How To Make Money Trading Options: Nov 8

The market hit another all time high this week which means traders did not have to dig deep to find ways to make money trading Options.

In today’s discussion, we are going to show you how to make money trading Options in this rare scenario for us.

Starting with the video analysis of McDonald’s.

HOW TO MAKE MONEY TRADING OPTIONS: MCD CALLS TRADE

After hitting a record High at close last Friday, SPY gaped up on Monday to $308 and proceeded to stay range-bound for the rest of the week.

This type of action is not ideal for basic Options Traders because time is adverse for calls and puts buyers.

It is important for traders be aware of sideways action as we alluded in previous posts.

In that regard, here is a very general basic guide of market behavior when it comes to movements.

How To Make Money Trading Options - US Market Trading Clock
US Market Trading Clock

Throughout a trading day, we have other activities that we have to tend do. The table above is an attempt to to provide a global view of the market for periods of movements.

Of course, not all the stocks will abide by this “schedule” especially during earnings season or in case of a major news break.

A major news break is exactly what led us into our Top trade the week.

HOW TO MAKE MONEY TRADING OPTIONS: The setup on MCD

Major news came on MacDonald (Ticker: MCD) on Monday that the Chief Executive Officer was fired due to some companies violations.

It turned out that the departing CEO was having a relationship with one of its employees : She must have been Lovin’It 

I digress but I just could not help myself on that one.

The market did not like the news and the stock gaped down on Monday from $193.94 close on Friday to $190.16.

Below is the daily chart of MCD stock to help follow the movement this week.

How To Make Money Trading Options - McDonald Stock Daily Chart from TradingView
McDonald Stock Daily Chart from TradingView

I typically do not trade news at all because it is not a sustainable methodology.

Most of us retail traders do not know when the news is coming out so by the time we take a position, the Smart Money may have already moved in the opposite direction.

WHY DID WE TAKE THE TRADE ON MCD ?

Here is a little nugget for you.

Anytime you take a trade, you ought to ask yourself why.

If you cannot answer this question clearly to yourself, then you simply have no business take this trade.

Think about  when you will be journaling your trade at the end of the day (our recommendation) or the week, you will need to enter a name for the setup.

This will go a long way into eliminating those “Just because type trades”.

So, On Tuesday morning, pre-market volume on McDonald(Ticker: MCD) got my attention.

This is one of the basic strategy to get involved into a trade : heavy unusual volume.

In the case of MCD, pre-market volume was about 117 shares which was above average and the price was bullish throughout .

I decided to enter the trade but I cautiously put a limit order well below the bid.

Here is my entry order and fill below.

How to Make Money Trading Options - Buy Order for MCD Calls
Buy Order for MCD Calls

Notice the time gap between my order and the time it was filled. It took about 6 minutes (from 9:29AM – this means I pre-entered the order before the market opened !!) to be in the trade.

How did I know that 20 cents per contract would get me filled ?

Remember in this article how we described Confidence ?

Yes, that is it at its best.

HOW DID WE EXIT THE TRADE ?

In this trade, we ended up taking partial profits and kept one contract overnight as shown below.

  • 9:35 AM EST : Buy 3 Contracts Order (See above) at 20 cents per Contract
  • 11:48 AM EST : 1st Exit on 2 Contracts at 35 cents : 75% gain just over 2 hours.
  • Not as great as last week’s one on WDC.
  • 10:12 AM EST (Next Day) : 2nd Exit on 1 Contract at  $1.07 : 435% gain on this one Contract carried overnight
How To Make Money Trading Options - Selling Orders To Close The Trade
Selling Orders To Close The Trade

Why did I decide to carry the 1 contract overnight ?

Well for starters, after selling the 2 contracts early at 75% gains, I was guaranteed that this would not be a losing trade !!

The sale of those two contract on the 1st exit gave me all my initial risk plus a small benefit of about 15% (if I take away the tiny fees).

That alone gave me the confidence to hold the sole contract.

Secondly, we were only Tuesday, and I did not want to leave any money on the table 🙂

Thirdly, let me introduce you the chart of the position itself : not the chart for MCD stock but the chart for the Nov 8 195 Calls Contract.

We are  scrutinizing that in this video.

CONCLUSION

In this trade, we showed you how to effectively make money trading Options by leveraging scaled exit to avoid leaving money on the table.

In the video analysis, we pointed out a good technique to define an exit strategy point.

I hope you enjoyed the review of this trade.

Should you have questions, please leave me your thoughts on this trade in the comments section below.

How would you have reacted if you were in my situation in this trade ?

 
Sincerely,
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TBP || Becoming A Successful Stocks and Options Trader

Email:Telex@Successfultradings.com

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“Risk Comes From Not Knowing What You Are Doing” – Warren Buffet

16 thoughts on “How To Make Money Trading Options: Nov 8”

  1. It really seems like you are really making some hit on it with this here. I have not started trading options yet but I will soon. I am only trying to evaluate it all for now. Looking at your trade, it is obvious that you know what you’re doing. I did not understand what MacDonalds meant though because I see you were mentioning it a lot here. Is it the name of the platform where you trade?

