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.

 

Consisting of two Vertical Spreads, the Iron Condor is designed to profit when the underlying remains in a reasonably narrow trading range.

The Iron Condor strategy typically involves 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 Vertical Spread 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. The underlying security is typically related to a well-known ETF or Index  such  as the SPY, SPX, IWM, DIA, DJX and QQQ.

The short Iron Condor strategy is designed to profit when the specified underlying remains in a reasonably narrow trading range during the expiration cycle. 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.

TradeWise Iron Condor recommendations will typically involve collecting a credit upon initiation of the trade. The goal is to keep the 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, TradeWise may recommend adjustments to the trade.

Often the recommended Iron Condor trades are designed to be market neutral, but depending on a number of factors there may be instances when TradeWise will skew the recommended trades slightly in one market direction or another. When that is the case, TradeWise will indicate these details in the trade recommendation sent to strategy subscribers. There may also be instances when TradeWise may purchase an Iron Condor if factors create an opportunity.

An allocation of $1000 is required for customers utilizing autotrade. There can be no assurance that any individual Iron Condor trade will be successful. 

 

The purchase of an Iron Condor may also be warranted if certain market conditions exist. 

The length of any specific trade recommendation in the Iron Condor strategy typically ranges from 20 to 70 days.

Multi-leg option strategies such as Iron Condors can entail substantial transaction costs, including multiple commissions, which may impact any potential return.

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

Feb 22, 2017, 02:50 PM CST
Opening Position : Iron Condor Advisory: TSLA - Sell the 3 Mar Weekly 252.5/255/292.5/295 Iron Condor for $1.00 credit to open on a 50% allocation

Trade Advisory
February 22, 2017

TradeWise Strategy:  Iron Condor Advisory

Underlying: Tesla Motors (TSLA)
Status:  Opening Trade– 50% allocation
Trade:  SELL -1 IRON CONDOR TSLA 100 (Weeklys) 3 MAR 17 292.5/295/255/252.5 CALL/PUT @1.00 LMT [TO OPEN/TO OPEN/TO OPEN/TO OPEN]
Trade Price:  $1.00 Credit
Underlying Price:  $273.71
Trade Risk:  $1.50
Trade Duration: Short Term
Buying Power Reduction: $150.00

Trade ExplanationFor the Iron Condor Advisory in TSLA, we are selling the 3 Mar Weekly 292.5 Calls and 255 Puts and buying the 3 Mar Weekly 295 Calls and 252.5 Puts for a net Credit of $1.00 to open. 50% allocation

Price Action: We are selling this $2.5- wide Iron Condor in the electric car-maker company for a credit of $1.00.  For an Iron Condor trade, we sell an out-of-the-money Call Vertical (292.5/295) and Put Vertical (255/252.5) simultaneously.  The shares of TSLA have rallied to all-time highs and earnings are due after the close.  We expect the shares to consolidate at current levels are giving ourselves a nice range of $37.5 between our short verticals. We need the shares to continue to trade between our break-even levels of $254 on the downside and $293.50 on the upside.
Volatility:  Volatility is relatively elevated in TSLA despite the fact that shares are near all-time highs due to the earnings event. This gives us a good entry point on short Iron Condors. Volatility will fall quickly and time decay also works in our favor, which will contract our position price in our favor.
Probability:  There is an 77% probability that TSLA shares will be below the $292.5 level and a 75% probability that it will be above the $255 level at 3 Mar expiration. This trade offers a good Risk/Reward scenario with the amount of credit collected vs. the probability numbers for this position.
Risk:   We are risking $1.50 to make a potential $1.00 on this Iron Condor.  The position is Risk-defined and any adjustments or closing trades never increases overall risk on the trade.
Trade Duration:  We have only 9 days to 3 Mar expiration in this position.  This is a short-term position and time decay will increase quickly due to the time frame and any move in volatility lower.
Logic:  We want to take advantage of the wide range and the fact that earnings are pushing option premium higher by initiating this neutral trade. The shares will hopefully remain between our short verticals and we will be aggressive in closing at least a portion of the trade if the price decreases by 20% or more.

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:   $1.00 credit 

 

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.*****

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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 most complex of the TradeWise Trading Strategies, the Double Double combines the use of Double Calendars, Double Diagonals and Straddle/Strangle Swaps to take advantage of market behavior.

The Double Double trade recommendations will involve options on highly liquid individual stocks, ETFs and Indices (such as the SPX, DJX or MNX) with medium correlation to market movements (beta). Because the Double Double is the most complex of the TradeWise strategies, it is important to have a clear understanding of all previous strategies listed in order to comprehend the nature of the Double Double.

