re not as common with the bigger names

A few of the things on our 17 point checklist have “wiggle room,” the 3 mentioned above do not

That’s a lot of info for a Sunday night. On Friday we listed how all of our stocks performed for the week. Feel free to reach out if you have any questions and we’ll be back in the morning with the Pre Market report

The Options Coach