    Reply
    • Hi,

      In the video you are referring to, we showed how we made 400% trading options derived from the MacDonald’s stock. These best options  strategies are shared each week through this blog and on our Youtube channel.

      Fee free to visit us and share your impression on it.

      Hope this answers your questions. 

      Reply
  2. Hi! You said in this post you don’t trade news because it’s not a sustainable method. But I can’t help to be surprised how the firing of the Chief Executive Officer had a direct impact on the market. Is there a way to determine which news related to the company will impact the market and which won’t?

    Reply
    • Hello Henry,

      I rarely trade news. Notice how in the article i described the reason for taking this trade ?

      The best way to to determine any potential news impact is to follow the Big Sharks.

      We provided a Tutorial on how to do so with the FlowAlgo tool. Check it out and let us know your thoughts.

      Thank you.

      Reply
  3. Thank you very much for this post, my friend. I’m surprised how the firing of the Chief Executive Officer impacted so much the market. i liked this McDonald’s case study. do you have other case studies as this one involving other options? I would also like to read what you had to say in those cases.

    Reply
    • Hello Abel,

      How are you doing ?

      Glad to see that you enjoyed the McDonald’s case study.

      We have been publishing weekly case stories here on this blog as well as posting them on our Youtube channel.

      Please go take a look and give us your reactions.

      Thank you hand have a productive weekend.

      Reply
  4. Wow, it is a very good thing to be able to look into your platform and see ways that you use personally in the stock market and see how you trade. To be honest, it is all but a privilege that I really cherish. From here I have learnt a couple of things but I still have a question though. Having found out those indications, do you just go in on stocks and on the trades you made here, what profit percentage did you make

    Reply
    • Hello John,

      I am not sure you were able to read the article all the way through.

      We showed our profit percentage for each sale we did. Did you missed that ?

      Reply
  5. I have read about options trading but have not started trading. You gave a great illustration on trading McD options. I like to know if options trading is only available in the US or anyone can trade from anywhere in the world. You took 3 positions and exit at 3 different times. Do you usually keep the position open, then decide when to close each position? Is there any expiry date on the position?Or you set just a closing price? What about risk management if the position moves unfavorably? Thanks for the information. I am trying to learn more about options.

    Reply
    • Hello Stanley,

      Thanks you for the questions.Here are the answers.

      I determine the exact criteria before i enter the trade. If the trade works out for me, i start selling one third of the position at 100% gain. The next at 200% and usually let the last third run its course.

      If the trade starts going against me and i still have time before expiry ( on Fridays), i can decide to close it between 30% and 40% loss. The key here is to scale my entries as well.

      About being able to trade internationally,  i think it is possible. Just check out with some of the major brokers.

      Reply
  6. Hello!

    I would really like to be able to make money with trading options. I would like to have more knowledge. I can see in the graph the Mac Donald case shows the movements of a week. 

    With a rise at the beginning and the final decays. What would be the best strategy to follow at the entrances and exits? From what I see the news can come to influence.

    I would like to improve my knowledge on the subject is it possible? 

    Thank you very much for your help!

    Reply
    • Hello Claudio,

      The entrance criteria was because the sentiment in pre market

      Was very bullish as suggested by the volume.

      On exit, our strategy is a scaled exit as we take partial profit

      All along.

      Hope this helps.

      Reply
  7. You really know how to gauge and play the market! That was brilliant. Maybe not millions of dollars brilliant, but still savvy. Now, I’m just confused as to why a forbidden relationship would cause such dissent on the market. Do people quit eating at McDonald’s if such things go on? Not that it’s acceptable, but it just doesn’t seem earth-shattering in the grand scheme of things. So, when I decide to start investing, I need to keep an eye on trists? It seems weird, but if the news helped you make a few bucks, why not??

    Reply
    • Hello Cathy,

      I really like your take on this trade.

      Of course people did not stop eating there.

      For traders, this is a great example of the irrational nature 

      Of the market. We do not wonder why the market is

      Reacting the way it did, our goal is solely to profit from it.

      Thank you.

      Reply
  8. I am so amazed by how quickly the market reacts to the event. So, this has taught me something, that I should open two tabs in my window. One tab for the tickers, and the other one for tuning up the latest news. Or, perhaps, a subscription to CNBC for the latest happenings in the business world. In that case, I will be ahead of everything and can make a timely decision that will affect my investing bottom line. What do you think of this strategy? Is this good?

    Reply
    • Hello Gomer,

      There is very little edge by listening to broadcast

      Stations. The real edge is getting these Dark Pool

      Prints before the nees is reported on Tv and that is exactly

      what this App does.

      Hope this helps.

      Reply

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