An ideal market condition for this strategy would be one in which the underlying stock trades in a relatively narrow range during the time until options expiration.

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 recommendations will always involve paying a debit upon initiation of the recommended trade. As the front-month options that were sold decay and lose value, an opportunity will often be provided to buy back those front-month options for a lower price and sell a subsequent series, collecting a credit and therefore reducing the amount of risk on the trade. The desired result is to collect more credits than the original debit paid for the trade upon rolling and closing the Double Calendar.

Unlike the Double Calendar, in which the strike prices will be the same in both the front and back series, in the Double Diagonal the front-series strike prices will be different than the back-series 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 Tradewise will be looking for the same conditions as in the Iron Condor strategy (see Iron Condor strategy for additional information). 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 front-month at-the-money call and an at-the-money put, which is known as a Straddle. This is coupled with the purchase of a back-month 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 number of strikes away from the price at which the underlying is trading. If the call is two strikes above that of the underlying, the put may be two strikes below the price of the underlying. The goal is for TradeWise to recommend that the client roll the positions for credits. When the two short options are rolled, the result is a short Put Vertical and a short Call Vertical at the same strike price on the short options.

An allocation of $1000  is required for customers utilizing autotrade. There can be no assurance that any individual Double Double trade will be successful.  

The length of any specific trade recommendation in the Double Double strategy typically ranges from 20 to 60 day.

Multi-leg option strategies such as the Double Double can entail substantial transaction costs, including multiple commissions, which may impact any potential return.

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

Mar 6, 2017, 01:13 PM CST
Opening Position : Double, Double Advisory: IWM - Buy the 24 Mar/7 Apr (135 Put/141 Call) Double Calendar for $1.10 debit to open

Trade Advisory
March 6, 2017

TradeWise Strategy:   Double, Double Advisory
Underlying:   iShares Russell 2000 ETF (IWM)
StatusOpening Trade
Trade:   BUY +1 DBL DIAG IWM 100 (Weeklys) 7 APR 17/24 MAR 17 141/135/141/135 CALL/PUT/CALL/PUT @1.10 LMT [TO OPEN/TO OPEN/TO OPEN/TO OPEN]
Trade Price:   $1.10 debit
Underlying Price:  $137.67
Trade Risk:   $1.10
Trade Duration:  Short Term
Buying Power Reduction:  $110.00

Trade Explanation:    For the Double, Double Advisory in IWM, we are buying the 7 Apr Weekly 141 Calls and 135 Puts and selling the 24 Mar Weekly 141 Calls and 135 Puts for $1.10 to open.

Price Action:  We are buying this two-week-wide straight Double Calendar in the small cap Sector ETF.  This Double Calendar consists of a long out-of-the-money call calendar ($141 strike) and put calendar ($135 strike) around the current share price of the ETF ($137.70).  We have a $6.00 wide range between the strikes in this position as we feel IWM will continue to chop back and forth after falling from all-time highs.  A Double Calendar allows us not to have to pick a direction but relies on moves towards either strike for the best outcome.
Volatility:  Option Volatility has fallen significantly as stocks are just below all-time highs.  This gives us a good price entry point for long calendars as we expect volatility to stabilize and finally reverse higher in our favor.  Any increase in volatility will expand the price of the position as it is a long Vega strategy.
Probability:   Double Calendars take advantage of the underlying trading at or near either strike in the trade.  We have a good range for the stock to trade which gives us a better probability of success if we have a move in the shares to either strike.
Risk:   We are risking our initiation price of $1.10 on this double calendar position. We will also have the opportunity to roll our short options into the 31 Mar Quarterly cycle and then a closing trade. The roll will reduce risk and potentially increase profits on the position. Each individual week-wide double calendar roll has the potential to easily trade above $0.80 so we have a good risk/reward profile on the trade. 
Trade Duration:  We have 18 days to roll or close this trade at 24 Mar Weekly expiration and 32 days to 7 Apr in the position.
Logic:  These Double calendar positions are a good way to take advantage of a low volatility environment for entry and expectations that it will rise. We have an additional 1-3% outside each side of our strikes where our position should remain above our initiation price.

We will continuously monitor all of the positions in this advisory for the best time to adjust or close out of all positions.

