Tackle Today: Call Option Selection
February 9, 2022
«How do you narrow down the choices? Create rules.»
Traders,
You like the characteristics of the long call we outlined yesterday and want to try one out. Apple from last weekend’s Scouting Report catches your eye with its shallow pullback pattern. So you pop open the options chain and are bombarded with choices. Dozens of months and hundreds of strikes attack you.
Pick me! Pick me! Pick me!
How do you narrow down the choices? Create rules.
For a swing trade, we usually buy 2 to 3-month options. This is the time rule. Any longer, and the cost gets too high. And ultimately, you’re paying for time you don’t need.
Apple offers March, April, and May options. Per the guideline, I’d be looking at April or May. In this case, let’s go with April to keep the cost lower.
Now we have loads of strikes to consider. Apple is at $174, so $170 is ITM, $175 is ATM and $180 is OTM. Our usual strike price rule is to buy the first strike ITM. But if you want to make the trade a little cheaper, you can buy ATM. That’s my desire with AAPL. The $175 call is $7.50, and the $170 call is $10.40. Paying over $1,000 for a call is too expensive for my taste.
In sum, buying the April $175 call on AAPL is a reasonable way to play the bullish pattern if you have an aggressive directional bias.
🛑 Upcoming Options Trading 101 Webinar: How to Swing Trade with Options with Coach Tyler Craig | February 14th, 2022 at 8:30 PM EST on YouTube
In this webinar you will learn:
✅ What is Swing Trading
✅ How to use Technical Analysis to identify entry points
✅ What is a Long Call Option
✅ Long Call Risk Graph
✅ What is a Long Put Option
✅ Long Put Risk Graph
✅ How to Swing Trade with Options
Click on the button below to go to YouTube and set a reminder so you won’t miss it when Coach Tyler goes LIVE.
Chart of the Day: Apple Continuation Pattern ($AAPL)
Apple made the cut for last week’s Scouting Report. It’s trying to carve out a higher pivot low at the rising 50-day moving average. One bullish entry is to buy the dip. The other is to wait for a break above $176 resistance.
Video of the day: Queen’s Court: Analyzing Long Call candidates
On today’s Queen’s Court, coaches Emily and Matt analyze stocks to trade the long call options strategy.
Today’s line up
Traders Lounge 11 AM EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
The Coaches Show Replay
If you missed last night’s episode where Coaches Coaches Mark Justice and Frank Martin talked about Long Call or would like to watch it again, check it out here.
Halftime Report 12:30 PM EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day, and fun in a way that only Matt and Tim can deliver.
Trade Masters 7:00 PM EST
Every Wednesday at 7 PM EST join us on the Trade Masters where two Coaches go head-to-head to see who can find the best trading setup.
Trading Justice 462: The Long Call
In this episode, Coach Matt and Tim discuss the Long Call option strategy. A trader is long a call when they purchase one or more call options on an underlying security in anticipation of an upward movement in the underlying price. Listen in to learn about this powerful speculative, leveraged, directional strategy.
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