TradeWise
Original Trade Price:   $1.10 debit          

 

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 Equity Calendar has the same construction as the Index Calendar, but typically utilizes large-cap Equities with anticipated low volatility rather than Indices.  
The Equity Calendar is based on the same methodology as the Index Calendar strategy but uses options on Equities rather than the major Indices used in the Index Calendar.

As with the Index Calendar, the structure of the Equity Calendar will always be selling the shorter-term option and purchasing the longer-term option. The trades that TradeWise recommends will always be initiated as a net debit, whether it is a Call Calendar or a Put Calendar. When recommending an Equity Calendar trade, TradeWise wants to see the underlying trading at or near the strike price of the option position. As option expiration nears, the short option will 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 and then sell the further-out option for a credit. The desired result is for the underlying to trade at or near the option strike price so the option positions can be rolled and more credits can be taken in to offset net debit that was paid to initiate the trade. TradeWise will monitor the recommended trade and will seek to make further recommendations to take advantage of such opportunities and/or suggest when to adjust or close the trade

An advantage of the Equity Calendar strategy is that the pool of individual stocks is very large. However, there is a possibility that some type of specific news event will cause the underlying stock to have a large move up or down. When recommending an Equity Calendar trade, TradeWise wants the market to remain in a narrow trading range and for the underlying not to have any big moves in either direction.

An allocation of $500 is required for customers utilizing autotrade in each recommended trade.There can be no assurance that an individual Equity Calendar trade will be successful.

The length of any specific trade recommendation in the Equity Calendar strategy typically ranges from 20 to 100 days.

Multi-leg option strategies such as Calendar Spreads can entail substantial transaction costs, including multiple commissions, which may impact any potential return.

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

Jan 10, 2017, 11:57 AM CST
Opening Position : Equity Calendar Advisory: CRM - Buy the 20 Jan/10 Feb 75 Call calendar for $1.03 debit to open

Trade Advisory
January 10, 2017

TradeWise Strategy:   Equity Calendar Advisory
Underlying:  Salesforce.com (CRM)
Status:   Opening Trade
Trade:    BUY +1 CALENDAR CRM 100 (Weeklys) 10 FEB 17/20 JAN 17 75 CALL @1.03 LMT
Trade Price:   $1.03 debit
Underlying Price:  $73.95
Trade Risk:    $1.03
Trade Duration:  Short Term
Buying Power Reduction:  $103.00

Trade Explanation:   For the Equity Calendar Advisory in CRM, we are buying the 10 Feb Weekly 75 Calls and selling the 20 Jan 75 Calls for $1.03 to open.

Price Action:  We are buying this three-week-wide bullish/neutral out-of-the-money Call calendar in the cloud-based software company.  The shares have rallied back from post-election weakness over the last week or so.  We feel the shares will continue to grind higher and stabilize near our ideal $75 strike and a calendar takes advantage of this.   
Volatility:  Volatility is low in the options ahead of earnings, which are after our long 10 Feb series. This gives us a great price entry point as volatility is low and flat across the option series. Time decay (Theta) works in our favor on calendar trades and any increase in volatility would expand our calendar value as it is a long Vega strategy.
Probability:  Calendars take advantage of the underlying trading at or near the strike in the trade.  With CRM shares only slightly below our strike and the underlying at its current levels, further trading near our strike would help expand this spread.  There is over an 80% probability over the life of the trade that the stock will touch the ideal $75 level at some point.
Risk:   We are risking our initiation price of $1.03 on this calendar position.  We have the opportunity to roll into different cycles up to twice if we choose and then a closing trade.  This will allow us to reduce risk and potentially increase gains.  We could always close the entire position without adjusting the trade. Each Weekly calendar can trade over $0.50 so we have a great risk/reward profile on the trade.  
Trade Duration:  We have 10 days to roll or close this trade at 20 Jan expiration and 31 days to 10 Feb.  
Logic:  With the recent rally and the tech sector hitting more highs, this calendar offers a positive risk/reward scenario the stock. Earnings are after the calendar’s duration and the trend continues to be higher.

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:   $1.03 debit          

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 Index Calendar is a simple two-legged option spread, including the sale of a near-term option and the purchase of a longer term option, and is designed to benefit from the differences in the rates of time decay between shorter and longer term expiration cycles.

A Call Calendar spread is a single transaction, involving the simultaneous sale of a short term call option and the purchase of a longer term call option at the same strike price in the same underlying. A Put Calendar has the same structure, using puts rather than call options. Calendar spreads will always sell the shorter term option and buy the longer term option and each calendar spread recommended by TradeWise will be initiated for a net debit. This is true both for Call Calendars and Put Calendars.

The Index Calendar will recommend Calendar spreads on ETF's that track major Indices including: SPY, DIA and IWM, with high liquidity and medium correlation to various aspects of the market.

When recommending an Index Calendar trade, the goal is to see the underlying trading at or near the strike price of the option position. As options expiration gets closer, the short option will decay (lose premium) faster than the longer term option in the further-out cycle. This would ideally provide the opportunity to buy the short option back for less than it was sold and then sell the longer term option for a credit. The desired result is for the underlying to trade at or near the option strike price so the option positions can be rolled and more credits can be taken in than the net debit that was paid to initiate the trade. TradeWise will monitor the recommended trade and will seek to make further recommendations to take advantage of such opportunities and/or suggest when to adjust or close the trade.

An allocation of $500 or above per trade for this strategy should ensure but does not guarantee client participation in each recommended trade.

There can be no assurance that an individual Index Calendar trade will be successful.

The length of any specific trade recommendation in the Index Calendar strategy typically ranges from 20 to 100 days .

Multi-leg option strategies such as Calendar Spreads can entail substantial transaction costs, including multiple commissions, which may impact any potential return.

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

Feb 1, 2017, 10:38 AM CST
Opening Position : Index Calendar Advisory: SPY - Buy the 17 Feb/10 Mar 229 Call Calendar for $1.07 debit to open

Trade Advisory
February 1, 2017

TradeWise Strategy: Index Calendar Advisory
Underlying:  S&P 500 Index ETF (SPY)
StatusOpening Trade
Trade:   BUY +1 CALENDAR SPY 100 (Weeklys) 10 MAR 17/17 FEB 17 229 CALL @1.07 LMT [TO OPEN/TO OPEN]
Trade Price$1.07 debit
Underlying Price:  $227.34
Trade Risk:  $1.07
Trade Duration:  Short/Med Term
Buying Power Reduction:  $107.00

Trade Explanation:    For the Index Calendar Advisory in SPY, we are buying the 10 Mar Weekly 229 Calls and selling the 17 Feb 229 Calls for a $1.07 debit to open.

Price Action:   We are initiating this three-week-wide 229 call calendar in the S&P 500 ETF.   The shares have risen recently and we want to take a short-term position on a slightly upside call calendar.  We feel the ETF will begin to consolidate or perhaps grind higher as investors continue to buy dips on positive data and earnings.
Volatility:   Volatility is at extremely low levels in the ETF and the overall market as equities have risinen.  This gives us a good price entry point for long calendar.   Any rise in volatility will also increase the value of our calendar.
Probability:  There is an 81% probability that SPY will touch our ideal $229 strike at some point over the duration of the trade prior to 10 Mar Weekly expiration.
Risk:   We are risking our initiation price of $1.07 on this calendar.  We will have the opportunity to roll our short calls up to 2 times if we choose along with a closing trade. This would reduce risk and potentially increase profitability on the trade.  Each Weekly roll has the potential to trade above $0.60 so we have a good risk/reward scenario in this short-term calendar.
Trade Duration:  We have 16 days to adjust or close this short-term trade at 17 Feb expiration and 37 total days in the position.
Logic:   We are buying the calendar to take advantage of low volatility in a rising market and the ability to roll our short options into multiple cycles.  Even if the shares remain between $225 and $232, the trade should remain in a profitable position. 

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:   $1.07 debit  

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 Vertical Spread is a defined-risk directional option spread that looks to take advantage of slight market moves in one particular direction.

The Vertical Spread strategy makes trade recommendations using Vertical Call Spreads and Vertical Put Spreads in underlying securities, such as individual stocks, ETFs or Indices  with anticipated high liquidity and generally with moderate volatility. The spreads are termed Vertical because the options are on the same underlying in the same expiration month but at different strike prices.

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.

TradeWise will typically recommend selling out-of-the-money Call Verticals or out-of-the-money Put Verticals. Upon selling the Vertical, a credit will be collected. The goal of the strategy is for the underlying to remain within a narrow trading range so that the credit received upon initiation can be retained. There are three out of four market situations where this type of trade can be successful:

  1. If the underlying is moving sideways for a period of time,
  2. If the underlying is moving up and down within a small range and not going in one particular direction for an extended period of time, or
  3. If the underlying has a relatively large move but does not go over the short vertical strike price on the upside or downside, depending on the particular trade that TradeWise recommends.

On the other hand, selling a Call or Put Vertical will not be successful if the market has a relatively straight-line move in one direction over the short strike price without pulling back.

TradeWise may recommend Verticals with a bullish or bearish direction. Bullish Vertical Spread recommendations will use long Call Verticals or short Put Verticals. Bearish recommendations will use short Call Verticals or long Put Verticals. If TradeWise recommends buying a Call Vertical or a Put Vertical for a debit, we will be seeking a short term move by the underlying in the desired direction. Such a move would increase the value of the Vertical because the Vertical could be sold for a credit that is greater than the debit paid upon initiation of the recommended trade.

An allocation of $500 or above per trade for this strategy is required

There can be no assurance that an individual Vertical Spread trade will be successful.

The length of any specific trade recommendation in the Vertical Spreads strategy typically ranges from 20 to 45 days.

Multi-leg option strategies such as vertical spreads can entail substantial transaction costs, including multiple commissions, which may impact any potential return.

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

Feb 16, 2017, 12:25 PM CST
Opening Position : Vertical Advisory: SPY - Sell the 10 Mar Weekly 236.5/238.5 Call Vertical for $0.57 Credit to open

Trade Advisory
February 16, 2017

TradeWise Strategy:   Vertical Advisory
Underlying:  SPDR S&P 500 ETF (SPY)
Status:   Opening Trade
Trade:   SELL -1 VERTICAL SPY 100 (Weeklys) 10 MAR 17 236.5/238.5 CALL @.57 LMT [TO OPEN/TO OPEN]
Trade Price:    $0.57
Underlying Price:  $234.34
Trade Risk:   $1.43
Trade Duration: Short Term
Buying Power Reduction: $143.00

Trade ExplanationFor the Vertical Advisory in SPY, we are selling the 10 Mar Weekly 236.5 Calls and buying the 238.5 Calls for $0.57 Credit to open.

Price Action:  We are selling this neutral/bearish out-of-the-money 236.5/238.5 call vertical in the 10 Mar Weekly cycle.  Shares have risen sharply this month and are at over-bought levels on a technical level. The market euphoria looks tired and we still see headwinds as Policy and Trump enters valuations. We expect SPY shares to continue trading in a range below our break-even of $237.07 on the upside.
Volatility:  Volatility had finally shown some life this week and is off of recent lows. If stocks continue bullish, time decay and lower volatility should keep the vertical price from expanding too much.
Probability:   There is a 68% probability that our short $236.5 strike will be out of the money at 10 Mar 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 $1.43 to make a potential $0.57 on this short vertical position.  We profit in three out of four scenarios: if SPY trades lower, remains at current levels or trades higher but remains below our break-even level of $237.07 at expiration. 
Trade Duration:  We have 22 days to adjust or close this short-term trade at expiration.
Logic:  SPY shares are falling today as the market is finally showing signs of an overdue break. We feel stocks should pull back at least 1-2% over the next couple of weeks as earnings season is over and economic data  seems to have hit a top. We also have a decent cushion to our upside break-even and the trade is a good complement to our short IWM Put vertical in the 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:   $0.57 credit         

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 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 always 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

Feb 3, 2017, 12:39 PM CST
Opening Position : Collar Advisory: JBLU - Buy the 17 Mar (22 Call/18 Put) Collar for a debit of $19.67 to open

Trade Advisory
February 3, 2017

TradeWise Strategy  Collar Advisory
Underlying:   JetBlue Airlines (JBLU)
Status:   Opening Trade
Trade:   BUY +1 COLLAR JBLU 100 17 MAR 17 22/18 CALL/PUT/JBLU @19.67 LMT [TO OPEN/TO OPEN/TO OPEN]
Trade Price:   $19.67 Debit
Underlying Price:  $19.44
Trade Risk:    $1.67
Trade Duration:  Medium Term
Buying Power Reduction:  $1967.00

Trade Explanation:   For the Collar Advisory in JetBlue Airlines, we are buying (JBLU) stock, buying the 17 Mar 18 Puts and selling the 22 Calls for a net debit of $19.67 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 (JBLU) bought, sold 1 contract of the 17 Mar 22 calls and bought 1 of the 18 puts. The total cost of the trade was the price paid for the stock and puts, minus the premium received for the calls.  JBLU shares have pulled back almost 15% from recent highs following  their last quarterly earnings report. JBLU looks oversold at these levels and should face less downside pressure compared to other carriers with more international flights.
Volatility:  Volatility is lower in the overall market and reflective in JBLU options.
Probability:  The stock has upside potential after the fall and we expect it to retrace back towards the $22 level as revenue growth and expanding profit margins take hold. 
Risk:We are risking $1.67  to make a potential $2.33 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 our options from month to month but only if it reduces risk and costs. Our initial break-even price is $19.67 on this position. 
Trade Duration:  We have 42 days to adjust or close this trade at 17 Mar 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 good opportunity for this strategy as the stock looks oversold at these levels.

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:   $19.67 debit 

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.*****

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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 “Sector Index” strategy looks to take advantage of the rise and fall in volatility that may occur in various sectors of the market. We will recommend positions using various risk-defined strategies, such as Calendar Spreads, Iron Condors, Vertical Spreads and Double Diagonals and Butterflies.

For the underlying, we will recommend ETF's with high liquidity specific to certain sectors of the market, such as ones tied to gold, oil, or real estate.

An allocation of $500 per trade is the minimum allocation amount in order to Autotrade this strategy. There can be no assurance that an individual Sector Index trade will be successful.

The length of any specific trade recommendation in the Sector Index strategy typically ranges from 20 to 90 days.

Multi-leg option strategies can entail substantial transaction costs, including multiple commissions, which may impact any potential return.

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

Feb 21, 2017, 11:44 AM CST
Opening Position : Sector Index Advisory: XLP - Buy the 17 Mar 55/52.5 Put Vertical for $0.64 debit to open on a 50% allocation

Trade Advisory
February 21, 2017

TradeWise Strategy:   Sector Index Advisory
Underlying:   Select SPDR Consumer Staples Sector ETF  (XLP)
Status:  Opening Trade- 50% allocation
Trade:   BUY +1 VERTICAL XLP 100 17 MAR 17 55/52.5 PUT @.64 LMT [TO OPEN/TO OPEN]
Trade Price:   $0.64 Debit
Underlying Price:  $54.90
Trade Risk:   $0.64
Trade Duration:  Short Term
Buying Power Reduction:  $64.00

Trade Explanation:    For the Sector Index Advisory in XLP, we are buying the 17 Mar 55 Puts and selling the 52.5 Puts for a net debit of $0.64 to open on a 50% allocation.

Price Action:  We are buying this $2.5-wide bearish put vertical in the Consumer Staples ETF. The shares have rallied sharply over the last few months.  XLP appears to be over-extended and we feel the sector may reverse lower again as the component stocks are stretched on valuation. This gives us a good price point to buy this bearish put vertical as the shares are up and the valuations of the components are stretched.
Volatility:  Volatility is lower in XLP than the overall market as it rises, which gives us a good price entry point for long directional vertical.  We only need a slight downturn to expand the closing price and any rise in volatility should also increase the value of our vertical.
Probability:  The long puts in this vertical are currently in-the-money and we have a 80% probability for the shares to trade back down below the $54.36 break-even level over the next 24 days.
Risk:   We are risking our initiation price of $0.64 to make a potential $1.86 on this vertical, which is a good risk/reward scenario on a directional trade.
Trade Duration: We have 24 days to adjust or close this trade at 17 Mar expiration.
Logic:  We are buying the vertical for a directional play based on the quick reversal in the sector. We will be aggressive in closing a portion or all of the trade if we see a significant move in the shares in either direction. Buying the vertical makes more sense because there is little premium and poor probabilities in selling a bearish call vertical. We will most likely attempt to reduce risk and close 50% of the vertical on any quick sell-off in the shares.

We will continuously monitor all of the positions in this advisory for the best time to adjust or close out of all positions.

TradeWise
Original Trade Price:   $0.64 debit    

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.

 

Weeklys are options that trade for a one-week timeframe. Much like the Sector Index, TradeWise Weeklys will use a variety of TradeWise Trading Strategies to offer clients innovative ways to participate in news-driven market moves and short-term trading strategies. Because of the short-term nature of this product, Weeklys allow more opportunity to trade on market events such as earnings reports, news and regulatory events, as well as in market-neutral environments.

Weeklys are listed in multiple series around Monthly Standard option cycles. No Weeklys are listed that would expire during the expiration week for standard options (the third Friday of the month). Due to the shorter timeframe to expiration, Weeklys may have lower premium costs than standard options. They tend to be highly liquid and only issued on underlying securities that generally have high volume and tight markets. As with any option, there is no guarantee of a secondary market.

When trading Weeklys, TradeWise will use the following strategies: Buying or Selling Vertical Spreads, Buying Index Calendars, Buying Equity Calendars, Buying Double Doubles, Buying Butterflies 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, timelines and events. TradeWise will be looking for news-based events for directional trades or high volatility for market-neutral positions. TradeWise generally looks 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. Any recommendations related to large-cap stocks will typically be related to the periods of their earnings announcements.

The same criteria will be followed for all the TradeWise strategies, but while the various TradeWise strategies trade standard options, TradeWise Weeklys will focus on weekly options in Equities, ETFs and Indices. The frequency of TradeWise Weekly trade recommendations will often be similar to the other TradeWise strategies; however, due to specific market events such as earnings season, the frequency of Weeklys trade recommendations may fluctuate from time to time.

Please note that Weeklys are most appropriate for experienced option traders. TradeWise clients using Weeklys must be extremely attentive to their positions as changes to underlying prices and days to expiration will have a larger impact on the option due to the shorter time frame. Clients must consider all relevant risk factors, including their own personal financial situation, before trading. To learn more about the risks associated with each strategy, please see the trade email or reference the strategy descriptions found in the ADV Part II.

An allocation of $1000 for this strategy is required for autotrade, but does not guarantee an individual Weeklys trade will be successful.

The length of any specific TradeWise Weeklys trade recommendation typically ranges from 1-60 days.

Multi-leg option strategies can entail substantial transaction costs, including multiple commissions, which may impact any potential return.

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

Feb 14, 2017, 09:27 AM CST
Opening Position : Weeklys Advisory: TLT - Buy the 10 Mar Weekly 119.5/117.5 Put Vertical for $0.90 debit to open on a 50% allocation

Trade Advisory
February 14, 2017

TradeWise Strategy:   Weeklys Advisory
Underlying:   iShares 20 year Treasury ETF (TLT)
Status:   Opening Trade
Trade:   BUY +1 VERTICAL TLT 100 (Weeklys) 10 MAR 17 119.5/117.5 PUT @.90 LMT [TO OPEN/TO OPEN]
Trade Price:   $0.90 debit
Underlying Price:  $119.30
Trade Risk:    $0.90
Trade Duration:  Short Term
Buying Power Reduction:  $90.00

Trade Explanation:   For the Weeklys Advisory in TLT, we are buying the 10 Mar Weekly 119.5 Puts and selling the 117.5 Puts for a net debit of $0.90 to open on a 50% allocation.

Price Action: TLT is the 20 year Treasury Bond ETF that replicates the price of a 20-year bond (as bond prices fall, TLT also falls). The shares of TLT are falling as Fed Chair Yellen may be signaling a rate hike next month.  We expect TLT shares to continue moving lower over the next few weeks as the market advances and rotation out of treasuries picks up as rates rise.
Volatility:  Volatility is low in TLT and the position is more directional in nature. This gives us better entry point for a long vertical as opposed to trying to sell a bearish call vertical.
Probability:  Long at-the-money verticals only need a short window to increase in value.  We have a probability of over 70% that TLT shares will touch the $118 level at some point before expiration.
Risk:We are risking $0.90 to make a potential $1.10 on this directional position with a break-even of $118.60.
Trade Duration:  We have 24 days to adjust or close this trade at 10 Mar Weekly expiration. If we adjust any of our risk-defined position, we never increase risk at any point.
Logic:  This vertical has a good risk/reward scenario with the probabilities and time in the trade. Treasuries have started to weaken and expectation of rate hikes should put pressure on the ETF.  We will be aggressive in closing all or a portion of the vertical on any significant move in our favor or against us by 20 to 25%.

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:   $0.90 Debit    

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 be 20 to 365 days.

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

Feb 22, 2017, 01:51 PM CST
Opening Position : Covered Call Advisory: MDLZ - Buy (MDLZ) stock & sell the 21 Apr 46 Calls for a net debit of $43.52 to open

Trade Advisory
February 22, 2017

TradeWise Strategy:   Covered Call Advisory
Underlying:   Mondelez Intl.(MDLZ)
Status:   Opening Trade
Trade:   BUY +1 COVERED MDLZ 100 21 APR 17 46 CALL/MDLZ @43.52 LMT
Trade Price:   $43.52 Debit
Underlying Price:  $44.65
Trade Risk:    $43.52
Trade Duration:  Long Term
Buying Power Reduction:  $4352.00

Trade Explanation:   For the Covered Call Advisory in Mondelez, we are buying (MDLZ) stock and selling the 21 Apr 46 Calls for a debit of $43.52 to open. 

Price Action:   When we initiate each Covered call position, we buy 100 shares of (MDLZ) and sell 1 contract of the 21 Apr Monthly 46 Calls for a net debit of $43.52. Our total cost on the trade was the price we paid for the stock minus the premium received for the calls on this trade in the snack food and beverage products maker. MDLZ shares have fallen sharply recently and is trading near support.  This gives us a good price point to buy this neutral/bullish covered call as we expect the shares to consolidate or perhaps move back higher as takeover potential increases.
Volatility:  Volatility is low in the overall market and also in MDLZ as the earnings event risk is past. Any increase in volatility should provide good opportunities to roll our short calls to further-term months for solid credits to reduce risk.
Probability:  With the recent downturn in the shares, we are giving ourselves a positive probability for the shares to turn higher or remain at current levels as we feel the negative news in the stock is already in the shares.  We have a cushion of 2.4% to the downside before we hit our break-even.
Risk:   We are risking our initiation price of $43.52 on this position.  Our initial break-even price is our cost on this position. 
Trade Duration:   We have 58 days to adjust or close this trade at 21 Apr expiration. Our ideal scenario is for (MDLZ) shares to continue to trade near our strike or go higher.
Logic:   We are buying the Covered Call to take advantage of the recent pull-back in the shares.  An over-sold entry point on the shares provides a good opportunity in the global company in a market that has seen takeovers.  The company pays a quarterly Dividend of $0.19, which also provides additional risk reduction to this trade.

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:   $43.52 debit   

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 monthly, quarterly and Weekly option cycles when trading the Volatility Strategy. We generally look for short-term opportunities of approximately 1-60 days in this strategy. 

 

An allocation of $2500 for this strategy is required for autotrade, but does not guarantee an individual Volatility trade will be successful.

 

We will use the following strategies: buying or selling Vertical Spreads, buying Index Calendars, buying Equity Calendars, buying Double Doubles, buying or selling Butterflies* (see description below) and buying or selling Iron Condors. As with regular options, there may also be opportunities to trade Weekly options. The strategy implemented by TradeWise on any particular trade will depend on many variables such as the underlying, beta, volatility, timelines and events. The same risks will apply to the trade recommendations in the TradeWise Volatility strategy as detailed in the descriptions of the individual strategies within the 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.

 

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

Feb 22, 2017, 09:22 AM CST
Opening Position : Volatility Advisory: TSLA - Sell the 10 Mar Weekly 290/292.5 Call Vertical for $0.70 credit to open - 50% allocation

Trade Advisory
February 22, 2017

TradeWise Strategy:  Volatility Advisory
Underlying: Tesla Motors (TSLA)
Status:  Opening Trade– 50% allocation
Trade:   SELL -1 VERTICAL TSLA 100 (Weeklys) 10 MAR 17 290/292.5 CALL @.70 LMT [TO OPEN/TO OPEN]
Trade Price:  $0.70 Credit
Underlying Price:  $277.83
Trade Risk:  $1.80
Trade Duration: Short Term
Buying Power Reduction: $180.00

Trade ExplanationFor the Weekly Advisory in TSLA, we are selling the 10 Mar Weekly 290 Calls and buying the 292.5 Calls for a credit of $0.70 to open.

Price Action:   We are selling this neutral/bearish $2.5-wide out-of-the-money call vertical in the electric car maker ahead of tonight's earnings report.  Shares have rallied sharply since December and we want to sell into the over-bought conditions. We believe TSLA will fail near the current level as the inflated valuation far exceeds production levels. We have a cushion of over 4.5% to the upside before TSLA reaches our break-even of $290.70.
Volatility:  Volatility is climbing into earnings which generates more available credit. We anticipate a collapse in value after the event which has the potential to quickly contract the closing price.
Probability:   There is a 69% probability that our short $290 strike will be out of the money at 10 Mar 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 $1.80 to make a potential $0.70 on this short vertical position.  We profit in three out of four scenarios: if TSLA trades lower, remains at current levels or trades higher but remains below our break-even level at expiration. Option markets are currently pricing in a move of +/- $16.00. 
Trade Duration:  We have 16 days to adjust or close this trade at 10 Mar expiration.
Logic:  The nearly $100 rally in the shares over the last 90 days gives us a great opportunity to short the stock using a vertical instrument with defined risk ahead of an earning event. We have good probabilities for the amount of credit collected vs. the risk in the trade. We feel that TSLA will be unable to maintain this momentum based on their current valuations.  

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:   $0.70 credit         

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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